Oil little changed as demand concerns offset Middle East tensions

Oil futures were little changed as rising concerns about global demand caused the market to take a break after prices jumped about 6% last week on worries that Middle East tensions could cause supply problems, said Hydrocarbonprocessing.

Brent futures LCOc1 fell 26 cents, or 0.3%, to $81.93 a barrel by 10:48 a.m. EST (1548 GMT), while U.S. West Texas Intermediate crude (WTI) CLc1 remained unchanged at $76.84. The major forces underlying last week's rally included persistent threats to shipping in the Red Sea, Ukrainian strikes on Russian refineries and U.S. refinery maintenance, Tamas Varga of oil broker PVM told Reuters.

"These factors have not subsided yet - and for this reason, I believe that what we see at the moment is only a retracement." U.S. gasoline futures RBc1, which soared 9% last week amid refinery downtime, extended gains by about 1% on Monday to a three-month high.

Logistics disruptions in the Red Sea continued on Monday, with Iran-backed Houthis in Yemen saying they targeted a cargo ship, which they claimed was American. Shipping trackers said the Marshall Islands-flagged ship was Greek-owned, while analysts said it had been heading to Iran with a corn cargo.

The Houthis have targeted shipping with drones and missiles since November in solidarity with Palestinians in Gaza. The U.S. has led retaliatory strikes on Houthi missile sites since January. An Israeli rescue operation freed two hostages held by Iran-backed Hamas militants in Rafah, but supporting airstrikes killed nearly 70 Palestinians in the southern Gaza city.

In supply news, Saudi Arabia's energy minister said the reason behind the kingdom's recent decision to halt its oil capacity expansion plans was the energy transition, adding that it has plenty of spare capacity to cushion the oil market.

Fellow member of the Organization of the Petroleum Exporting Countries Iraq said it is committed to the group's decisions and after its second voluntary cut announced in December, it is also committed to producing no more than 4 million barrels per day (bpd).

We remind, portfolio investors abandoned hope for an early rally in crude prices after a site-wide electricity failure caused an unexpected shutdown in production at bp’s refinery at Whiting in Indiana on Feb. 1. The refinery is the largest in the U.S. Midwest and processes more than 400,000 barrels per day, so the extended closure for safety checks and restart processes threatens to reduce crude consumption significantly.

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In early February, Royal Dutch Shell, a prominent Anglo-Dutch oil and gas company, declared force majeure concerning the supply of butadiene to its facility in Norco, Louisiana, USA, said Chemanalyst.

Market reports have confirmed the shutdown of a line with a substantial capacity of 265,000 tonnes of butadiene annually. This operational halt is anticipated to persist at least until the conclusion of February, with the precise cause of the disruption remaining undisclosed.

The declaration of force majeure signifies a contractual clause invoked by Shell, releasing the company from its obligations due to unforeseen and uncontrollable circumstances. For clients dependent on the Norco site for butadiene supply, this triggers a series of limitations and disruptions in the expected deliveries.

This recent force majeure event echoes a similar occurrence in the Shell portfolio, as on March 25, 2022, the company had previously announced force majeure for the butadiene supply at its Moerdijk facility in the Netherlands. The rationale behind this prior declaration was a technical issue, specifically a steam leak, affecting a 115,000-tonne per year line. This incident led to the incapacitation of a cracking unit, prompting Shell to invoke force majeure for the butadiene supply.

The declaration of force majeure in Norco, Louisiana, raises questions about the operational resilience and supply chain dynamics within Shell's butadiene production network. The unavailability of precise details regarding the cause of the disruption adds an element of uncertainty, leaving industry stakeholders and clients keenly awaiting further insights from the company.

As the force majeure situation unfolds, the affected clients at the Norco site must navigate through the challenges posed by restricted butadiene supply. This disruption may have implications for downstream industries dependent on butadiene, a key ingredient in the production of various synthetic rubbers and plastics.

Shell's proactive response to unforeseen technical challenges underscores the complexities inherent in the operation of petrochemical facilities. The company's commitment to transparency and effective communication with its clients will be pivotal in managing the impact of the force majeure on butadiene supply.

The force majeure declaration by Royal Dutch Shell for butadiene supply to its Norco facility in Louisiana introduces a level of uncertainty and disruption in the downstream petrochemical supply chain. The ongoing challenges faced by Shell, coupled with a recent similar incident in the Netherlands, highlight the intricate nature of operating facilities that are crucial to the global energy and chemical sectors. As industry participants await more information on the causes and resolutions of these disruptions, the resilience and adaptability of companies like Shell will be critical in navigating the complexities of the evolving petrochemical landscape.

We remind, Czech oil pipeline operator MERO is in the final stages of talks to buy Shell Deutschland's 32.5% stake in the Mineraloelraffinerie Oberrhein refinery in Karlsruhe, daily paper Hospodarske Noviny reported without citing sources. The purchase by state-owned MERO should be approved by the Czech government within weeks, the paper said.

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The Board of Directors of TotalEnergies SE, chaired by CEO Patrick Pouyanne, met on 6 Feb 2024, to approve the 4Q 2023 financial statements, said the company.

Hydrocarbon production was 2,462,000 barrels of oil equivalent/d in the 4Q 2023, down 1% quarter-over-quarter. 4Q 2023 benefited from LNG production growth, which partially compensated for the Canadian oil sands assets disposals that were effective this quarter. Hydrocarbon production was 2,483,000 barrels of oil equivalent/d in 2023, up 2% year-on-year (excluding Novatek).

Adjusted net operating income from business segments was $5724 M in the 4Q 2023, compared to $6808 M in the 3Q 2023 mainly due to lower oil prices and refining margins. Adjusted net operating income from business segments was $25,107 M in 2023, compared to $38,475 M in 2022 due to lower oil & gas prices and lower refining margins compared to the exceptional environment in 2022.

