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Fri, 26th May 2017

Anirudh Sethi Report

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Archives of “Crude” Category

Baker Hughes US oil rig count 703 vs 697 prior

US oil and gas drilling rigs from Baker Hughes

  • 16 weeks in a row of gains
  • Prior was 697
  • Gas rigs 173
  • Prior gas rigs were 171
  • Total rigs 877 vs 870

OPEC quotas might continue in the second half but increasing drilling and production in the US means they’re doomed.

Saudi energy minister: There is a growing conviction that the oil deal needs to be extended

we’re firmly in the “deal chatter zone” now

  • Based on the data today, there is a growing conviction that the deal may need to be extended for 6 months, although the length of extension is not firm yet
  • There’s a growing consensus among OPEC and non-OPEC members on the need to continue rebalancing the market
  • Energy minister spoke to Russian counterpart yesterday to discuss status of the oil market
  • Both ministers to meet in Beijing within 10 days
  • Both ministers expressed their satisfaction with market fundamentals
  • Agreed on the need to continue working with others to help guide the oil market towards its rebalancing

So far, oil’s having none of all this chatter, although it has staged a bounce from the earlier 46.61 lows to 48.24.

WTI/RBOB Pop After Biggest Crude Draw Since 2016, Surprise Gasoline Draw

Following last week’s surprise builds in Gasoline and Distillates, API reported a bigger than expected crude draw of 4mm barrels (whioch will be the biggest since 2016 if it holds for DOE). Furthermore, RBOB jumped after gasoline (and distillates) inventories fell (against expectations of a modest build)

API

  • Crude -4.158mm (-3.5mm exp) – biggest since 2016
  • Cushing -215k
  • Gasoline -1.93mm (+1mm exp)
  • Distillates -436k

Inventory draws across the board…

And the reaction was a kneejerk higher – after an ugly day (thanks to comments from the Saudi crown prince) for WTI (6mo lows) and RBOB (8mo lows)…

 

Notably, Russian announced production cuts right before the data hit and stated that it favbored extending the OPEC production cut deal.

 

Oil Suddenly Drops To 6-Month Lows After Saudi Prince Comments

Driven by both a technical level break and comments from Saudi crown prince bin Salman, WTI Crude just tumbled to below $47.50 – its lowest since early November

Breaking below last week’ slows, testing stops below early March’s lows…

Driven by both a technical level break and comments from Saudi crown prince bin Salman, WTI Crude just tumbled to below $47.50 – its lowest since early November

Breaking below last week’ slows, testing stops below early March’s lows…

After Saudi Crown Prince Mohammed bin Salman commented… saying OPEC and Non-OPEC deal was unprecedented, and that the optimistic scenario for oil prices if $55, and $45 is lowest.

  • *SAUDI PRINCE: SAUDI BUDGET DEFICIT NARROWED MORE THAN EXPECTED
  • *SAUDI PRINCE: SAUDI ECONOMY AVOIDED RECESSION
  • *SAUDI PRINCE: NON-OIL REVENUE IN 1Q EXCEEDED EXPECTATIONS
  • *SAUDI PRINCE: OPEC, NON-OPEC DEAL WAS UNPRECEDENTED

And we also note that RBOB (Gasoline) prices have tumbled to 8-month lows…

 

Big OPEC producers want $60 oil – report

WSJ says target price raised

  • Iraq oil minister: “Iraq wants prices to rise to $60. This our aim”
  • WSJ says Saudis and Kuwait also targeting $60

The WSJ is out with a story that’s bullish for oil. They say main producers had been seeking $55 per barrel but now want $60. They believe that level will boost their economies without attracting too much US shale drilling.

The higher price target suggests they will support an extension of quotas at meetings scheduled for the end of May.

The target is symbolic, the WSJ says, but “offers a window into how serious they are about using their supply power to affect the market.”

The big upcoming event is the Saudi Aramco IPO and that’s what is motivating the discipline from the Kingdom.

“They need this price [$60] for the IPO of Saudi Aramco,” a person familiar with Saudi oil policy told the WSJ.

IEA cuts 2017 global oil demand growth by 40k bpd to 1.32mln bpd

International Energy Agency out with their monthly bulletin 13 April

  • global demand estimate for 2017 could prove optimistic as slowdown in OECD nations deepens
  • raises f/cast for non-OPEC supply growth to 485k bpd in 2017 vs 400k prev
  • can be argued confidently that oil market is already close to balance

Sound like suitably dovish tones to me but oil unfazed albeit already its session highs.

Full IEA report here at some point.

OPEC compliance on quotas at 104% – report

Reuters gets an early look at secondary sources data

  • The 11 OPEC countries in the supply pact complied with 104% of curbs in March, according to the secondary sources data
  • The numbers are due to be published tomorrow and could still be revised, Reuters warns

Oil was higher today was is down 230cents at $52.85 as everything slumps.