More Oil On The Way

Todd Moses
April 16, 2024

"Texas-based Exxon Mobil now expects its six offshore Guyana projects to generate gross production of 1.3 MMbbl/d by 2027," reports Yahoo! Finance.

Inputs that matter: Whiptail is Exxon's "sixth multi-billion-dollar project in Guyana," Mallon said in an April 12 press release, and production is expected to begin in 2027.

  • Block partner Hess, which Chevron aims to acquire in a $53 billion all-stock deal, said Whiptail will target an estimated resource base of more than 850 MMbbl of oil and include up to 10 drill centers and 48 production and injection wells.

The opportunity: According to The Motley Fool, "Oil is a notoriously volatile commodity (just over the last five years, we've seen prices swing from negative numbers during the pandemic, to as high as $120 a barrel in the immediate aftermath of Russia's invasion of Ukraine)."

  • On Monday, the U.S. House of Representatives is set to vote on several bills toughening sanctions on Iran, including one aimed at reducing Chinese imports of Iranian crude oil.
  • Currently, 80% of Iranian oil goes to China.
  • G7 sanctions are already in place against Russian oil with price caps.
  • reports, "The cap requires that any Western company transporting Russian oil receives a so-called attestation, a document vouching that the cargo cost $60 a barrel or less."

Zoom in: According to The U.S. Energy Information Administration (E.I.A.), the Strait of Hormuz is the world's most important oil transit chokepoint.

  • Iran seized an Israel-linked commercial ship early on Saturday morning as it passed through the Strait of Hormuz, reports the B.B.C.
  • Saudi Arabia and the United Arab Emirates (U.A.E.) have functioning pipelines that can circumvent the Strait of Hormuz.
  • 82% of the crude oil that moves through the Strait of Hormuz goes to Asian markets: China, India, Japan, and South Korea.

Between the lines: Sanctions on oil by the G7 (Canada, France, Germany, Italy, Japan, the U.K., the U.S., and unofficially the E.U.) is a soft attack against their BRICS rivals (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the U.A.E.).

  • Analysts at S&P Global Commodity Insights have predicted that global crude demand will increase by 1.4 mb/d in the current year.

Follow the money: As tensions rise between G7 and BRICS countries, western companies focus on oil exploration outside the group.

  • A significant breakthrough occurred in Namibia's energy sector in early 2022 with Shell Plc. (NYSE: SHEL) and TotalEnergies (NYSE: T.T.E.) finding oil in the Graff and Venus blocks. This oilfield has the potential to become the largest-ever discovery in Sub-Saharan Africa.
  • The Energy Select Sector SPDR Fund (X.L.E.) is an ETF representing Western energy stocks from the S&P 500 index. It is currently peaking near its all-time high of $100.39, which occurred in 2014.
  • Oil prices fell more than 1% on Monday after rising ahead of Iran's airstrike. West Texas Intermediate (WTI) crude futures were trading around $85 a barrel, while Brent futures slipped toward the $89 mark.

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