As Expected……………………Freefall Continue !!
Having closed below $50 for the first time in 3 weeks, WTI Crude extended its losses to 3 week lows after API reported crude inventories rose by a bigger than expected 4.8mm barrels (more than double the 2mm expectation).
- Crude +4.8mm (+2mm exp)
- Cushing -2.3mm (-500k exp)
- Gasoline +1.7mm (-1mm exp)
- Distillates -940k
Crude inventories have drawn down for 6 of the last 7 weeks but rose notably this last week. Cushing inventories drewdown by the most since Feb 2014 (we suspect the spillage was the driver) and distillates inventories drew down for the 5th straight week). Gasoline inventories built notably despite expectaions of a sizable draw.
Oil prices tick higher but remain near the lows of the day
Everyone wants an exemption.
Oil is down 57-cents today to $50.28. That’s largely because Iraq doesn’t want to join in any kind of production cut. They hope to boost production from ISIL-controlled regions after they are retaken.
The problems is that everyone wants an exemption.
Saudi Arabia’s Energy Minister Khalid al-Falih said Sunday that he expects that oil producing states will reach a common decision at the meeting of the Organization of the Petroleum Exporting Countries (OPEC) in late November.
“Today our meeting is an important point in coordinating the process of reaching an agreement between the OPEC [member] states and the other oil producing countries in late November,” al-Falih said. “Today’s meeting is the best demonstration of Saudi Arabia’s intention to stabilize the oil market,” al-Falih added, stressing that Russia and Saudi Arabia will express the viewpoint which will become an encouraging sign for the oil market.
OPEC countries reached a preliminary agreement on the output freeze in September, with the final decision to be taken at the OPEC summit in Vienna on November 30.
“The president of Azerbaijan and I have discussed the agreement of the countries that do not belong to OPEC. We are very close to signing this agreement. It will be done to form a real oil price,” Maduro said, as quoted by Aliyev’s press office.
At the same time, Beijing revealed official statistics data underestimating the country’s actual oil reserves.
According to the new data, crude shipments to China increased to 600 million barrels a month. Since then, China has kept that pace. Crude imports to China reached a new record high in the beginning of the year. By June, shipments grew by 16 percent against the previous year. The images showed 2,100 commercial and strategic petroleum reserve tanks with a capacity of 900 million barrels. That is four times what industry reports indicated at the time, according to the company. “Storage capacity seems to still be rising along with supply. It really represents China’s capacity to take advantage of any price swings in the market,” Orbital Insight’s CEO James Crawford told Newsweek. Moreover, China is showing no signs of easing with construction of new oil tanks. “I’m not surprised. There is more storage available in China than the market is willing to acknowledge. Any information around this is valuable. There seems to be quite a bit of flexibility between commercial strategic storage tanks, even though official statistics do not account for all of it,” Michal Meidan, an analyst with London-based consultancy Energy Aspects, told Bloomberg.
China’s policy is aimed at keeping oil prices low by underestimating global demand for crude. When prices go down China buys large shipments of oil.
Results of the weekly US energy inventory and production report
- Prior oil build was 4850K
- API crude -3780K
- Cushing -1635K
- Gasoline +2469K vs -1125K exp
- API gasoline +929K
- Prior -1907K
- Distillates -1240K vs -1500K exp
- API distillates -2300K
- Prior -3746K
As we reported last week, just as OPEC announced a new monthly production record, with total cartel output rising by 220kbpd to a record 33.4mmbpd…
… driven by a jump in production in Iraq, Nigeria and Libya, more confusion emerged regarding the recently concluded OPEC Algiers “deal”, according to which production would be cut back to 32.5-33.0 mmbpd, as opposition to OPEC’s secondary production estimates rose, as Venezuela join Iraq in disagreeing with the cartel’s third-party production estimates. To wit: Venezuela reported crude output of 2.33m b/d in Sept. to OPEC, 245k more than secondary source estimates, while Iraq reported 4.78m b/d in Sept., 320k above secondary source estimates.