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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! The bulls reasserted themselves in the oil market last week, with the major crude benchmarks rallying on worries that Israel’s assault on the Gaza Strip will draw more nations in the region into the war. That rally was offset somewhat Monday on reports that the Biden Administration will ease some sanctions against Venezuela that may allow more crude exports from that nation. Let’s look at what’s happening in the energy world, where there’s a lot of concern about supply and safety.

Today’s top headlines:

• As India frowns on paying for Russian oil with yuan, some payments held up 
• EXPLAINER: What the Israel-Hamas war means for the global oil market
• How Texas oilman Scott Sheffield made Pioneer the prized catch

Hamas and Israel flags. REUTERS/Dado Ruvic

Brent crude futures closed last week with a furious rally to bring the benchmark above $90 a barrel, with the Venezuela developments finally taking some of the juice out of the rally, as Reuters reports here. The war between Islamist group Hamas and Israel is a significant geopolitical risk to the markets, the biggest since Russia’s invasion of Ukraine last year – and the twin conflicts have the potential to keep prices still elevated, analysts said.  

The primary worry among investors is that the war could draw in additional actors as Iran threatened intervention against Israel in recent days before backing off while an ongoing process to normalize relations between Israel and Saudi Arabia appears put off for now. At the same time, Saudi Arabia’s crude exports hit a 28-month low in August as the kingdom, the largest OPEC producer, and Russia, work together to constrain supply to keep prices higher. “The market is growing increasingly concerned that the Israel-Palestine war may spill into a larger regional conflict,” analysts at TPH said on Monday.  

That’s the map of the Balticonnector pipeline. (Reuters Graphics)

If it seems at times that the world’s energy supply is vulnerable, that’s because it is. Finland is tightening access to parts of its Inkoo port that imports liquefied natural gas (LNG) after recent damage to a gas pipeline and telecoms cable connecting Finland and Estonia that investigators believe could have been deliberate, as Anne Kauranen reports here. 

The pipeline was damaged on Oct. 8, and Nordic and Baltic seismologists say they detected blast-like waves on Sunday – but the data was inconclusive as to whether explosives were involved. Some have suggested Russia intentionally damaged the line; Russian President Vladimir Putin dismissed the idea as “rubbish.” Finnish investigators have not said who caused the incident, and they have not connected it to the destruction of the Nordstream gas pipeline that was damaged last year. 

Russian tankers. 

Russian crude oil producers are working with an increasing supply of vessels that are helping them evade the $60-per-barrel price cap imposed by the United States and its allies in the wake of Russia’s invasion of Ukraine, as Reuters reports here. Russia, in response to big customers like the EU cutting it off, has been selling heavily to India and China, but using non-Western flagged vessels to transport their crude. 

That’s allowing them to evade sanctions – and with more shipping vessels becoming available, the cost is getting cheaper. Because so many vessels are now willing to load Russian crude, the sellers of Russian Urals are saving $7 per barrel on freight rates this autumn compared with last winter – so exporters are earning about $70 a barrel for what’s loaded at Baltic ports.    

That’s a pic of increased petrol and diesel prices in Newcastle-under-Lyme, Staffordshire, Britain, from last year. REUTERS/Carl Recine

Last year in the throes of severe supply crunches for diesel, China was key to alleviating that crunch. It is poised to do the same this year, as Laura Sanicola reports here. The EU and United States were worried then about shortages following Russia’s Ukraine invasion – and this year, Russia’s ban on diesel exports ahead of winter has caused those concerns to resurface. China is still the world’s biggest importer of crude, but it has become a key fuel exporter due to growing refining capacity. 

But China’s fuel exports are set to rise by about 519,000 barrels per day in October, with diesel exports up about 160,000 bpd. Total diesel exports for the first nine months of the year have tripled from the year-ago period.  

“We’re beginning to witness an uptick similar to last year’s once again,” said Matt Smith, lead oil analyst at Kpler.  

“Pioneer sat in a position of being a predator and prey. He was thinking multiple steps ahead.” 

Dan Pickering of Pickering Energy Partners, on Pioneer Natural Resources CEO Scott Sheffield, who agreed to sell to Exxon Mobil. 

The unions at Chevron’s liquefied natural gas (LNG) facilities in Australia are planning on resuming strikes this week as they continue to talk, but that hasn’t made Chevron happy, as Lewis Jackson reports here. The companies and unions had a deal in September, but that later fell apart as the unions said Chevron reneged on commitments, threatening to resume strikes at sites that supply around 6% of the world’s LNG. 

The talks are now in a fourth day, but a union representative who declined to be named told Reuters the parties were apart on key issues and Chevron needs to change its position to avoid strikes restarting.  

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