ADIPEC Days I & II: All about 'Energy^AI'

The first two days of ADIPEC 2024 in Abu Dhabi have whizzed by with one theme dominating proceedings - the deployment of AI as a service. 

In whichever direction you look around the venue - ADNEC Centre - you can't miss signage flagging it. 

At the opening ceremony on Monday, ADNOC's CEO and the UAE's Minister of Industry and Advanced Technology Sultan Ahmed Al Jaber said the state-operated energy company will deploy autonomous AI for the very first time and called on his peers to embrace it too for the benefit of the wider energy industry.

ADNOC's move - dubbed Energy^AI or 'energy to the power of AI' will be in partnership with government-backed G42, AiQ and Microsoft. Here's The Oilholic's full report for Forbes on Al Jaber's remarks and ADNOC's wider plans. ADIPEC itself has allocated 40,000 square feet of exhibition space showcasing AI, quantum computing and the latest in robotics. 

Technology driven energy transition efforts were variously revisited throughout the day, just as many big oil CEOs including BP's Murray Auchincloss and Shell's Wael Sawn highlighted market and geopolitical complexities they are operationally anxious about as well as a return to the basics of traditional oil and gas exploration and production to firm up their bottomline. 

Monday also saw several ministers speak at ADIPEC including the UAE's energy Suhail Al Mazroui and India's minister for petroleum and natural gas Hardeep Singh Puri, as did OPEC Secretary General Haitham Al Ghais, fresh from the crude producers' group's decision to postpone its planned production increase by a month. Most were united in their belief that oil and gas will continue to play a role as part of a wider energy mix for decades. 

The 2024 round of ADIPEC features conference several streams new and old including - its Strategic Conference, Hydrogen Conference, Downstream Technical Conference, Decarbonisation Conference, Maritime &  Logistics Conference, Digitalisation & Technology Conference, Technical Conference, Finance & Investment Conference and Voices of Tomorrow. 

Yours truly kick-off his ADIPEC 2024 journey by hosting a panel titled: 'Climate finance: The role that of the energy and finance sectors' with panellists Lina Osman, Managing Director & Head, Sustainable Finance - Africa and MENAP at Standard Chartered, Bruce Johnson, Director, Corporate Finance and Treasury at Masdar, and Debnath Mukhopadhyay, CFO of TruAlt Bioenergy.

In a riveting session, we all discussed how the energy transition represents a trillion-dollar investment opportunity for investors and how the energy and finance sectors can work more closely together to accelerate the flow of investments in clean energy projects to match investor risk return expectations.

The Oilholic also took time out for a BBC Business Today interview with Sally Bundock to discuss the goings-on at ADIPEC, OPEC's decision to postpone its production cuts, state of the oil market and climate finance. 

We discussed current oil market permutations, impact of the US election, how a possible protectionist White House may impact crude demand in 2025 and why climate finance and investing in energy AI / technology is a major part of the discourse at this year's ADIPEC, and as a potentially politically charged COP29 approaches. 

Tuesday, Day II, brought more discussions on sector innovation to the fore, and a renewed emphasis on why the shift to low-carbon energy was imperative in a gradual march to net zero, and the critical role governments of the world can play in facilitating this. 

Of course, the event saw divergent views on whether this should be achieved via taxation, subsidies or be left to the free markets. Or perhaps a combination of all three. Technology occupied centrestage here too, with several industry participants outlining the various ways in which AI, advanced analytics, quantum computing and IIoT can make a difference in helping the energy sector as well as the wider global industrial complex discover a low - to - ultimately zero carbon future. 

For his part, the Oilholic hosted his second panel of ADIPEC 2024 titled 'Standardised sustainability reporting: building energy transition trust to boost investment' first thing on Day II with panellists Karim Arslan, Executive Director, Green & Sustainable Finance Originator, Green & Sustainable Hub, Natixis Corporate and Investment Banking, Semih Ozkan, Executive Director, EMEA Energy, Power, Renewables, Metals & Mining, J.P. Morgan and Don Dimitrievich, Senior Managing Director and Portfolio Manager for Energy Infrastructure Credit, Nuveen.

