Tag: Brent Crude

Saudi Arabia’s Aramco Digital, the digital arm of the world’s largest oil producer, Aramco, is making moves to boost the country’s artificial intelligence (AI) ecosystem and help the country play a more significant role in the global AI industry.

Case in point: the business recently teamed with Groq to set up the world’s largest inferencing data center in Saudi Arabia. 

According to a press release, “The facility will process billions of tokens per day by the end of 2024 and be able to onboard hundreds of thousands of developers in the region and then hundreds of billions of tokens per day with millions of developers by 2025, setting a new industry standard and bringing advanced technology from Groq to the Kingdom.”

Aramco Digital has also signed several Memorandums of Understanding (MoU) at the Global AI Summit held in Riyadh recently. It inked a deal with Cerebras Systems and FuriosaAI to explore collaboration in the supercomputing and AI domains and also partnered with South Korea’s Rebellions to deploy Rebellions Neural Processing Unit chips in Aramco’s data centers.

In addition, Aramco Digital has signed an MoU with SambaNova Systems to accelerate AI capabilities, innovation and adoption across the country. It also announced the deployment of an AI supercomputer powered by NVIDIA GPUs, one of the region’s first systems of its kind.

The deals come after Aramco Digital jumpstarted its AI efforts last year by hiring Tareq Amin, one of the industry’s most charismatic and visionary leaders, as its CEO.

The new collaborations and partnerships are all part of the Saudi Arabia’s Vision 2030 initiative to transition from an oil-based to a technology-based economy. This transition is driven by the realization that it is crucial for the country to build capabilities in new and advanced technologies as the global economy is becoming knowledge-based.

“This shift is not just about diversification but about securing the nation’s future in a rapidly evolving global economy,” said Hamza Naqshbandi, IDC’s Country Lead for Saudi Arabia. 

“Strategic investments in AI will not only help diversify revenue streams but also future-proof the economy, creating new industries and job opportunities,” Naqshbandi continued. “Additionally, it will enhance Saudi Arabia’s global competitiveness, enabling it to play a larger role as a knowledge-based economy on the international stage.” 

Already, the country has taken several steps to grow its AI capabilities, including creating the Saudi Data and AI Authority (SDAIA), which is responsible for the country’s overall AI strategy. As per media reports, the Saudi Arabia government is also planning to create a fund of around $40 billion to invest in AI.

Roadblocks: Talent and chips

However, Saudi Arabia faces a number of issues in its quest to play a bigger role in the growing AI ecosystem. A key challenge is that it lacks a vibrant tech industry, which means that developing AI talent will be a problem.

“The country remains heavily reliant on technology vendors that hail from abroad. The Kingdom has a long way to becoming a genuine AI enabler and not just an AI deployer. AI sovereignty will be a key focus of policymakers in the Kingdom,” Patel continued. 

In addition, a U.S. ban on Saudi Arabia on sourcing advanced NVIDIA AI chips is a problem that can possibly thwart Saudi Arabia’s growing technology industry. The U.S. has imposed restrictions to prevent China from accessing AI chips. Still, the country is hopeful that it will be able to procure high-performance AI chips in the coming year.

“This is a problem, though it is increasingly becoming a grey area for even the U.S. vendors. The U.S. vendors want their chipsets to be sold to institutions and companies in Saudi Arabia and the wider region, but U.S. legislation is blocking the sale of high-end chipsets. If Saudi Arabia and its institutions and governments do not completely detach themselves from Chinese technology (which is what is happening in the UAE), this dynamic will continue,” Patel concluded. 

By Gagandeep, Kaur  Fierce-network / Oct 7, 2024.

BP (BP.L), opens new tab has abandoned a target to cut oil and gas output by 2030 as CEO Murray Auchincloss scales back the firm’s energy transition strategy to regain investor confidence, three sources with knowledge of the matter said.

When unveiled in 2020, BP’s strategy was the sector’s most ambitious with a pledge to cut output by 40% while rapidly growing renewables by 2030. BP scaled back the target in February last year to a 25% reduction, which would leave it producing 2 million barrels per day at the end of the decade, as investors focused on near-term returns rather than the energy transition.

