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Sat, 22nd July 2017

Anirudh Sethi Report

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Archives of “Crude” Category

OPEC July oil supply to rise 145k bpd vs June

So say PetroLogistics in their latest report 21 July

  • OPEC 14 supply is expected to exceed 33mln bpd in July
  • increase driven by higher supply in Saudi Arabia, UAE and Nigeria

The firm is one of many that tracks OPEC supply and this latest f/cast suggests lower compliance with the OPEC/non-OPEC oil output deal.

Compliance has been relatively high up until now but undermined by output from Libya and Nigeria who are exempt from the output cut requirements.

Oil prices falling further helped by this latest news with WTI posting $48.80 from $49.60 retreating further from its $50+ highs yesterday,

One Way Or Another – Venezuela Will Send Oil Prices Up

In a desperate bid to survive its economic meltdown, Venezuela is lobbying other OPEC members to agree to steeper oil production cuts, a move that would likely lead to higher oil prices.

Venezuelan officials have reached out to their counterparts in Iran, Russia and Saudi Arabia to press them on more collective action, according to Argus Media. If there was enough interest, the next step would be an “extraordinary meeting,” which would weigh the option of cutting deeper.

 The rumors about deeper OPEC cuts have been floating around since June, when oil prices collapsed into the low-$40s. The markets have grown deeply pessimistic about the health of the oil market, and doubt the OPEC cuts will balance the market by the end of the compliance period in March 2018.

But the behind-the-scenes effort from Venezuelan officials is notable, if only because the South American OPEC members was one of the earliest and most aggressive supporters of the original deal to reduce output. In 2016, for months the more powerful members of the cartel rebuffed Venezuelan pleas, but in the end they agreed to reductions in November after oil prices continued to wallow below $50 per barrel.

The deal pushed prices above $50 for a period of time, but after six months of restraint, the market is back in sub-$50 territory.

However, the urgency for higher prices is more acute now for Venezuela. Protests have spread nationwide in the South American nation as the economy contracts at a torrid rate. Violence is becoming more widespread, and the nation is suffering from political gridlock and economic and social disaster.

Over the weekend, the opposition organized an informal referendum, which attracted more than 7 million votes, to oppose anti-democratic moves by the government. The vote demonstrated widespread anger and opposition towards the government’s upcoming effort to consolidate power in a July 30 vote to rewrite the constitution, a move that would weaken competing institutions like the National Assembly. The referendum opposing the July 30 vote was not recognized by the government, but it was a show of force for the opposition.

There is no way out of the downward economic spiral for Venezuela in the short run without significantly higher oil prices.

WTI Crude Sinks After Surprise Crude Inventory Build

WTI has roller-coastered higher since last week’s ‘bullish’ API report and rose today for the 6th of the last 7 days (on Saudi cut hype). While many eyes are on record high shale production, the recent trend in inventory draws remains key but API upset that dream briefly as Crude saw an unexpected build (+1.628mm vs -3.5mm exp). Gasoline and Distillates saw major draws (much bigger than expected) and Cushing saw its first build in 8 weeks.

API

  • Crude +1.628mm (-3.5mm exp)
  • Cushing +608k
  • Gasoline -5.448mm (-1.3mm exp)
  • Distillates -2.888mm

OIL-OPEC Secondary sources say compliance for members dropped to 92% in June

There are a few headlines about the place this morning on compliance rates

Basic gist is that ‘secondary sources’ data used by OPEC show cartel members are pumping more, with compliance with cuts for its members down to 92% in June (from 110% in May)
  • Note, news on this has been doing the rounds since last week, with various numbers bandied about (the compliance rate updated)
  • Last week compliance was being reported around 97%, so the 92% figure is a worsening
Note, secondary-sources data is from external agencies OPEC uses to assess compliance. OPEC uses two sets of figures to monitor output, those supplied by each country & the secondary sources

CRUDE -Crucial Update

Image result for oil gif

As Expected on Fire…………..Now ,What ?

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IEA say recent oil price weakness may lead US shale firms to reassess

International Energy Agency out with their monthly report 13 July

  • output may be gushing but profits are not
  • compliance with OPEC cuts slips to 78% in June vs 95% in May
  • Non-OPEC compliance 82%
  • Algeria, Iraq, UAE and Venezeula pump more than allowed
  • 2017 global oil demand growth forecast revised up by 100k bpd to 1.4mln bpd
  • global oil stocks fell in May to 266mln barrels above 5 year average vs 300 mln in April
  • sees hefty stock draw later in 2017 provided there is strong compliance with OPEC cuts and even if Libya,Nigeria output recovers further
  • call on OPEC crude to rise steadily through 2017 and reach 33.6blb bpd in Q4

IEA highlighting the fragile conditions still prevailing and less confident on oil market rebalancing.

WTI $45.03 near session lows as is Brent at $47.45 on the bearish price news. USDCAD unfazed and trawling along around 1.2750

More from the IEA here

Crude oil inventories for the July 7th week -7564K vs -2450K est.

Prior week draw -6299

The API data last night showed a larger than expected draw of -8133K. So this draw is much bigger than the estimate but it mirrors the draw from the API data.

In the other data:

  • Cushing OK crude -1948K vs -1334K last week
  • Gasoline -1647K vs -534K est
  • Distillates rose 3131K vs 900k est.
In addition to the data, is there is a headline that OPEC has scheduled an extraordinary meeting on July 17th.  There is no further details.
The price of Crude oil traded up to $46.48  but is back down to $46.23 currently.  The low for the day came in at $45.61.