View in Browser

Sign up for Reuters newsletters

By David Gaffen, Editor, Energy Markets

Happy New Year Power Up readers! This year opens the way the last one ended – with oil prices sinking even though myriad factors would suggest they could be moving higher. Brent crude is currently bouncing around $76 a barrel despite worries about Red Sea transit and as the Saudis lower certain prices, in effect bowing to reality. Here’s how it all stands in early January.  

Today’s top headlines:

• Saudi Arabia cuts Feb Arab Light crude price to Asia to 27-month low  
• India’s fuel demand hits seven-month high in December  
• France seeks to settle hydroelectric dispute with EU

Brent’s trend has been down. 

Oil prices were down sharply on Monday after top exporter Saudi Arabia cut prices – a clear sign the market is of a bearish mind, as the escalating political tension in the Middle East have not produced any kind of sustained rally in crude futures, as Reuters reports here. 

Both contracts climbed more than 2% in the first week of 2024 as Yemen’s Houthis attacked ships in the Red Sea. However, the ships most affected are container ships, and the Saudis still have access to the key Suez Canal route by virtue of the placement of their ports. Supply worldwide has also been on the rise – and China’s demand has been lackluster. So Saudi Arabia cut the February official selling price (OSP) of its flagship Arab Light crude to Asia to the lowest level in 27 months. 

“Saudi Arabia is signalling that it aims to remain competitive in the market and is unwilling to unilaterally reduce its volume,” said Bjarne Schieldrop, analyst at Swedish bank SEB, adding that the move makes further unilateral output cuts from the world’s top exporter less likely.   

That’s a gas flare on an oil production platform next to an Iranian flag in the Gulf. REUTERS/Raheb Homavandi

China’s oil trade with Iran has stalled out as Tehran is withholding shipments, demanding higher prices from its top client in a move that may tighten cheap supply for the world’s biggest crude importer, as Reuters reports here.  

Iranian oil makes up some 10% of China’s crude imports and hit a record in October – and the cuts could support global prices and squeeze profits at Chinese refiners. The abrupt move comes in a roundabout way after the United States put in place a waiver on sanctions of Venezuelan oil. That caused shipments from the South American producer to China to be diverted to the United States and India, elevating prices for China as shipments dwindled. 

A Shell petrol station sign is reflected in a puddle in London. REUTERS/Luke MacGregor

Shell on Monday said it would take impairment charges of up to $4.5 billion for the fourth quarter related largely to the Singapore refining and chemicals hub the oil major is looking to sell, as Reuters reports here. 

The company also said gas trading would be significantly higher than the previous three-month period but oil trading results were expected to be significantly lower over the same period. Shell’s liquefied natural gas (LNG) production volumes were expected to come in at 6.9 million to 7.3 million metric tons, higher than previous guidance, after Shell restarted production late last month at its giant Prelude LNG facility offshore Australia following four months of maintenance. 

A view of a gas production plant in ‘t Zand in Groningen, Netherlands. REUTERS/Michael Kooren 

The Dutch government will turn on the “pilot light” – meaning minimal production – at two stations in the Groningen gas field due to impending cold temperatures in the Netherlands, as Reuters reports here, after it said in June that it would end output at Groningen by last October after winding down output following earthquakes triggered by production at that field. 

The government in a letter to parliament said this was an option left open to resume minimal production – called a “pilot light” – as a just-in-case measure.  While the expected temperatures are not enough cold enough to trigger actual production, the move is a preparatory step needed to recommence production in case of an emergency.   

“This is considered as an extensive default and the order to hike prices apparently came from the headquarters in Tehran.” 

A China-based trading executive on Iran’s decision to withhold oil shipments for higher prices

Libya’s National Oil Corporation (NOC) on Sunday declared a force majeure at its Sharara oilfield, which can produce up to 300,000 barrels per day, due to protests, as Reuters reports here.  

Libya’s oil output has been disrupted repeatedly in the chaotic decade since the 2011 NATO-backed uprising against former leader Muammar Gaddafi – and the Sharara field has been a frequent target of local and broader political protests. “The loss of confidence in the continuity of supplying the global market with Libyan oil will result in Libyan oil remaining unmarketed,” the oil and gas ministry said in a statement on Wednesday. 

Sponsors are not involved in the creation of newsletters or other Reuters news content.

Advertise in this newsletter or on Reuters.com

Power Up is sent twice weekly. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this newsletter? Unsubscribe here.

To manage which newsletters you’re signed up for, click here.

Reuters Terms & Conditions and Privacy Statement