We discussed the critical subject of how standardised sustainability reporting could provide the key to boosting investment into the energy transition through higher levels of investor insight and confidence. And here's to more insightful dialogues over the days to follow. That's all for now folks. There's plenty more to come from ADIPEC 2024. So keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo I: Energy AI signage at ADNEC, Abu Dhabi - the venue of ADIPEC 2024. Photo II: AI display at ADNOC exhibition booth at ADIPEC 2024. Photo III: Gaurav Sharma host a panel on climate finance at ADIPEC 2024 on 04.11.24. (Courtesy: dmgevents) Photo IV: Gaurav Sharma on BBC World Business Today on 04.11.24 at 9:50 GST. (Courtesy: BBC) 

Are we back to fundamentals as oil prices tank further?

For the second successive session this week oil prices have slid further and faster. After Monday's declines of over 2%, Tuesday has logged fresh intraday drops of as high as 5%. 

At the time of writing this post, The Oilholic noted that Brent and WTI front month futures contracts had breached their respective $74 and $70 per barrel floors. Headwinds are in fact gathering momentum and yet lower prices may follow. 

Over the weekend, China's promised economic stimulus underwhelmed the market with its vagueness. Then came a revelation that OPEC - deemed the most bullish of the crude oil demand growth forecasters - had revised its prediction lower for 2024 below 2 million bpd. The IEA's prediction is below 1 million bpd. 

And if that wasn't bearish enough, media reports, led by The Washington Post, also suggested on Tuesday that Israel may not attack Iran's oil facilities as feared. So has the risk premium effectively decoupled and are we now back to market fundamentals driving the oil price again? Largely yes in an oversupplied market. But then again not a complete yes yet, as its contingent upon what Israel may or may not do next! 

That said, outlandish $100 per barrel oil price predictions can once again take a back seat. That's all for the moment folks! Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Oil production site. © jplenio / Pixabay, 2018. 

Stock market carnage wobbles oil bulls' stance

Before the recent global stock market carnage hit, bulls in the oil market had already revised their pipe-dream of $100 per barrel Brent prices down to still somewhat unrealistic $90 prices. 

In the face of uncertain summer demand in the Northern Hemisphere, oil prices were already wobbly prior to the wider market volatility. To the Oilholic, even lower to mid-$80 levels appeared to be on the higher side back then. Then - at least from the Bulls' standpoint - disaster struck last week. 

Stock market fears in the US on Friday (Aug 2) spilled over to Asia on Monday sparking declines from Tokyo to Frankfurt, and London back to New York and pretty much all else in between. 

Since energy markets don't operate in isolation from the wider macro climate, oil futures also took a predictable hit, with the Brent front-month contract sliding down to $75 at one point. Recovery followed on Tuesday, both for the stock market as well as the oil market. However, the future direction of travel is not as clear cut for crude markets. 

With lack of clarity on demand and plenty of non-OPEC, especially US, crude available, these days tension in the Middle East doesn't create the kind of price spikes the market had become accustomed to seeing in the previous decade. And in case you haven't heard, the latest Energy Information Administration (EIA) weekly data suggests new all-time US oil production record of 13.4 million barrels per day (bpd) and currently projected to rise to 13.7 million bpd in 2025.

Elevated levels of geopolitical tension offer ample proof of that, and price spikes caused by risk now tend to fizzle out pretty quickly unless energy infrastructure is hit, as yours truly recently told Reuters. And it hasn't been hit so far. 

Meanwhile, both the IEA and OPEC are stuck in their respective positions that oil demand growth for 2024 will below 1 million bpd for the former and above 2 million bpd for the latter. Even if the figure is an average of the two, that demand growth can currently be serviced by the uptick in non-OPEC production alone. 

Not a single physical crude market source and their solver models (i.e. what-if analysis 6 months out) seem to indicate he/she is having (or will have) difficulty in securing crude cargoes at their projected price points, especially of light sweet crude. 

