Oil prices ended higher on Friday as geopolitical risk related to the ongoing Ukraine-Russia war, along with wildfires affecting production in Canada, outweighed another OPEC+ output hike.
BKR Rig Count | The total active drilling rigs in the United States decreased by 4 last week, to 559. Oil rigs dropped by 9 to 442, and gas rigs increased by 5 to 114.Rig count in the Permian Basin dropped by 3 to 275 | Jun 6 | BKR NAM Rig Count.
US Crude Inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by 4.3 MMbbl to 436.1 MMbbl (about 7% below the 5y average for this time of year). On the products side, gasoline increased by 5.2 MMbbl (1% below the 5y average). Distillate fuels increased by 4.2 MMbbl (16% below the 5y average). Total commercial petroleum inventories decreased by 12.9 MMbbl | May 30 | EIA Weekly Report
OPEC raised oil production by 200,000 bpd in May to 27.54 mbpd, with Saudi Arabia accounting for about half of the increase, boosting production by 110,000 bpd to 9.08 mbpd, while Libya added 50,000 bpd to an average of 1.32 mbpd. OPEC+ nations will hold another call on July 6 to review levels for August, with Saudi Arabia warning it could push through several more accelerated monthly hikes to fully reverse the latest restraints by October | Jun 5 | Bloomberg
HSBC analysts expect “another two big hikes in August and September for 411,000 b/d and 274,000 b/d respectively”. OPEC+ will switch to regular-sized increases from October to December, meaning the whole of its 2.2m b/d “voluntary” cutbacks will have been unwound by end-2025, HSBC added. Continuation of accelerated hikes past summer “would confirm that the group is motivated by factors beyond meeting seasonal demand.” Saudi Arabia is pursuing a multifaceted policy to curb overproduction and regain market share. HSBC sees the global oil market balanced in 2Q-3Q, as rising summer demand absorbs OPEC+ hikes, then tipping into surplus in 4Q. Bank said its $65/bbl price assumption from 4Q onwards faces “downside risks” from deteriorating fundamentals | Jun 6 | Bloomberg
US and Chinese negotiators will resume trade talks on June 9 in London to resolve a dispute over tariffs and technology, following a 90-minute call between Trump and Chinese leader Xi Jinping in which they agreed to defuse growing tensions. The US expressed concerns over the lack of rare-earth magnets essential for American EVs and defense systems, while China bristled at fresh US restrictions on artificial intelligence chips and other advanced technologies. After the call, Trump said he obtained a commitment to restore rare-earth magnet flows, but questions remain about what Trump conceded to Xi | Jun 6 | Bloomberg
Calgary-headquartered Cenovus Energy has shut in almost a quarter of a million barrels per day of oil production and evacuated non-essential personnel from its Christina Lake oil sands asset because of the wildfires in northern Alberta, Canada. The decision came after two other key oil sands players, Canadian Natural Resources and MEG Energy, were also forced to evacuate non-essential personnel and rein in oil production over the weekend | June 1 | Upstream
China, the world’s largest oil importer, avoided buying American crude for a second straight month as trade disputes between the countries continue. US oil exports slid to the lowest this year in April and marked the first time since the pandemic that Chinese refiners skipped buying from the US for two straight months. China’s pullback from US crude has wider implications for shale producers which partly depend on overseas demand to keep pumping oil. Competition is getting stiffer after OPEC and its allies announced they’re restoring production as Saudi Arabia seeks to claw back market share lost to America’s drillers | Jun 5 | Bloomberg
The US Department of the Interior (DoI) on Monday said it is aiming to reverse a ruling from the administration of former president Joe Biden that limited oil and gas leasing on 13 million acres within the National Petroleum Reserve in Alaska. DoI claimed the rule exceeded the statutory authority of the Bureau of Land Management (BLM) | June 2 | Upstream
President Trump urged the Federal Reserve to cut interest rates by a full percentage point, intensifying his pressure campaign against Chair Jerome Powell. Trump's call for the central bank to lower rates is not new, as he has regularly complained that the Fed chief has been too reluctant to cut markets borrowing costs. Fed officials are scheduled to meet June 17-18 in Washington and are widely expected to leave their benchmark rate unchanged, as they have done all year | Jun 6 | Bloomberg
Looking ahead
Upstream O&G investment to decline 4% this year, $3.3T overall Energy Investment, $2.2T to Clean Energy, says IEA | Global energy investment will hit a record high in 2025 but spending on fossil fuels is expected to decline, with lower crude prices curbing investment in the oil sector, according to the International Energy Agency. Spending in upstream oil is forecast to drop 6% from a year earlier to $535 billion in 2025, the IEA said in its latest World Energy Investment report published on Thursday. The expected drop would be the first year-on-year decline since the Covid-induced slump of 2020, and marks the second-lowest oil sector spending figure in the last decade. The bulk of this year’s decline is likely to be concentrated in unconventional plays, according to the IEA. Investment in shale is forecast to drop by almost 10% in 2025.Investment in oil and natural gas, at a combined $570 billion, is expected to be down 4% on the previous year. The IEA noted a “a strong upward trajectory” in LNG spending, with facilities in development in the US, Canada, Qatar and other regions. The drop in oil sector expenditure comes amid rising capital flows to the energy industry as a whole. Global energy investment is set to hit a record high of $3.3 trillion in 2025, the agency forecasts, marking a 2% increase on 2024.About two thirds of the total, $2.2 trillion, will be invested in renewables, nuclear, grids, storage, low-emissions fuels, efficiency and electrification, with $1.1 trillion invested in fossil fuels — oil, natural gas and coal | June 5 | IEA, Upstream
Asia Power: Gas demand outlook clouded by more affordable coal and accelerated renewable deployments. Asia accounts for over 60% of the world’s population and approximately 52% of global electric power demand. By 2035, rising living standards are forecast to increase power demand by over 40%. In this context, gas plays a crucial role by providing flexible generation to accommodate intermittent renewable sources and serves as a lower-emission alternative to coal and oil. Mainland China is the world’s second-largest economy and possesses the largest power system globally, accounting for 64% of Asia’s power demand. India, the third-largest electricity market globally, has power demand that constitutes 14% of Asia’s total. Mainland China’s robust clean technology supply chain and strong policy support are driving an accelerated shift toward non-fossil fuels, aiming for peak carbon emissions before 2030 and carbon neutrality by 2060. In contrast to mainland China, the outlook for India’s power sector indicates a continued reliance on coal, plateauing later in the 2040s, coupled with a growing share of renewables. In Southeast Asia and the JKT markets, natural gas fulfills baseload and mid-merit power generation needs, with a significantly higher share in the power fuel mix. Mainland China will continue to lead global renewables and storage capacity additions, driven by decarbonization policies and its massive clean energy manufacturing capacity. Solar and wind capacity is expected to grow by over 80% by 2030, with storage capacity more than doubling. [From a baseline of ~270bcm rising to ~350bcm by 2035,] S&P’s sensitivity scenarios indicate, in Asia, a potential upside of 56 Bcm of gas demand from the power sector by 2035. Conversely, there is a potential downside of 69 Bcm by 2035 | June 5 | S&P
