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Fri, 23rd June 2017

Anirudh Sethi Report

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Archives of “petroleum” Tag

Weekly US oil inventories -2451K vs -1200K expected

Weekly oil inventory and production highlights from the US Department of Energy

  • Crude prior -1661K
  • Gasoline -578K vs -579K expected
  • Distillates +1079K vs  +500K expected
  • Refinery utilization -0.40%
  • Production +0.2% w/w to 9.35 mbpd

WTI climbs over $44.00 on the headlines.

Here’s what API reported yesterday:

  • Oil -2720K
  • Gasoline +346K
  • Distillates +1837K
  • Cushing -1269K

Overall, it’s slightly better than estimates but there isn’t anything for crude oil bulls to get excited about. Inventories have fallen in 10 of the past 11 weeks but that’s normal for this time of year and overall supplies are still far above historical norms with production continuing to increase.

IEA says global crude oil demand will grow by 1.5m bpd in 2018 vs 1.3m bpd in 2017

Oil demand should outpace supply in the second half of this year but excess inventories will persist well into 2018, dealing a blow to global crude producers enacting output cuts to bring down stubbornly high stockpiles.

The forecast from the International Energy Agency comes as higher than expected demand growth next year is met by even stronger output from the US and other producers outside of the Opec cartel.

In its monthly oil market report, which include forecasts for next year, the Paris-based energy agency said: “[The] outlook for 2018 makes sobering reading for those producers looking to restrain supply.”

The IEA expects global demand growth will increase by 1.4m b/d next year- from 1.3m b/d in 2017 – as China and India take total consumption to a record 99.3m b/d.

ALERT : Qatar military placed on highest state of alert

  • Qatar military placed on highest state of alert
  • KSA, UAE & Bahrain warned not to enter maritime borders

Trying to confirm this now … apparently via CNN

I suppose it would be logical for a high state of alert given the tensions.

US officials say:
  • Have observed increased Qatari military activity
  • Qatar military now “on the highest state of alert”, fearing military incursion
  • Has observed 16 Leopard tanks taken from storage
  • Qatari Ministry of Defense has sent letters to Saudi, UAE and Bahrain governments – warning that they would fire on any naval ships from those countries that enter into its waters

 

Oil-Private inventory data shows US crude stocks bigger than expected draw

Following last week’s biggest crude build since 2016, API reports another large crude draw (seemingly confirming refinery run rates remain high), but WTI/RBOB prices slipped lower on an unexpectedly large build in Gasoline (and Distillates).

Genscape reported a 750k draw at Cushing last week…

API

  • Crude -4.62mm (-3.25 exp) -0 9th weekly build in a row
  • Cushing -1.56mm (-593k exp) – biggest draw since Oct ’16
  • Gasoline +4.08mm (-50k exp) – biggest build since Jan ’17
  • Distillates +1.75mm

Following last week’s biggest build since 2016, API reported a 9th weekly draw in Crude but Gasoline saw its biggest build since Jan 2017, very much against the recent trend…

Overnight US Market :Dow closed -22 points

The major US stock indices are ending the session with modest losses.
  • The S&P is ending down -2.96 points or -0.12%
  • The Nasdaq is ending down -10.112 points or -0.16%
  • The Dow is ending down -22.12 points or -0.10%
The ranges were fairly narrow but most of the day was in the red.
In the US debt markets today, rates are up as the close approaches:
  • 2 year 1.302%, up 1.4 bp
  • 5 year 1.7385%, up 1.9 bp
  • 10 year 2.1782%, up 1.9 bp
  • 30 year 2.8373%, up 2.7 bp
Crude oil is lower by -$0.28 to $47.38
Spot gold is little changed (+$0.55 or +0.04%)

 

US crude oil price to average $53.52 per barrel in 2017

So say the results of latest Reuters poll 2 June

  • vs $57.24 in prev poll in April
  • 2018 $57.24 vs $59.23 prev
  • Brent crude ave price $55.57 in 2017 vs $57.04 prev
  • 2018 $59.63 vs $61.46 prev

34 economists polled

Reduced expectations (weakest of 2017 so far) but still seems very toppish to me.

I bet there’s a few traders who would love to see prices up there again.

Currently $47.14 and $49.33

 

India :April core sector growth slows to three-month low of 2.5%

The growth of eight core sectors declined to 2.5 per cent in April mainly because of lower coal, crude oil and cement productions.

The growth rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — was 8.7 per cent in April last year.