And Brent also remains in backwardation, i.e. a position wherein the current price is higher than prices trading in the futures market for later months. June 2025 Brent prices are nearly $3 lower than front-month (Oct) Brent prices. 

Many in the market are now calling for a $75 Brent floor. It is something the Oilholic has long suggested would be the lower end of a $75-$85 per barrel Brent price range. Looks like the Bulls may well have to recalibrate their long calls yet lower again. Well, that's all for the moment folks. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Oil pump jack building block model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. © Gaurav Sharma, October 2023. 

Third successive weekly loss for crude oil futures

As another trading week came to a close on Friday, oil futures posted their third successive weekly loss. That's the first such occurrence since early June and the Brent front-month contract is now down below $80 per barrel, having spent much of the month of July in the red. It seems no matter what the market is presented with inventory-wise, concerns over demand - especially China's demand - continue to weigh on trading sentiment.

The long ongoing divergence in global demand growth forecasts between the IEA and OPEC adds to the element of uncertainty, with the former keeping its projections for 2024 below 1 million barrels per day (bpd) and the latter maintaining them above 2 million bpd. 

And some in the market are factoring in an unwinding of OPEC cuts later this year, even though the Saudi oil minister has been on record saying the producers' group will react otherwise should conditions merit it. It looks like they do! 

Furthermore, for major buyers such as China and India the availability of discounted crude, however nominal that discount maybe, remains as yours truly noted in an interview with Asharq Bloomberg on July 17.

Overall, in a market that's seeking direction and looking at summer demand in the Northern Hemisphere, things have turned south given the absence of clear signals. As things stand, the first month of a pivotal third quarter of oil trading - ahead of a peaking of refinery demand in August - has turned out to be a damp squib for crude market bulls.

But it is (so far) looking like OPEC is not going to do much at its next meeting, Brent remains in backwardation and many are joining the IEA in predicting an oil market surplus toward the end of the year and early next year. Last week, investment bank Morgan Stanley became the latest to do so (For The Oilholic's Forbes post on the subject, click here). Oil is a story of demand too, so supply-side measures can only do so much in terms of impact in prices. 

Generally speaking, most contacts in the market envisage lower crude prices in Q1 2025, and much of the year-end surplus to be in light sweet crude, boosted undoubtedly by relatively higher US production. So the pipe dream of $90 Brent oil prices this year, remains just that - a pipe dream. That's all for the moment folks. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Gaurav Sharma on Asharq Bloomberg TV © Asharq Bloomberg TV, July 17, 2024. 

Oil heading to $90, renewables in Japan & more

It's been a hectic few weeks in the energy markets over the course of which oil prices have acquired a bit of buoyancy. Its something they briefly lost last month following the OPEC+ meeting. Brent crude futures currently sit just a few dollars south of $90 per barrel level, having dropped below $80 in early June. 

While global crude demand permutations haven't materially altered, there is renewed optimism over lower interest rates in key markets. That and higher demand projections in Asian markets, especially India, appear to be supporting prices. This sets the stall for relatively higher crude prices as we enter the first month of the second half of the year. 

All things staying even, the Oilholic would argue there is now a near-term case for $90 Brent crude prices. However, defending price upticks beyond the level would prove tricky, given the fact that crude supplies, especially those of light sweet non-OPEC crude, remain on a solid footing.  

Away from the oil market, yours truly was interviewed by the BBC on Japan's and wider East Asia's renewable energy landscape. The Oilholic spoke about a call by the country's private sector to triple its renewables capacity by 2035. 

This kerfuffle over Japan's future energy mix has been going on since the Fukushima tragedy in 2011, and has been further complicated by readily available and competitively priced LNG. 

Japan continues to trail the G7 in terms of renewables. However, while still using coal as a power generation source, Japan is not expanding usage in the same way as India and China are. Overall, a renewables capacity target in excess of 360GW by 2035 looks very ambitious. However, never discount Japanese ingenuity for getting things done! 

