Data from the American Petroleum Institute revealed Wednesday that US crude oil inventories dropped by 2.8 million barrels in the week ended May 22, following a 9.1-mmbbl draw the previous week, according to a Bloomberg-compiled survey.
The oil market now awaits the US Energy Information Administration's petroleum inventory report, scheduled for release on Thursday.
China has sharply reduced crude oil imports in response to the ongoing disruption in the Strait of Hormuz, but deeper cuts may soon threaten fuel and petrochemical supply, Michal Meidan, analyst at the Oxford Institute for Energy Studies, said in a note on Wednesday.China's crude imports fell to 9.3 million barrels per day in April from an average of about 11 mb/d over the past five years. Seaborne imports are expected to decline further into early summer as refiners cut processing rates.Meidan looked at how long China can continue lowering imports before it is forced to return to the market or begin drawing down oil inventories more aggressively.He said China still has several tools available, including refinery run cuts, fuel yield adjustments, and stock management. But each option carries trade-offs.Under one scenario, a 10% reduction in refinery runs could cut seaborne imports to as low as 7.2 mb/d. However, this would require refiners to prioritize gasoline and diesel production over petrochemical feedstocks, a strategy the report said would be difficult to sustain for more than a few months.A more moderate 5% cut in refinery runs appears more viable over a longer period. At around 8 mb/d of seaborne imports, China could largely meet domestic fuel demand while limiting damage to petrochemical output.China's effective crude import "red line" is not a single number but depends on a combination of refinery operating rates, product yield management and stock policies.Pushing imports too low without drawing inventories would force steep refinery cuts that could undermine petrochemical supply, while keeping run cuts modest would require policymakers to accept controlled stock draws and continued intervention in fuel prices and export volumes.
French utility EDF delayed plans to sell a stake in its Italian unit, Edison, to 2027 as Middle East LNG disruptions weighed on the subsidiary's valuation, Reuters reported Wednesday, citing two sources familiar with the matter.To raise cash for investments in its nuclear reactor fleet, EDF had reviewed several options for Edison last year, including an initial public offering and a sale of a minority stake to investors.Disruptions to Middle East gas shipments, combined with regulatory changes in Italy, weakened Edison's operating outlook as the country's second-largest natural gas importer, the sources reportedly said."At this stage, we are still assessing all the available options, notably in light of the various recent developments, and are closely monitoring market conditions," EDF toldin an emailed response.Advisers are revising Edison's business projections to reflect LNG supply disruptions, while EDF could resume investor talks in September if regional tensions no longer weigh on the company's valuation, Reuters reported, citing sources.In April, the companies reportedly pushed a decision on the potential sale to this month. Last year, sources reportedly told Reuters that Edison could be valued at 7 billion euros ($8 billion) to 10 billion euros.QatarEnergy, which supplies Italy with 6.4 billion cubic meters of gas annually under a long-term Edison contract, canceled five additional LNG cargoes and extended force majeure through mid-August.Edison didn't immediately respond to' request for comment.(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)
Northern Oil and Gas (NOG) is expanding into the Canadian market with a $259 million acquisition in Alberta's light-oil Duvernay shale, betting the basin's low-cost inventory can bolster growth amid expectations for stronger long-term crude prices, RBC Capital Markets strategists said on Wednesday.The US energy firm said it agreed to acquire an undivided 25% non-operated interest in assets owned and operated by Parallax Energy Operating, a private equity-backed firm.The deal includes net production of about 4,000 barrels of oil equivalent per day, about 80% of which is light oil, along with 75,000 net acres and about 500 gross drilling locations in the Duvernay East Shale Basin in Alberta.Northern Oil and Gas said the assets contain about 20 years of drilling inventory with breakeven oil prices below $50 per barrel, while operating costs are expected to remain below $7.50 per barrel of oil equivalent.The acquisition marks the energy firm's first expansion into Canada, and provides exposure to what RBC described as "inventory-rich" light-oil acreage in a higher mid-cycle oil price environment.The bank said the sellers will receive about $83.5 million in Northern Oil and Gas common stock as part of the transaction, with the remainder funded in cash.The company also said it plans to hedge currency fluctuations tied to operating costs through multi-year derivative transactions. The transaction is expected to close in Q2.Northern Oil and Gas said updated pro forma guidance tied to the acquisition remains in line with the high end of its previously issued low-activity outlook.Price: $21.33, Change: $-1.02, Percent Change: -4.54%