The mad first month of crude trading year 2024

As the first month of the current oil trading year nears its end, the Oilholic's thoughts on the direction of crude prices hasn't materially altered. We're likely to see prices oscillate in the range of $70 and $85 per barrel in 2024, using Brent as a benchmark. And that's because the bearish bias in wider market fundamentals remains the same in a different trading year, despite all the geopolitical flare-ups we've seen October. We'll touch on those later in this blog. However, admittedly it has been the maddest possible start to trading. 

Feeling the pulse of the market and tepid demand, the Saudis made two profound short- and medium-term decisions. The first came early in the month after Aramco - the Saudi state-owned behemoth - announced a cut to official selling prices (OSPs) for all regions, including lucrative Asian markets, for several crude grades. These included Aramco's flagship Arab Light crude oil. Aramco said cuts in Asia would be as high as $2 per barrel versus the Dubai Oman regional crude benchmark from January levels. 

Prices for Europe would be down by $1.50-$2 per barrel versus Brent January prices, while North American exports would see a drop of $2 per barrel versus the Argus Sour Crude Index (ASCI) used to benchmark U.S. Gulf Coast sour grades. The move weighed on oil prices and seemed like a logical one. 

The Saudis, having voluntarily cut their headline production down to 9 million barrels per day (bpd), want to make sure every single drop of it gets sold in a competitive market receiving plenty of barrels, especially of US light crude. 

The second move came late-January, after Aramco said it was stopping its expansion plans and concentrating on a maximum sustained capacity of 12 million bpd. This immediately generated headlines along the lines of the Saudis acknowledging the end of oil, which, as the Oilholic said via market commentary on several broadcasters, is a load of rubbish. 

Aramco plans to finish the oilfields it has started - namely Berri (250,000 bpd), Dammam (75,000 bpd), Marjan (300,000 bpd) and Zuluf (600,000 bpd). There's only one project cancellation and the company intends to let some other existing fields decline. So with respect, it is nothing more than a pragmatic business move faced with changing medium- to long-term demand in a market the Saudis hope to tap with aplomb for as long as they can.

Away from Saudi moves there were geopolitical flash points aplenty. But none of these managed to move the oil price quite like they used to back when US crude barrels weren't keeping the global markets honest. Following weeks of attacks by Yemen's Iran-backed Houthi rebels on energy and commercial shipping in the Red Sea, the US and UK pounded Houthi positions and infrastructure. The Houthis vowed a response and their sporadic attacks on shipping continued. 

Then on January 28, after over 170 drone and missile attacks on US bases in Syria, Jordan and Iraq since October by Iran-backed proxies in the Middle East, one got through and killed three service personnel. The US' imminent response is to be expected and could mark a dangerous escalation. Where this goes is anybody's guess. But an attack by the US on Iranian soil appears unlikely. (Should it happen, and its hasn't since the 1980s, we could see crude prices around the $90s).

As things stand, crude prices remain range bound. January offered precious little to alter this despite it being one of the most volatile starts to a trading year. Well that's all for now folks. More market thoughts to follow. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Gaurav Sharma on Asharq Business with Bloomberg TV in January 2024 © Asharq Business with Bloomberg TV.

Getting going in 2024 after a break!

Greetings folks, the Oilholic is getting going meaningfully in 2024 after last year was marked by sporadic commentary and long pauses in blogging. 

Sincere apologies for that as yours truly was busy juggling his departure from a full-time job at a bank and taking time out for a paternity break for much of the last quarter. All went well in the end and bubb is here safe, sound and healthy! 

Call it a reboot, relaunch or a 'crude' restart - this blog is now going to be bigger and better with your support carrying regular market commentary, details of industry engagements, missives and interviews on energy economics, geopolitics, financials and more. So watch this space! 

And of course, the Oilholic will also continue his broadcast media commentary, energy circuit speaking engagements, and writing for Forbes and many other publications and websites as before! So here's to 2024. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2024. Photo © Pixabay

Can oil really hit $150? (And more!)

As the current crude oil trading year enters its final two months marked by festive breaks and potentially higher consumer demand as the Northern Hemisphere's winter approaches - thoughts inevitably turn to what price levels we will likely encounter in 2024.

With hostilities in the Middle East failing to lift crude prices despite all the talk of risk premiums and potential supply disruptions, being bullish about oil early in 2024 is proving hard. That's because concerns over crude demand are outweighing concerns over supply. 

We're talking muted demand from the economic powerhouses of Germany and China, lower consumer confidence levels in key OECD markets and elevated interest rate levels kept there by major global central banks, especially the US Federal Reserve. 

It therefore came as a surprise to The Oilholic when the World Bank opined that crude prices could hit $150 if hostilities in the Middle East escalate! Here are this blogger's thoughts on that via Forbes. Simply put - don't hold your breath! 

And let's not forget, Brent hasn't even capped a more realistic $100 per barrel level the bulls crave. The benchmark's January 2024 contract is barely higher than current levels, and contracts further out into the summer of next year are even lower. That implies Brent remains in backwardation mode.

Away from the crude price, the latest quarterly earnings posted by energy majors provided plenty of talking points. More so, after the return of megadeals as ExxonMobil swooped for Pioneer Natural Resources and Chevron swooped for Hess Corp. 

Other deals may follow as the energy majors fish for viable plays. It's led many, including this blogger, to wonder if a supermajor itself could be vulnerable? The prime candidate for finding itself in this position is BP; a chronically undervalued supermajor in the Oilholic's opinion. More on the subject here via Forbes. 