TotalEnergies adjusted net income was $5226 M in the 4Q 2023 versus $6453 M in the 3Q 2023. Adjusted diluted net earnings per share were $2.16 in the 4Q 2023, based on 2387 M weighted average diluted shares, compared to $2.63 in the 3Q 2023. Adjusted diluted net earnings per share were $9.40 in 2023, based on 2434 M weighted average diluted shares, compared to $13.94 in 2022.

TotalEnergies' net cash flow was $7765 M in the 4Q 2023 compared to $4249 M in the 3Q 2023, reflecting the $840 M decrease in CFFO that was more than offset by the $4356 M decrease in net investments to $735 M in the 4Q 2023. Net cash flow was $19,109 M in 2023 compared to $29,426 M in 2022, reflecting the $9783 M decrease in CFFO and the $534 M increase in net investments to $16,837 M in 2023.

2023 cash flow from operating activities was $40,679 M versus CFFO of $35,946 M, which reflects positive variation from a working capital release of $4.8 bn, of which around $2 bn is related to exceptional fiscal debt variations that are mainly due to the change of the gas and power price cap compensation system in France and the disposal of our German retail network to Alimentation Couche Tard. Net income for TotalEnergies SE, the parent company, amounted to EUR 11,232 M in 2023, compared to EUR 7835 M in 2022.

We remind, TotalEnergies has not sent ships through the southern strait leading to the Red Sea and the Suez Canal for several weeks, extending its ships' travel time to Europe. The Bab-el-Mandeb strait at the southern end of the Red Sea has been disrupted by Houthi attacks on commercial vessels, driving up freight costs and restricting traffic.

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Olin and Albemarle agreed to dismiss their claims that accused each other in federal court of trying to establish monopolies for their products, said the company.

Albemarle accused Olin of trying to establish a monopoly in the merchant market for railcar chlorine. Chlorine and caustic soda are co-products. In its countersuit, Olin accused Albemarle of trying to establish a monopoly in tetrabromobisphenol A (TBBPA), a flame retardant made by reacting bromine with bisphenol A (BPA). Olin uses TBBPA to produce a flame-retardant epoxy resin used in printed circuit boards.

A federal court agreed to dismiss each of the companies claims on January 5, 2024. In a statement, Olin alleged that Albemarle filed the federal litigation in retaliation to an earlier lawsuit that the chlor-alkali producer had filed in Virginia state court concerning breach of contract.

That earlier lawsuit and a counterclaim filed by Albemarle continue. Olin alleged that Albemarle's federal lawsuit lacked merit.

"Olin is uncompromisingly committed to abiding by all applicable laws regarding fair competition," the company said. "We will simultaneously and relentlessly strive to maximize value for our shareholders while producing chemicals essential to our modern economy in a safe and responsible manner." In a statement, Albemarle said its acceptance of the deal was strictly a business decision.

With the federal claims dismissed, Albemarle will seek a full recovery of its claims in state court, where it expects to achieve most of its litigation goals in a way that is more cost effective. Albemarle's federal lawsuit and Olin's counterclaims were filed in US District Court, Eastern Virginia District. The case number is 1:23-cv-600.

We remind, Olin Corporation announced financial results for 4Q ended 31 Dec 2023. Epoxy sales for 4Q 2023 were USD313.1 M, compared to USD484.2 M in 4Q 2022, said the company. The decrease in Epoxy sales was primarily due to lower product pricing and USD94.0 M of lower cumene and bisphenol A sales. 4Q 2023 segment loss was (USD23.1) M, compared to segment earnings of USD30.5 M in 4Q 2022.

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MRC -- Portfolio investors abandoned hope for an early rally in crude prices after a site-wide electricity failure caused an unexpected shutdown in production at bp’s refinery at Whiting in Indiana on 1 Feb, as per Hydrocarbonprocessing.

The refinery is the largest in the U.S. Midwest and processes more than 400,000 barrels per day, so the extended closure for safety checks and restart processes threatens to reduce crude consumption significantly.

Surplus crude is likely to accumulate across the Midwest and especially around the NYMEX delivery point at Cushing in Oklahoma. Before the power failure, Cushing inventories had been depleting, and investors were positioning for a squeeze on deliverable supplies.

The prospect of a squeeze had been lifting prices for both U.S. crude and Brent, but the outage has delayed further depletion and sent prices sliding. Hedge funds and other money managers sold the equivalent of 86 million barrels in the six most important petroleum-related futures and options contracts over the seven days ending on Feb. 6.

There were heavy sales of NYMEX and ICE WTI (-62 million barrels) and Brent (-23 million) as fund managers anticipated a significant increase in the amount of crude available. Funds sold WTI at the fastest rate since October 2023 and before that July 2021 as the prospect of a squeeze receded.

The combined position in WTI was cut to a three-week low of 55 million barrels (4th percentile for all weeks since 2013) down from 117 million barrels (16th percentile) the previous week. Fund managers had been trying to become bullish again about WTI since the middle of January on the prospect of sustained inventory depletion and renewed growth in U.S. manufacturing.

But the Whiting power failure has pushed that scenario back by at least several weeks.

We remind, Phillips 66 is committed to playing a meaningful role in the energy transition by offering lower-carbon solutions to supplement its production of traditional fuels. That was the message delivered by Suresh Vaidyanathan, the company’s vice president of renewable fuels, at the Argus America Crude Summit in Houston on Jan. 24. He was joined by executives from other refiners operating in the U.S. on a panel discussion exploring refining in a low-carbon world.

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