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Fri, 24th February 2017

Anirudh Sethi Report

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Archives of “petroleum” Tag

WTI/RBOB Tumble As US Crude Inventory Hits Record High

Following last week’s massive inventory build (and hope for improved gasoline demand), API reports another much bigger-than-expected build (Crude +9.94mm versus +3.5mm exp) and WTI and RBOB prices tumbled.

API

  • Crude +9.94mm (+3.5mm exp)
  • Cushing -1.27mm (+500k exp)
  • Gasoline+720k
  • Distillates +1.5mm

This wil be the 6th weekly build in a row for crude (and 3rd week of major builds)…

If the DOE data is anything loike the API data then this will be a new record for US crude inventory…

Mukesh Ambani’s gas pipeline company’s net worth erodes by Rs 7,966 crore

Even as Reliance Industries is creating ripples in the telecom industry, the net worth of  Mukesh Ambani owned, Reliance Gas and Transportation Infrastructure Ltd (RGTIL) has eroded by a massive Rs 7,966 crore as on September 2016 as low gas supply from RIL’s Krishna Godavari basin hit the pipeline company’s financials. The company owns and operates a 1400 kilometers gas pipeline connecting Krishna Godavari basin to Gujarat and depends on gas production from RIL’s KG basin to earn revenues.

According to Reliance Gas filings, for the financial year 2016 its net worth was negative Rs 2,641 crore (see chart). Reliance Gas said the net worth erosion statement is prepared in compliance with Indian accounting standards and is subject to further transition adjustment as may be required under the Ministry of Corporate Affairs’ guidelines and interpretations.

Reliance Gas, which made profit only once since 2010, said it plans to Rs 4,000 crore by issuing Cumulative Optionally Convertible Preference Shares, the company said on October 25th filings with the stock exchanges. 

How’s that oil demand picture looking OPEC? – India’s demand at the lowest for 13 years

One part of the OPEC production deal isn’t going according to plan

The main reason for the OPEC deal was to freeze production so that demand eats into the glut of supplies. That’s all well and good until the glaring floor in the plan comes home to roost, i.e demand doesn’t grow or worse, it drops.

So when one of the fastest growing countries sees oil demand fall the most in 13 years, there should be alarm bells ringing at OPEC.

Bloomberg has noted the drop which has seen India’s use of diesel drop 7.8% in Jan. Diesel accounts for around 40% of total fuel use. India also imports around 80% of it’s oil and the IEA said it will be the fastest user of oil through to 2040.

The drop is being tied in with the recent policy crackdown on high value bank notes, which is expected to shrink economic growth. One analyst expects that this is a one off and demand will pick back up in Feb. We’ll see whether he’s right no doubt. If he’s not then this could be a bigger issue for OPEC who will start to think about what to do with the current deal in a couple of months or so.

For me, the demand part of the OPEC puzzle was always the weak link and if demand doesn’t match expectations in relation to this deal, there’s going to be strong calls to expend it.

OPEC Production Cut May Need to Be Extended: Oil Ministers

The oil ministers of Iran and Qatar have suggested that OPEC’s production cut agreement may have to be extended beyond the June deadline, despite an almost 100-percent compliance rate.

The comments come a day after the American Petroleum Institute reported the second-largest crude oil inventory increase in history, at 14.227 million barrels, which added fuel to worries that production cut efforts are not enough to rebalance the market.

Saudi oil minister welcomes Donald Trump election

Saudi Arabia’s oil minister has said President Donald Trump’s election will be good for the oil industry, playing down concerns over the impact of his “America First” policies for the export-reliant kingdom.

Khalid al-Falih said Saudi Arabia is considering increasing its investment in the US encouraged by the new White House administration’s pro-industry and pro-oil and gas stance.

The minister, a former head of Saudi’s state oil company Aramco, said in an interview with BBC, the Trump administration looked like adopting policies “which are good for the oil industry” while steering “away from excessively anti fossil fuel, unrealistic policies by some well intentioned environment proponents”.

But Mr al-Falih said what the US wanted was a “mixed energy portfolio that includes oil, gas, renewables and make sure that the American economy is competitive. We want the same in Saudi Arabia”.

India :Eight core industries grow by 5.6% in December

Eight core industries register a growth of 5.6% in December 2016 on the back of healthy output recorded by refinery products and steel.

The growth rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — was 2.9% in December 2015.

It stood at 4.9% in November 2016.

The core sectors, which contribute 38% to the total industrial production, expanded 5% in April – December 2016 compared to 2.6% growth in the same period last financial year, according to data released by the commerce and industry ministry today.

Refinery products and steel production jumped 6.4% and 14.9%, respectively during the month under review. However, crude oil, fertliser, natural gas and cement output reported contraction.

Coal output declined by 4.4% in December 2016 from 5.3% in the same month previous year. Similarly, electricity generation too dipped by 6% as compared to 8.8% in December 2015.