Is it possible? Yes, especially in a industry built on big ticket deals. Will it happen? Probably no, not least down to BP's $100 billion plus valuation (however discounted that may appear to some). But as yours truly noted on Forbes - that the company has had to bat away questions about being a takeover target is pretty extraordinary and indicative of how far it has fallen. Well that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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

The challenge of producing more industrially with less

Last week The Oilholic had a hectic, but fruitful and amazing trip to AVEVA World 2023 in San Francisco. Much of the discussion at the event was about one profound question - how to do more with less for the energy and industrials complex, and finding answers via the deployment of technologies such as artificial intelligence (AI), industrial internet of things (IIoT), digital twins and enhanced data analytics. 

From the standpoint of the hosts - industrial software solutions and consulting firm AVEVA - the pathway forward is all about creating a connected industrial ecosystem. One that offers a gateway to an unlimited world of data analytics, including third party analytics, with everything focused on one key priority - how to efficiently, safely and diligently improve throughput whilst using less energy and resources.

AVEVA's corporate take goes along the lines of "working to build a new industrial ecosystem, defined by agility, resilience and sustainability. By connecting [clients'] teams with trusted information and insights, powered by the cloud, and finding new ways to deliver life’s essentials – while driving responsible use of the world’s resources."

You deploy solutions to do that, and by default you lower your carbon footprint - a mantra this blogger saw repeated often by the company executives from the exhibition floor to the main auditorium, from keynotes to panel discussions, and much else in between. 

While AVEVA's age-old business mainstay may well have been in the oil and gas business, today it provides software solutions for most segments of the global commerce and industry all of which are under pressure to lower their carbon footprint. In keeping with this, the event had several breakout streams and content on a range of subjects. 

These included sessions for process industries (chemicals, pulp and paper, manufacturing, etc.), infrastructure, power and utilities, and of course oil, gas and energy. Each of these touched on advanced solutions and practices for improving efficiencies and finding that low to zero carbon horizon. And if numbers are your thing, we're talking more than a dozen industry tracks, keynotes, and an immersive expo.

There was also plenty of chatter on deriving multifaceted value from AI, and viewing it as an ally or enabler rather than a threat. Both AVEVA and its customers, including the likes of Mitsubishi Power, Yinson and Henkel, appeared to be pretty candid about the constructive deployment of AI. Read more about it in The Oilholic's latest Forbes post here. 

In summation, to quote AVEVA CEO Caspar Herzberg (pictured here at an analysts' briefing on October 25, seated third from left): "The true benefits go beyond the numbers: connected digital insight and technologies enable you to turn volatility into commercial opportunity by transforming industrial production into digital insights, so you can boost efficiency, resilience, and sustainable impact, and realize your boldest aspirations."

Part of being bold or having bold aspirations - especially for the energy, oil and gas sector - is embracing the technological solutions of our age provided by the likes of AVEVA, and of course, its peers. Going by the interest AVEVA's software products suite generated in San Francisco and the number of energy players in town, The Oilholic reckons that the message is cutting through big time. Well that's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo 1: AVEVA logo at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. Photo 2: AVEVA World 2023 Expo Floor. Photo 3: AVEVA CEO Caspar Herzberg (third from left) speaking at an analysts' briefing at AVEVA World 2023. © Gaurav Sharma October 24-25, 2023. 

Connected energy solutions at AVEVA World 2023

The Oilholic is delighted to be back in San Francisco for AVEVA World 2023 - the annual client fixture for technology consulting and industrial software company AVEVA. It's also the company's first major event since being taken over by Schneider Electric in January 2023.

A content packed start to the conference, being held at San Francisco's Moscone Center, has seen wide ranging discussions on connected solutions in the industrial software space, cloud-based applications and how the energy industry can turn volatility and challenges over meeting sustainability targets into opportunities. Afterall, the sector is pursuing a deep transformation to become more sustainable as well as ensure that the world's needs are met. Technology provides many, if not all, of the answers.

Kicking off proceedings, Caspar Herzberg, CEO of AVEVA, talked of exploring use cases for a sustainable industrial ecosystem - one that's connected and utilizes the power of big data and a seemingly unlimited world of data analytics. And of course, placing the company's platform agnostic AVEVA Connect product suite at the heart of this connected industrial ecosystem. 

"Those that master this art [of a connected, sustainable industrial ecosystem] will outperform other systems," Herzberg said in his keynote. The AVEVA boss' pitch is a clear and simple one to energy, heavy industrials, mining, metals, companies, and indeed other sectors - tie in process efficiencies, improved throughout and sustainability, take learnings from data using AI solutions, and the results would become evident.

Those results include energy efficiency pathways that are 20% better and would invariably help in lowering carbon emissions. One enabling solution is digital twin technology. Read more about it and this blogger's conversation with AVEVA's Head of Research and Innovation Simon Bennett on Forbes.

There's more to come from AVEVA World 2023 - an event Herzberg himself described on Tuesday as one of the largest gathering of industrial software professionals and specialists in the world. That appears to be around 2,500 attendees and counting.

Away from the event, here is the Oilholic's latest piece for The Motley Fool on BP's share price direction, and how significant the appointment of its next CEO could be. That's all for now folks. Keep reading, keep it here, keep it 'crude'!

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© Gaurav Sharma 2023. Photo: Caspar Herzberg, CEO of AVEVA, speaks at AVEVA World 2023 at the Moscone Center, San Francisco, US on October 24, 2023. © Gaurav Sharma 2023.