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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! The crude market remains stuck. Will it find a way to rally? Or is it going to continue to meander about on worries about demand? If Russia and Saudi Arabia have anything to do with it, the market will push higher. But China’s weak demand – and that matters a lot – complicates that possibility. Let’s look at what’s going on…  

Today’s top headlines:

• Oil edges higher as Saudi Arabia, Russia stick to supply cuts
• Ship shortage dealt death blow to Orsted’s NJ offshore wind hopes
• Canada’s Trans Mountain ordered to stop pipeline work over non-compliance

That’s a worker checking the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia. REUTERS/Sergei Karpukhin

Saudi Arabia and Russia both said on Sunday that they’re going to continue their voluntary oil output cuts through the end of the year, as Maha El Dahan and Olesya Astakhova report here, because of the ongoing concerns over demand and growth that are still weighing on crude markets.  

The Russia-Saudi collaboration that grew out of an agreement in late 2016 to pull several other exporters, but most notably Russia, closer to the Organization of the Petroleum Exporting Countries, has been maintained for several years now – and it has restricted supply to effectively keep prices higher. However, demand and overall world supply has been just offset enough that oil prices remain in the $80-to-$90 a barrel range, rather than at a more elevated level.  

Saudi Arabia confirmed it would continue its additional voluntary cut of 1 million barrels per day (bpd), while Russia is maintaining its 300,000 bpd cut too. 

China’s crude oil throughput. Graphic by Muyu Xu. 

Some of the reason why oil prices have been stubbornly stuck in a range is demand, which is to say, it isn’t strong enough to push crude even higher. Where can we see that? China – where the country’s oil refinery utilisation rates are stepping back from record third-quarter levels due to thinning margins and a shortage of export quotas, as Muyu Xu, Trixie Yap and Chen Aizhu report here.  

China is expected to process 15.1 million barrels per day (bpd) in November, down from 15.37 million bpd in October, consultancy FGE said. “Refineries should be mulling marginal run cuts due to limited export quotas left for the remainder of this year,” Mia Geng, FGE’s head of China oil analysis, told Reuters, referring to state refiners. 

“Margins are almost disappearing as we’re processing higher-priced crude while demand for refined fuel is weakening,” said an official at a Sinopec refinery.  

More oil workers! These are in an oil field in Cabimas in Venezuela’s western state of Zulia, near Lake Maracaibo. REUTERS/Jorge Silva/File Photo

Venezuela’s PDVSA is in talks with local and foreign oilfield firms to kick output back in gear, as Deisy Buitrago and Marianna Parraga report here, after the U.S. relaxed sanctions on the country.  

The country’s output has been depressed after a series of sanctions from the United States and the country’s own mismanagement of its resources, as it sits on top of some of the biggest reserves in the world. Currently, Venezuela only has one active drilling rig left from more than 80 units that were operational in 2014, making it hard to boost output. This year’s output is 780,000 bpd – far short of the more than 3 million bpd it once produced. 

Gas trading revenues, graphic per Ron Bousso.

This most recent quarter’s results from the big European energy giants showed a glimpse into liquefied natural gas (LNG) trading strategies, as Ron Bousso reports here, with Shell’s and TotalEnergies’ bets on Asian demand doing well while BP’s bet on a European deficit didn’t work out so well. 

What the companies showed was that Shell and TotalEnergies successfully bet on rising Asian demand for LNG ahead of winter, which helped results, while BP’s focus on the European markets – where demand wasn’t as strong – hit trading profits. “Gas trading was exceptional in the first quarter, exceptional in the second quarter and had a weak quarter in the third quarter. That’s just from a lack of structure inside the markets,” BP interim CEO Murray Auchincloss told Reuters. 

“People did not anticipate (Orsted) backing out of Ocean Wind.”  

Timothy Fox, analyst at ClearView Energy Partners, after Denmark’s Orsted surprisingly cancelled two offshore wind farms off New Jersey’s coast.  

Kuwait’s state oil company Kuwait Petroleum Corporation is about $45.7 billion short of the funds it needs to meet its five-year spending plan and will need to borrow and sell assets, as Ahmed Hagagy reports here.  

 
The company may need to delay some projects, remove others, and borrow an additional amount to deal with the deficit.  

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