The London-listed company is now targeting several new investments in the Middle East and the Gulf of Mexico to boost its oil and gas output, the sources said.

Auchincloss took the helm in January but has struggled to stem the drop in BP’s share price, which has underperformed its rivals so far this year as investors question the company’s ability to generate profits under its current strategy.

The 54-year-old Canadian, previously BP’s finance head, has sought to distance himself from the approach of his predecessor Bernard Looney, who was sacked for lying about relationships with colleagues, vowing instead to focus on returns and investing in the most profitable businesses, first and foremost in oil and gas.

The company continues to target net zero emissions by 2050.

“As Murray said at the start of year… the direction is the same – but we are going to deliver as a simpler, more focused, and higher value company,” a BP spokesperson said.

BP shares were up 0.8% by 0912 GMT.

Auchincloss will present his updated strategy, including the removal of the 2030 production target, at an investor day in February, though in practice BP has already abandoned it, the sources said. It is unclear if BP will provide new production guidance.

Rival Shell has also slowed down its energy transition strategy since CEO Wael Sawan took office in January, selling power and renewable businesses and scaling back projects including offshore wind, biofuels and hydrogen.

The shift at both companies has come in the wake of a renewed focus on European energy security following the price shock sparked by Russia’s invasion of Ukraine in early 2022.

BP has invested billions in new low-carbon businesses and sharply reduced its oil and gas exploration team since 2020.

But supply chain issues and sharp increases in costs and interest rates have put further pressure on the profitability of many renewables businesses.

A company source said that while rivals had invested in oil and gas, BP had neglected exploration for a few years.

BACK TO THE MIDDLE EAST

BP is currently in talks to invest in three new projects in Iraq, including one in the Majnoon field, the sources said. BP holds a 50% stake in a joint venture operating the giant Rumaila oilfield in the south of the country, where it has been operating for a century.

In August, BP signed an agreement with the Iraqi government to develop and explore the Kirkuk oilfield in the north of the country, which will also include building power plants and solar capacity. Unlike historic contracts which offered foreign companies razor-thin margins, the new agreements are expected to include a more generous profit-sharing model, sources have told Reuters.

BP is also considering investing in the re-development of fields in Kuwait, the sources added.

In the Gulf of Mexico, BP has announced it will go ahead with the development of Kaskida, a large and complex reservoir, and the company also plans to green light the development of the Tiber field.

It will also weigh acquiring assets in the prolific Permian shale basin to expand its existing U.S. onshore business, which has expanded its reserves by over 2 billion barrels since acquiring the business in 2019, the sources said.

Auchincloss, who in May announced a $2 billion cost saving drive by the end of 2026, has in recent months paused investment in new offshore wind and biofuel projects and cut the number of low-carbon hydrogen projects down to 10 from 30.

BP has nevertheless acquired the remaining 50% in its solar power joint venture Lightsource BP as well as a 50% stake in its Brazilian biofuel business Bunge.

By: Reuters, Ron Bousso / October 7, 2024

In summary, the worst case (for the oil market) would be an Israeli attack that reduced Iranian oil exports, and then the issue becomes whether the Saudis raise production to compensate or seek to draw down global inventories in support of prices, which would mean Brent stays over $80. Absent such an attack, the security premium will be only temporary and weakness in the fundamentals will reassert themselves; Brent would sink below $75 again.

At this point, it appears that the conflict in the Middle East is morphing into a ‘forever war,’ with Israel attempting to destroy Hamas and Hezbollah, something which is almost certainly impossible, and to cow Iran into reducing its support for members of the ‘axis of resistance.’ To date, the damage done in both Iran and Israel from ongoing missile attacks has been minimal, but concerns that the situation might escalate has been keeping oil prices elevated, our old friend the security premium making a reappearance. Prices that had been under pressure from fundamentals have instead risen by $5 to $8 a barrel in recent days. Given the possible direction of the conflict, what do the different paths mean for oil prices?