According to the government data released on Wednesday, coal, crude oil and cement production recorded negative growth of 3.8 per cent, 0.6 per cent and 3.7 per cent, respectively.
Slow growth in key sectors would also have implications on the Index of Industrial Production (IIP) number as these segments account for about 38 per cent to the total factory output.
Growth in refinery products and electricity output slowed down by 0.2 per cent and 4.7 per cent in April as against 19.1 per cent and 14.5 per cent, respectively in the same period last year.
However, natural gas, fertiliser and steel reported positive growth at 2 per cent, 6.2 per cent and 9.3 per cent, respectively.

OPEC Is Studying The Following Three Options Ahead Of Thursday’s Meeting

Last week, ahead of the OPEC meeting, BofA commodity analyst Francisco Blanch said the oil cartel faced three specific choices ahead of its May 25 meeting in Vienna, when it is widely expected to extend the November 2016 production cut:

  1. First, OPEC could cut production beyond the 1.2mn b/d agreed in December and encourage non-OPEC members to deepen the cuts.
  2. Second, OPEC could increase output aggressively and restart the oil price war.
  3. And third, OPEC could keep the cuts at the current levels for the next 6 to 9 months and hope for oil market demand conditions to improve.

BofA also presented the following table adding the proposed likelihoods of any given choice of action, of which a simple deal extension had the highest probability of taking place.

Today’s Stunted Oil Prices Could Cause Oil Price Shock In 2020

As oil prices remain unsteady and OPEC continues to make headlines every hour, the world is focused on oil’s immediate future. As Saudi Arabia announces plans to slash production and move their economy away from oil dependency, many industry insiders are predicting that the now over-saturated market will reach an equilibrium with higher commodity prices by 2018 and U.S. shale production will continue to grow along with global demand.

Robert Johnston, the CEO of one of the world’s biggest political risk consultancies, is unconvinced. In a speech made at the Association of International Petroleum Negotiators’ 2017 International Petroleum Summit, Johnston laid out his concerns for the future of oil.

Despite the recent dip in oil prices, industry experts have been predicting a supply-gap and rising oil prices for years. This is due in large part to an oil investment drought marked by two year of consecutive decline, a statistic that has no precedent in the oil industry. This year a report by the International Energy Agency concluded that if oil investment remains stagnant over the next few years, by 2020 we will see a significant increase in the price of oil as global demand continues to climb.

The IEA’s Executive Director Fatih Birol addressed these findings in a keynote address at the Atlantic Council Global Energy Forum in Abu Dhabi in January, announcing that no major oil projects were started in the last year and there were zero large oil discoveries “because there is no money for exploration. You find something if you look for it,” Birol said.

The potential supply gap has far-reaching implications that we are not ready to combat. Gas and oil are still fundamental to much of the world’s infrastructure, despite a steady increase of research and utilization of renewable energy resources. While electric cars continue to show a promising future, especially in the light of ambitious new green car policy initiatives in India and China, they still account for less than 2 percent of the world’s cars. And, as the global middle class continues to grow and exercise their buying power, the demand for oil will continue to grow alongside them.

The oil industry desperately needs new sources of oil, and they need new investors and technologies to find those sources quickly. There are currently a wide variety of techniques employed to find new deposits (seismic prospecting, well logging, gravity surveying, magnetic prospecting, and geochemical prospecting, etc.) but these are all methods with significant limitations in their ability to accurately estimate the size of new oil and gas deposits.

Many companies, including oil giant BP, have begun efforts to develop of artificial intelligence programs with algorithms that will allow them to find and drill with unprecedented accuracy in the future, but the technology is not yet ready. We can only hope that it will be ready by 2020 or that the IEA is wrong in their predictions. 

Donald Trump’s Saudi Speech: Full Transcript

I want to thank King Salman for his extraordinary words, and the magnificent Kingdom of Saudi Arabia for hosting today’s summit. I am honored to be received by such gracious hosts. I have always heard about the splendor of your country and the kindness of your citizens, but words do not do justice to the grandeur of this remarkable place and the incredible hospitality you have shown us from the moment we arrived.

You also hosted me in the treasured home of King Abdulaziz, the founder of the Kingdom who united your great people. Working alongside another beloved leader—American President Franklin Roosevelt—King Abdulaziz began the enduring partnership between our two countries. King Salman: your father would be so proud to see that you are continuing his legacy—and just as he opened the first chapter in our partnership, today we begin a new chapter that will bring lasting benefits to our citizens.

Let me now also extend my deep and heartfelt gratitude to each and every one of the distinguished heads of state who made this journey here today. You greatly honor us with your presence, and I send the warmest regards from my country to yours. I know that our time together will bring many blessings to both your people and mine.

I stand before you as a representative of the American People, to deliver a message of friendship and hope. That is why I chose to make my first foreign visit a trip to the heart of the Muslim world, to the nation that serves as custodian of the two holiest sites in the Islamic Faith.