Elsewhere, here is one of the Oilholic's missives from late June on why the world needs to nurture sustainable entrepreneurship for Forbes (click here), and another one on why green hydrogen's fate in a net zero economy hinges on upscaling for Energy Connects (click here).

Finally, on the eve of the UK's general election, here are this blogger's thoughts on how the outcome will impact the country's energy industry. Regardless of whoever wins, looks like UK Energy Inc may be stuck between a rock and hard place! That's all for the moment folks. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Gaurav Sharma on BBC World © BBC, June 25, 2024. 

Oil market's OPEC meeting tantrum & global LNG

On June 2nd, OPEC+ decided to adopt a pensive position rather than a defensive or offensive one and it promptly sent the oil market into a tizz. Quite frankly, it needn't have. According to data aggregators, OPEC+ members are currently cutting production by 5.86 million barrels per day (bpd). 

The figure includes 3.66 million bpd of group-wide cuts and "voluntary cuts" by eight members of 2.2 million bpd. They include Saudi Arabia, Russia and six others - Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates.

The latter cuts were due to expire at the end of June 2024 while the group-wide ones were due to end in December 2024. Following a part-online, part-physical meeting, OPEC+ extended the cuts of 3.66 million bpd until the end of 2025. But it only prolonged the cuts of 2.2 million bpd by three months until the end of September 2024. After which these voluntary cuts will be gradually phased out over the course of a year from October 2024 to September 2025.

As the markets opened for trading the following, a crude carnage ensued with Brent shattering its $80 per barrel floor and heading lower to $77. While the OPEC+ decision can be construed as bearish, it wasn't the only reason for the slide in prices. As this blogger told Reuters, a number of factors came into play and OPEC's mild surprise merely served as a catalyst. Economic uncertainties persist both in US and China - the world's two leading crude consumers. Neither country offered consistently positive data the month before. 

Both the IEA and OPEC have now revised their demand growth forecasts lower, albeit to varying degrees. The IEA's (at 1.1 million bpd) is half of what OPEC now predicts (2.2 million bpd). Traders looked at all that and went net short for the week.   

However, all things being equal, Brent under $80 did appear to be oversold, as yours truly wrote on Forbes. That's why merely a calendar week later, prices are back above $80 and about right too. What OPEC did (or didn't) matters, but only to a point.

And now from oil to LNG, where yours truly has been doing a deep dive into the state of affairs and the general direction of the global market. 

That's after the latest outages in Norway and Australia triggered yet another spike in prices. As the Oilholic said in a recent CGTN interview, only high levels of storage in Europe have stopped prices from overshooting. It all bottles down to Asia (the world's largest LNG importing region) regularly competing with Europe (the second-largest) for cargoes. This year, Dutch TTF gas prices have risen by 40% over the past three months to trade at around $11 per million British thermal units (mmbtu) levels. 

However, here's the Oilholic's latest market analysis via Forbes on why a change may be on the horizon. Overall, future Asian demand, pace of the energy transition and new supply coming onstream (in the US and Qatar) will likely influence a calmer direction of near-term travel as the end of the current decade approaches. (Full report here). 

That's a wrap for now. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo I: OPEC logo at its Secretariat in Vienna, Austria. © Gaurav Sharma 2018. Photo II: Gaurav Sharma on CGTN Europe for commentary on the natural gas market. © CGTN, June 2024. 

Range-bound crude prices & European majors' antics

After a fairly volatile April, a sense of relative calm has returned to the global oil markets in May. Since the start of the month, Brent futures have fluctuated between $82-84 per barrel with the global proxy benchmark's $85 support having been firmly breached last month. 

What was April's technical support level is proving to be this month's resistance level with oil struggling to cap $85 in a market still searching for a firm direction of travel.

It's doubtful if OPEC+ would be the one to provide direction. The Oilholic's reading of market sentiment is that a rollover of production cuts by the producers' group has been largely priced in by the market. 

If China's data remains positive overall, and the second reading of the US Q1 GDP is similarly so, perhaps an uptick in prices may be expected in the second half of the year. However, for now Brent remains in technical backwardation, i.e. the current contract is trading higher compared to one six months or more out. For example, Jan 2025 Brent is just north of $81 at the time of writing this blog. 