First, it’s important to keep in mind that while fundamentals tend to move slowly, geopolitical events can change abruptly and drastically. Although oil supply sometimes drops sharply, demand evolves only gradually: next month, next quarter, will not be substantially different from current levels. In effect, geopolitics are fast, fundamentals slow but more persistent.

That said, consider the different political/military decisions going forward. It should be taken for granted that Israel will continue to prosecute the war against Hamas and Hezbollah, but their response to the latest Iranian missile attack remains unclear. There are four likely choices: a minimal attack, such as after the April barrage from Iran, would ease tensions and see oil prices pull back quickly. Israeli rhetoric at this point implies this is unlikely.

Next, a larger attack from Israel that targets Iranian military bases and infrastructure, such as weapons depots or factories, is possible. Given recent developments, Israel clearly has good intelligence on its adversaries, so such an attack is doable, although the long-term effects would be minimal. However, Iran would almost certainly respond with another missile attack which would mean that the tit-for-tat exchanges would continue the security premium on oil prices would remain elevated.

A third choice would be for Israel to go after Iranian nuclear facilities, something that Israel has supposedly long wanted to do but been restrained from attempting by the U.S. However, with U.S. influence clearly at a low point, Netanyahu might be tempted to undertake this, seeing a successful attack as a crowning achievement to his long political career. There is uncertainty about Israel’s ability to launch such an attack without U.S. help and many caution that Iranian facilities are not vulnerable to air strikes. Even so, Israel might feel that inflicting minor damage on those sites would provide a demonstration effect and serve as a deterrent to further Iranian retaliation. Again, this would translate into continuing violence, keeping the oil price’s security premium high.

Finally, some have been suggesting Israel might attack Iranian oil infrastructure, including refineries or export facilities. Reducing Iran’s oil income would seem desirable from Israel’s point of view, and while the U.S. would presumably discourage such a move, especially the Biden Administration which doesn’t want an October surprise of higher oil prices, U.S. political clout appears at a low point.

Expectations of an Israeli attack on the Iranian oil industry explains much of the recent elevation in prices, since that is the only likely development that would have a direct impact on world oil markets. However, even the destruction of the Abadan and Bandar Abbas refineries, with 700 tb/d of capacity, while no doubt generating impressive videos of spectacular fires and explosions, would not have a major effect on world oil markets.

In 1951, the Iranian nationalization of BP’s holdings and the shutdown of Abadan raised Asian oil prices by approximately 30%, because at that time, Abadan was providing a large fraction of Asian product demand. Now, those two refineries together provide less than 1% of world capacity and could easily be replaced. The figure below shows global refinery capacity and throughput with an implied 20 mb/d of surplus but overstates the available capacity. A more realistic estimate would be about 3-5 mb/d of surplus capacity, at any rate, more than enough to replace any disruption to Iranian operations. There would be some rebalancing and Iran would lose money, but aside from that the impact would be minor.

An attack on Iranian oil fields would also look impressive, generating massive blazes but having only a limited effect on supplies given the dispersed nature of production. Destroying the tanker loading facilities at Kharg Island would be more serious and could reduce Iranian oil exports by perhaps 1 mb/d in the worst case scenario. Then, the question becomes whether or not the Saudis replace the lost supply. They have ample spare capacity, but might prefer to let markets tighten, inventories drop, and prices firm. In that case, Brent would remain at or above $80.

In essence, there are three paths forward: the level of violence remains roughly constant or declines, in which case the security premium would fade as traders get crisis fatigue, Brent sliding back towards $70-75. Alternatively, an escalation with continuing missile attacks and/or assassinations would mean traders remain fearful of an oil supply disruption and the price would remain elevated, as it is now (Brent about $78). Finally, any attack on Iranian oil facilities would boost Brent above $80, if and only if Iranian exports dip significantly and the Saudis refuse to raise production.

Overall, then, the prospect is for prices to return to the levels of September, sooner rather than later, and the chances for Brent to remain above $80 for any period appears slim. Even so, wagering on peace in the Middle East is never for the faint-hearted.