Overnight US Markets :Dow closed + 113 points.Nasdaq Hits New High

Stocks jumped Tuesday as the S&P 500 and Nasdaq hit new all-time highs and the Dow moved back up toward the 20,000 level.

The Dow Jones industrial averagegained 113 points, or 0.6%, to 19,912.71. The Standard & Poor’s 500 index climbed 0.7% to an all-time closing high of 2280.07. The tech-heavy Nasdaq composite index rose 0.9% to set a new closing record of 5600.96.

Materials and financial companies led the stock indexes higher in afternoon trading as investors sized up the latest round of company earnings news. Energy stocks also rose as crude oil prices headed higher. Health care, phone companies and other high-dividend stocks were among the biggest laggards as bond yields rose.

The heads of General Motors, Ford Motor and Fiat Chrysler Automobiles met with President Donald Trump early Tuesday. Trump wants the automakers to build new factories in the U.S. He’s warned of a “substantial border tax” on companies that move manufacturing out of the country and promised tax advantages to those that produce domestically. GM (GM) shares gained 1%, Ford (F) added 2.4% and  Fiat Chrysler (FCAU) jumped 5.9%.

Trump’s latest moves on trade and regulations have raised concerns over future access to the U.S. market, particularly among Asian countries. Trump signed a memorandum saying the U.S. will withdraw from the trade pact known as the Trans-Pacific Partnership. He also said he would renegotiate the North American Free Trade Agreement.

“The lack of any key U.S. economic data overnight had dealers focused exclusively on the Trump administration’s trade policy and the signing of the executive order to pull out of the TPP,” said Stephen Innes, senior trader at Oanda, of the Trans-Pacific Partnership.

Benchmark U.S. crude  rose 43 cents, or 0.8%, to $53.18 a barrel in New York. Brent crude, used to price international oils, gained 21 cents, or 0.4 %, at $55.44 a barrel in London.

The 10-year Treasury yield jumped to 2.47% from 2.40% late Monday.

OPEC/non-OPEC monitoring committee say markets are on their way to rebalancing

the OPEC/non-OPEC deal monitoring committee met in Vienna today 22 Jan

Saudi energy minister Khalid al-Falih said earlier today after the first meeting:

“I am satisfied, I am optimistic and, as I said, the markets are on their way to rebalance and it’s happening,”

adding that compliance with the agreement, which calls for cuts to begin this month, had been “fantastic“.

“Usually non-OPEC would raise their production to compensate for voluntary cuts by OPEC. Now, we are seeing voluntary cuts by both sides,”

Some 1.5 million bpd in crude production had already been taken out of the market last week he said.

“The other 300,000 bpd, for all I know, is still happening,” saying that he hoped for 100% compliance in February.

The next meeting was scheduled for after 17 March they also announced today.

More from Reuters here

I’m heading back out now. Enjoy the rest your week-end one and all. Thanks again, as always, for your fantastic support and input.

I wish you good trading this coming week and hopefully we can help make/save you a few pips along the way.

El-Falih Oil rebalancing on its way he says

 

Saudi minister says 1.5 mbpd of oil already removed from market

OPEC and Russia tout progress

Producers have already cut output by 1.5 mbpd, according to Saudi minister of energy Khalid Al-Falih. He said his country along with Kuwait and Algeria have already taken more off the market than required.

Meanwhile, Russian oil minister Novak said progress in cutting Russian production was “ahead of schedule”.

The monitoring committee of OPEC are meeting today and tomorrow. The topic won’t yet be compliance because we’re not yet at the end of the first month of the agreement. Instead, they will talk about how to monitor and measure.

The total amount of oil expected to be removed from the market for six months is 1.8 mbpd. Skeptics argue that much of the ‘cut’ is optics and that countries were producing beyond capacity in the lead-up to the agreement or had scheduled natural/seasonal depletions.

Influential Algerian oil minister Boutarfa repeated a comment from his Saudi counterpart, who said last week that quotas beyond June may not be necessary.

“If we really comply by 80-90%, it may not be necessary to continue,” he said.

WTI crude finished $1.10 higher on Friday to $53.22 but failed in a test of downtrend resistance after a large jump in oil drilling rigs.

Oil supply cuts may not be extended after June – Saudi Arabia’s oil minister

Saudi Arabia’s oil minister said that the supply cuts agreed by Opec and non-Opec countries at the end of last year may not need to be extended beyond June, as rising demand and strong compliance should have pushed the market towards balance by then.

Khalid al Falih, speaking at an industry event in Abu Dhabi, struck a bullish pose saying the cuts, which began on January 1, would have their “full impact by the first half” of 2017.

“We don’t think it’s necessary given the level of compliance…and given the expectations of demand,” Reuters reported.

He added, however, that the group could still extend the six-month deal “if there was a need”.

Brent crude, the international oil benchmark, was up 38 cents at $55.83 a barrel by 10am London time while US benchmark West Texas Intermediate gained 32 cents to $52.69 a barrel.