Defying Lower Oil Prices, Saudi Aramco Goes on Borrowing Spree
– Saudi Arabia’s national oil company, Saudi Aramco, is seeking to borrow more from the financial markets to meet its investment needs, having raised $5 billion this week in its first dollar-bond sale of 2025.
– The company’s net debt rose to its highest since 2022 as of April 2025, up 18% quarter-on-quarter to 25 billion, although Aramco’s gearing ratio remains relatively low at 5.3%, a fraction of BP’s more than 25%.
– According to the IMF, Saudi Arabia’s fiscal breakeven oil price is $92.3 per barrel, and even its 2030 forecast sees breakevens above $80 per barrel, suggesting the country’s deficit is set to worsen in the current pricing environment.
– Potentially, farm-ins could also be a source of income as Saudi Aramco was rumoured to be seeking investors for infrastructure assets in its giant $100 billion Jafurah project, expected to start up later this year and add some 2 bcf/day of natural gas production.
Trump’s EU Tariffs Are Not a Good Idea
– President Trump’s proposal to slap a 50% blanket tariff on all goods coming from the European Union created a new scare for the US refined market, as large parts of PADD I still rely on trans-Atlantic gasoline flows.
– Last year, some 240,000 b/d of gasoline were supplied from European countries to the US, with New York being the most frequent delivery point, with smaller volumes of naphtha also flowing ‘across the pond’.
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Defying Lower Oil Prices, Saudi Aramco Goes on Borrowing Spree
– Saudi Arabia’s national oil company, Saudi Aramco, is seeking to borrow more from the financial markets to meet its investment needs, having raised $5 billion this week in its first dollar-bond sale of 2025.
– The company’s net debt rose to its highest since 2022 as of April 2025, up 18% quarter-on-quarter to 25 billion, although Aramco’s gearing ratio remains relatively low at 5.3%, a fraction of BP’s more than 25%.
– According to the IMF, Saudi Arabia’s fiscal breakeven oil price is $92.3 per barrel, and even its 2030 forecast sees breakevens above $80 per barrel, suggesting the country’s deficit is set to worsen in the current pricing environment.
– Potentially, farm-ins could also be a source of income as Saudi Aramco was rumoured to be seeking investors for infrastructure assets in its giant $100 billion Jafurah project, expected to start up later this year and add some 2 bcf/day of natural gas production.
Trump’s EU Tariffs Are Not a Good Idea
– President Trump’s proposal to slap a 50% blanket tariff on all goods coming from the European Union created a new scare for the US refined market, as large parts of PADD I still rely on trans-Atlantic gasoline flows.
– Last year, some 240,000 b/d of gasoline were supplied from European countries to the US, with New York being the most frequent delivery point, with smaller volumes of naphtha also flowing ‘across the pond’.
– The European Union ran a $225 billion surplus last year in its trade with the United States, mostly coming from automotive exports, agriculture, and oil products.
– Whilst the EU is highly unlikely to reciprocate with tariffs on US crude oil or natural gas, last year’s surge in US diesel flows to Northwest Europe (seeking to replace sanctioned Russian diesel) could be cut short by regulatory interference.
California’s Power Curtailments Get Worse Over Time
– California is increasingly curtailing renewable power generation as seasonally high solar often creates oversupply conditions, predominantly over the shoulder season in the spring and fall.
– In 2024, California’s grid operator CAISO curbed 3.4 million MWh of utility-scale wind and solar production, a 29% increase year-over-year, overwhelmingly coming from solar power that tends to peak around noon.
– The Golden State has 89 GW in installed generation capacity as of end-2024, with 28.2 GW (or 32%) coming from wind and solar, but even the installation of 12 GW of battery storage has not solved the issue of generation curtailments.
– The proliferation of battery storage is a much-needed addition to California’s power options, but over the spring months, there is more solar energy than can be used within a day, as storage draws usually take place 4-8 hours later in the day.
US Agriculture Lobbies for Stronger Biofuels Mandates as Exports Wane
– US-China trade wars are taking a toll on American farmers as exports of China-bound agricultural commodities continue to plummet, with overseas sales of soybeans currently running 79% below the 5-year average.
– Constrained in finding new export markets, soybean and corn farmers would need domestic outlets; however, the US’ cattle herd is at its lowest since the 1950s, leaving farmers heavily reliant on biofuels obligations, the so-called RVOs.
– As such, agricultural giants ADM, Bunge, and Cargill are lobbying for a 60% increase in biofuels mandates starting next year, demanding that the EPA set the RVO volume at no less than 5.25 billion gallons for biomass-based diesel.
– In 2024, the US exported $12.8 billion worth of soybeans to China (north of 27 million tonnes), accounting for slightly more than 20% of the Asian country’s imports, but tariff wars prompted Chinese buyers to ramp up purchases from Brazil.
Are Permian Producers Slamming the Brakes on Shale?
– As OPEC+ is headed towards another sped-up production unwinding in July, unleashing another 411,000 b/d of slashed output, Permian producers are struggling to adapt to a new low-price environment.
– The US Energy Information Administration lowered its Permian production forecast for the third straight time, expecting 2025 output to average 6.51 million b/d, which would still mark a 200,000 b/d year-over-year increase.
– Declines might be just around the corner as the US shale frac spread count dipped by 28% from a year ago to 186, with oil drillers wary to open the spigots with wells that are dangerously close to the Permian’s $62-63 per barrel breakeven.
– The rig count of the Permian Basin plunged to 279 rigs in the week ended May 23, the lowest since November 2021 and a 11% year-over-year decline, with only Eagle Ford and Niobrara seeing bigger drops from a year ago.
The Great Copper Trade of 2025 Now Focuses on China
– Glencore has been orchestrating one of the largest metal transactions of 2025 to date, buying up Russian-origin copper on the London Metal Exchange and planning to deliver it to China after Beijing’s inventories of the transition metal started to wane.
– This week saw the drawdown of around 15,000 metric tonnes of copper from LME warehouses in Rotterdam, slashing available stocks to their lowest since April 2024 at a mere 85,000 metric tonnes.
– Chinese premiums for copper rose to their highest since 2020 amidst steep backwardation, driven by the US’ unprecedented import spree as companies sought to build stocks ahead of potential Trump tariffs.
– Almost all of the copper inventories held in Europe in LME-registered warehouses tend to be of Russian origin, although most traders stepped away from those stocks after the US and the UK imposed sanctions in April 2024.
Beijing Asks Chinese Industry to Stock Up on Domestic Coal
– The Chinese government has asked its power-generating companies to buy more of domestically produced coal and build inventories thereof, seeking to shore up coal prices that have been in a freefall for two years already.
– China’s state planner put forward a plan to increase thermal coal stockpiles by 10% by June 10, setting an overall target of 215 million metric tonnes, but medium-grade coal prices continued to weaken, trading around ¥620 per metric tonne ($85/mt) this week.
– Chinese coal production remains robust, recording a 6.6% surge from a year ago as the Asian country’s miners produced 1.58 billion tonnes in January-April, despite lower profit margins.
– According to Kpler data, Chinese coal imports have fallen by 17% from a year ago as importers took in 137 million tonnes, with lower-quality (and cheaper) Indonesian coal accounting for half of those volumes.