By: Forbes, Michael Lynch- Oct 6, 2024

U.S. pipeline operator ONEOK said on Wednesday that it struck two deals worth $5.9 billion with infrastructure investor GIP to boost its presence in the Permian Basin as well as mid-continent, North Texas and Louisiana regions.

In the first, ONEOK will buy GIP’s 43% stake in EnLink Midstream for $14.90 per unit and GIP’s full interest in EnLink’s managing member for a total of about $3.3 billion in cash.

The price per unit is a 12.8% premium to EnLink’s closing market price on Aug. 27.

In the second deal, ONEOK will buy GIP’s equity interests in Medallion Midstream, a crude gathering and transportation system in the Permian’s Midland Basin, for $2.6 billion in cash.

“We are particularly excited to meaningfully increase our company’s presence in the Permian Basin, which is expected to continue driving the majority of U.S. oil and gas growth,” ONEOK CEO Pierce Norton II said.

The deals, coming a year after ONEOK bought rival Magellan Midstream Partners for $18.8 billion, will boost the Tulsa, Oklahoma-based company amid plunging U.S. natural gas prices due to mild weather and high storage levels. Higher volumes helped bolster its profit in the latest quarter.

ONEOK said it expects the two deals to immediately add to its earnings and free cash flow, bolstering its ability to execute its planned $2 billion share repurchase program.

The company also expects synergies between $250 million and $450 million over the next three years as a result of these acquisitions, it said in a statement.

ONEOK has secured financing commitments worth up to $6 billion from JPMorgan Chase and Goldman Sachs to fund the deals, which it expects to close early in the fourth quarter.

By: Reuters, August 29, 2024.

Trafigura Group could switch more of its crude-oil tankers to carry refined products if sluggish market conditions persist.

About 12% of Trafigura’s fleet of very-large crude carriers (VLCCs) and 20% of its Suezmaxes can carry those fuels on top of shipping denser crude, the trading house’s global head of wet freight, Andrea Olivi, said in an interview. “From what we see in the market today, I would expect this number to potentially increase,” he said.

The conversion, which began in recent months, was prompted by low crude-oil tanker rates amid weaker oil demand from China, Olivi said. He added that production cuts from the Organization of the Petroleum Exporting Countries also meant there was less oil that needed to be transported on tankers.

At the same time, attacks by Houthi militants on merchant vessels in the Red Sea have forced ships to take a longer route to reach Europe from Asia. That’s boosted charter rates for smaller ships that transport fuels like gasoline and diesel as they now need to sail around Africa, adding thousands of miles to their journeys.

VLCCs, with their large sizes and ability to sail longer distances, allow for greater economies of scale, said Olivi. “VLCCs have become the bellwether of the market, they are extremely flexible in adapting,” he said.

By: Weilun Soon / Trasfigura , September 11, 2024 

Sinopec, one of China’s largest state-owned oil and gas companies, has been awarded a significant contract to develop a tank farm in Saudi Arabia, marking a major expansion of its presence in the Middle East.

This development represents a key strategic move for Sinopec, which aims to strengthen its foothold in one of the world’s leading oil markets.
 

The project involves the construction of a state-of-the-art storage facility designed to handle a substantial volume of crude oil and refined products. The tank farm is expected to enhance Saudi Arabia’s capacity to manage and distribute its vast oil resources more efficiently, boosting its operational capabilities.

The deal comes at a time when the global oil industry is undergoing significant changes, with major players seeking to optimize their logistics and storage infrastructures. Sinopec’s involvement underscores the growing trend of increased collaboration between Chinese and Middle Eastern energy sectors. The company’s advanced technology and expertise in large-scale industrial projects were key factors in securing this contract.

This tank farm will feature advanced storage and management systems, designed to ensure high efficiency and safety standards. The facility’s strategic location within Saudi Arabia will facilitate better logistical coordination and support the country’s goal of increasing its oil export capabilities.

The project is expected to have substantial economic benefits for both Sinopec and Saudi Arabia. For Sinopec, it offers a substantial revenue stream and a chance to further integrate its operations within the region’s oil supply chain. For Saudi Arabia, it provides a critical infrastructure upgrade that will support its long-term energy strategy and economic diversification efforts.

