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Sun, 25th June 2017

Anirudh Sethi Report

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Archives of “Crude” Category

(Oil – Weekend piece on) Floating LNG production- “superseded” by rising U.S. output

An item over the weekend with some background on developments in floating liquefied natural gas (FLNG)

There is nothing new, but it’s a reminder of what’s been going on in that space.
It says:
  • FLNG projects have been firmly relegated to the backburner as global gas producers seek cheaper ways to compete with a surge in U.S. shale supplies and slumping prices
  • monthly U.S. LNG exports have risen above 1 million tonnes since the start of this year
  • Hit a record 1.05 million tonnes in February (Thomson Reuters Eikon trade flow data)
  • 8.6 billion cubic feet per day of U.S. gas production (68.3 million tonnes per annum of LNG) is currently under construction and scheduled to come on stream by 2020

Titans of oil world meet in Houston after two-year price war

The biggest names in the oil world come together this week for the largest industry gathering since the end of a two-year price war that pitted Middle East exporters against the firms that drove the shale energy revolution in the United States.

When OPEC in November joined with several non-OPEC producers to agree to a historic cut in output, the group called time on a fight for market share that drove oil prices to a 12-year low and many shale producers to the wall.

Oil prices are about 70 percent higher than they were the last time oil ministers and the chief executives of Big Oil met in Houston a year ago at CERAWeek, the largest annual industry meet in the Americas.

The ebullience as both sides enjoy higher revenues will be a welcome relief from the gloom of a year ago, near the depths of the price war.

“The oil market has been rebalancing and the powerful forces of supply and demand have been working,” said Dan Yergin, vice chairman of conference organizer IHS Markit and a Pulitzer Prize-winning oil historian.

“The mood will be different this year.”

More Oil – (overnight) Russia says too early to say output cut deal will be extended

More catch up …

Russian Energy Minister Alexander Novak (speaking overnight):
  • Said it was too early to say if the deal to reduce oil production would be extended
The agreement ends at the end of June
OPEC, Russia & others will meet again over the next 3 months to discuss an extension
Also, remarks from ANZ on oil:
  • Crude oil fell to a three-week low as the stronger U.S. dollar combined with concerns about rising U.S. crude oil inventories to reduce investor appetite

Oil – overnight piece says Saudi the biggest OPEC cutters

Just doing a bit of a catch-up, this from Bloomberg overnight on the OPEC supply cuts:

  • Saudi Arabia continued to lead OPEC’s efforts to cut production
  • Organization of Petroleum Exporting Countries’ production fell to 32.17 million barrels a day in February, a 65,000 barrel-a-day drop from January
  • Increases from Iran, Nigeria and Libya (permitted under the terms of the agreement)
  • OPEC’s total output remains 415,000 barrels a day above the target set out in the Nov. 30 deal
  • The group as a whole is only about 70 percent of the way toward the production level it deemed necessary to eliminate a global oversupply and boost prices

 

Weekly US DOE crude oil inventories +1501K vs +3000K expected

Weekly oil inventory data from the Department of Energy

  • Prior was +564K
  • Gasoline -546K vs -1500K exp
  • Distillates -925K vs -1000K exp
  • Cushing +495K vs -400K exp
  • Refinery utilization +1.7% vs +0.15% exp
  • Production up 0.3% to 9.032mbpd

API data released yesterday showed crude +2500K, gasoline up 1840K and distillates down 3730K, according to reports.

Oil ticked higher on the headlines, hitting a session high of $54.44.

RBOB Slides After Surprise Gasoline Inventory Build; New Record Glut In Crude

After a volatile day of White House rumors and denials, and OPEC headlines, WTI and RBOB ended the day lower ahead of tonight’s API data which showed a slightly smaller than expected crude build (+2.5mm against expectations of +3mm). However RBOB prices tumbled after an unexpected build.

API

  • Crude +2.502mm (+3mm exp)
  • Cushing +544k
  • Gasoline +1.84mm (-1.5mm exp)
  • Distillates -3.73mm

While crude built again (the 8th week in a row), it was the swing back to a build in gasoline that is most notable…

OPEC remains optimistic that the worst is over for this cycle

OPEC’s Barkindo with a definite kiss of death comment

  • Non-OPEC countries are having some challenges monitoring production cuts
  • Non-OPEC is lagging behind OPEC members conformity but remain committed
  • Will review production agreement and exemptions at the end of the 6 month period

So the cracks in the deal are appearing, and mainly from non-OPEC producers. Who didn’t see that one coming? Maybe they’ll be up to speed by about the end of June, just in time to reverse it all 😉

Iranian Oil Minister says crude above $60 / barrel would hurt OPEC – more

Spoiler – because higher prices would attract more supply

(Economics 101 will continue tomorrow)
The headline remark from Iranian Oil Minister Bijan Namdar Zanganeh was out a little earlier, but more now:
  • Crude above $60 would ultimately hurt OPEC because it would spur competitors to boost production and trigger medium-term price decline
  • Zanganeh spoke after meeting Russian Energy Minister Alexander Novak

Comments reported by Iranian Students News Agency, via Bloomberg