The oil price isn't too high and it isn't too low at the moment. So if you were OPEC+ why would you make any headline moves on production quotas? Much rather focus on soothing internal tensions for the common cause. Well their common cause, obviously not the consumers'! 

Away from crude prices, the European oil and gas majors sang from the same hymn sheet in recent weeks at the release of their quarterly results - offer shareholders higher dividends and announce multi-billion share buybacks. BP, Shell and TotalEnergies were all at it, but the latter two went one step further by professing their love for a primary US-listing in search of a higher valuation. 

Here are this blogger's musings on their antics and reasons via Forbes, and Chevron calling time on 55 years of oil and gas exploration in the North Sea. That's a wrap. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Oil pump jack model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. © Gaurav Sharma October 2023. 

All missives from CERAWeek 2024

With CERAWeek 2024, organised by S&P Global, drawing to a close last week, the Oilholic marked a fascinating and engaging week for the energy markets with a number of pieces for Forbes as well as daily blog posts. 

Here are the Forbes pieces:

• Aramco Investing ‘Big Time’ In Renewables But CEO Slams ‘Fantasy’ Of Phasing Out Oil And Gas, March 18, 2024.
• Oil Is Nearing 5-Month Highs And Its Not Just About Supply Fears, March 18, 2024.
• What Will Oil Demand Look Like In 10 Years And When Might A ‘Peak’ Occur?, March 20, 2024.
• Why Bill Gates Reckons Houston May Become The ‘Silicon Valley Of Energy’, March 24, 2024.
• Global LNG Market: Sliding Prices In 2024, Rising Opportunities By 2030?, March 27, 2024.
• Energy Transition: Challenge Of Financing And Investing In A $6 Trillion Megatrend, March 28, 2024.

All blog entries for each CERAWeek day may be found here. 

And that's a wrap. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. 

CERAWeek Day III: On peak oil demand & more

As the end of day III of CERAWeek nears, for the Oilholic one panel session stood out in particular - Oil Demand: How will it look in a decade? This emotive and extremely polarizing subject turned hot late last year after the International Energy Agency issued a forecast predicting a peaking of oil demand in the 2030s. 

Naturally, OPEC blasted the IEA and said demand would continue to grow for many, many years. It also offered a bullish scenario of 116 million barrels per day in global oil demand by 2045. 

If the Oilholic were to offer his tuppence, oil will indeed continue to be a major part of the energy landscape not just for many years, but many decades. The stark reality of the matter is that no one can say for sure when oil demand will peak whether it is the IEA or OPEC. 

But kudos for the CERAWeek panelists to have at least tried. They included names familiar to the readers of this blog - Joseph McMonigle, Secretary General of International Energy Forum and Jeff Currie, a former Goldman Sachs partner and Chief Strategy Officer of Energy Pathways at Carlyle. 

Both were joined by Fred Forthuber, President of Oxy Energy Services, and Arjun Murti, Partner, Energy Macro and Policy at Veriten, and another former Goldman Sachs executive. The discussion was as lively as it gets. Here's the Oilholic's full report on the goings-on of the panel via Forbes. 

The panel followed a related quip by Shaikh Nawaf al-Sabah, CEO of Kuwait Petroleum Company, earlier in the day's proceedings. He told delegates that global energy demand will increase faster than the population growth rates through to 2050. "That means that we're going to require more energy intensity for the population in the world."

KPC's answer - why of course - increase its production capacity to 4 million bpd by 2035 from its current level of 3 million bpd. 

See, again the thing here is (as asserted earlier by yours truly), if the various forecasters can't even agree on what demand growth will be like at the end of 2024 (with the IEA predicting 1.3 million bpd and OPEC predicting 2.25 million bpd) - how can they predict for sure what the approaching horizon may look like in 2030! And on that note, it's time to say goodbye. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: CERAWeek 2024 panel on - Oil Demand: How will it look in a decade? © Gaurav Sharma, March 2024.