As part of the agreement, Sinopec will work closely with local partners to ensure the project’s successful execution, adhering to Saudi Arabia’s regulatory standards and environmental guidelines. This collaborative approach is likely to foster stronger business relationships and open up further opportunities for Sinopec in the region.

The tank farm’s development is also expected to create numerous job opportunities, contributing to the local economy and supporting Saudi Arabia’s Vision 2030 initiative, which aims to diversify the economy and reduce its dependency on oil.

Overall, this contract signifies a pivotal moment in Sinopec’s international expansion strategy and highlights the strengthening ties between China and Saudi Arabia in the energy sector. The successful completion of this project could pave the way for additional partnerships and investments in the region’s growing energy market.

By: 1Arabia , September , 6 , 2024

Oil prices began the month of September with a drop in Asian trade, depressed by another weak reading of China’s official manufacturing activity data and signals from OPEC+ that it could proceed with unwinding some of the production cuts in October, as planned.

Early on Monday morning in Europe, oil prices were down by around 0.5%, with Brent Crude prices falling to $76.54, and the U.S. benchmark, WTI Crude, down by 0.4% to $73.24 per barrel.

Oil prices fell on reports that OPEC+ producers could start easing the ongoing cuts. Weak Chinese manufacturing also added to the downward pressure on crude prices.

Libya’s supply outage and a stronger-than-expected U.S. economy are helping to keep oil prices afloat despite this growing bearish pressure.

This weekend, the official Purchasing Managers’ Index (PMI) from the National Bureau of Statistics showed that China’s manufacturing activity contracted for a fourth consecutive month in August and slumped to the lowest reading in six months.

The PMI data from the National Bureau of Statistics was also below analyst expectations and matched last year’s lowest level. New orders, including export orders, as well as employment, remained in contraction territory in August.

“This month’s PMI data was another data point showing manufacturing strength from the first half of the year is cooling off and that we will need to see other areas of the economy pick up if the 5% GDP growth target is to be achieved,” analysts at ING said in a note on Monday.

Another weak manufacturing dataset from China weighed on the outlook of oil demand in the world’s top crude oil importer.

A private PMI assessment tracking small export companies showed on Monday modest improvement in manufacturing last month.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), a private gauge of the manufacturing sector by Caixin Media and S&P Global, showed on Monday the purchasing managers index rising to 50.4 in August, up from 49.8 in July, signaling a slight recovery of the index into expansion territory with the reading of above 50.

Nevertheless, analysts believe that China needs more economic stimulus to turn a corner in its economy.

By Tsvetana Paraskova for Oilprice.com / Sep 06, 2024

The Trans Mountain Expansion Project, now finally completed after years of delays, is expanding access to markets for Canadian oil producers and is set to boost the price of Canada’s heavy crude oil for years to come, top executives at the major energy firms say.

The expanded pipeline is tripling the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.

The expanded pipeline provides increased transportation capacity for Canadian producers to get their oil out of Alberta and into the Pacific Coast and then to the U.S. West Coast or Asian markets.

TMX has reserved 20% of its capacity – or 178,000 bpd – to uncommitted customers, or spot shippers.

As a result of the increased competition from Trans Mountain, other pipeline operators – including Enbridge, operator of North America’s largest crude oil pipeline network, Mainline – are cutting rates to transport crude on their network in September. Enbridge will ask lower tolls from companies to ship heavy crude from Hardisty, Alberta, to Texas on Enbridge’s networks, per company filings cited by Bloomberg.

As a result of TMX entering into service, crude trade flows are expected to shift, Wood Mackenzie’s analysts Lee Williams and Dylan White wrote in July.

“Wood Mackenzie data suggests that increased westbound flows will moderately cut into volumes moving on other routes out of Western Canada, especially crude-by-rail and Enbridge’s Mainline system,” they said.

Since Canadian producers continue to ramp up production, the excess pipeline capacity on the networks carrying crude from Canada to the demand centers in the U.S. should be filled fairly soon, according to analysts.

By: Oilprice / September 06, 2024.