Analys
SEB Jordbruksprodukter, 30 september 2013

Vi anser att vi har tidiga tecken på en vändning uppåt i pristrenden för vete och majs. Därför byter vi rekommendation från neutral till köp på dessa. För oljeväxter har vi fortfarande säljrekommendation. Den tekniska analysen av sojamarknaden indikerar ett nytt stort prisfall från fredagens 1319 till 1250 cent per bushel.
Den sista september är det dags att ta emot lagerstatistiken från USDA: hur stora lagren av spannmål och oljeväxter som fanns i USA den 1 september.
Estimaten hos marknaden är som följer:
Statistiken publiceras klockan 18:00 svensk tid.
Det är den så kallade Golden Week i Kina den här veckan, vilket innebär att affärslivet går på sparlåga där hela veckan.
Odlingsväder
Det kalla och torra vädret i Argentina väcker frågan om det är någon La Niña i vardande, men det är det inte som vi ser av ensemble-prognosen från Australiens Meteorologiska byrå nedan.
Det har ändå varit torrt och kallt i norra Argentina, så pass att frost befaras ha skadat nysått vete.
Australien har varit nästan helt torrt och väntas enligt den senaste prognosen med GFS-modellen vara fortsatt huvudsakligen torrt fram till mitten av oktober.
Vete
November månads terminskontrakt på Matif har arbetat sig upp mot motståndslinjen. Bryts den signaleras en stigande trend. Den fallande trenden är redan slut och vi har sedan mitten av augusti haft neutral rekommendation. Eftersom Chicagovetet har brutit motståndet redan (svagare dollar har inverkat), men är den viktigare börsen, går vi över till köprekommendation från och med det här veckobrevet. Vi skrev också förra veckan att förväntningarna på stigande pris helt saknas. Det finns alltså en god jordmån för stigande priser hos marknadens aktörer. De är av allt att döma tämligen oförberedda. Däremot tror vi inte just nu på att det finns stor potential på uppsidan, eftersom så många lantbrukare håller på sin spannmål och successivt kommer att sälja.
Decemberkontraktet på CBOT har brutit motståndet på 676.5 cent och därmed befinner sig marknaden enligt den tekniska analysen, i stigande trend.
Nedan ser vi terminskurvorna för Chicagovete och Matif.
Som vi ser är det framförallt de korta löptiderna som har gått upp på Matif. På Chicagobörsen har alla löptider gått upp i pris. Det råder nu backwardation på Matif-börsen, vilket är ett tecken på ”brist på material för omgående leverans”. Det är en återspegling av den höga exporttakten i kombination med att bönderna håller på materialet i förhoppning om högre pris – vilket indikerar att de ännu inte lärt sig att de i dessa lägen ska sälja sin vara spot och köpa den på termin – istället för att sitta kvar med sin spannmål.
Måndagens Crop Progress från USDA visar att skörden av amerikanskt vårvete går mot sitt slut. För de 6 stater som rapporterar så är nu 93% av skörden avklarad, en ökning från förra veckans 90%. Vid den här tiden förra året var dock skörden avklarad.
Sådden av amerikanskt höstvete går också framåt och 22% av den förväntade arealen var avklarad per den 22 september, upp från förra veckans 12 och i linje med förra året men en hårsmån lägre än det 5-åriga genomsnittet på 24%.
IGC (International Grains Council) kom med sin rapport i förra veckan och har ökat sitt estimat för den globala spannmålsproduktionen 2013/14 med 1 mt till 1930 mt. Tack vare gynnsamma väderförhållanden hos de stora producenterna, framförallt i USA och OSS, så bidrar detta till en förväntad ökning med 8% på årsbasis från 2012 års produktion då torka drabbade stor del av grödorna. Utgående lager justeras upp med 2 mt till 367 mt.
För vete indikeras en global produktion på 693 mt, vilket är en ökning med 2 mt från förra månaden och som nu kommer än närmare rekordnivån under 2011/12. Revideringen återspeglar högre produktion i Europa och OSS, vilket ger en ökning med 6% på årsbasis. USDA’s nuvarande estimat ligger på 708.9 mt.
Utgående lager förväntas öka med 5 mt på årsbasis till 180 mt som en följd av högre lager hos de stora exportländerna samt Kina.
Det är en typisk IGC-rapport. IGC börjar året lågt och höjer successivt estimaten. IGC:s ”sanning” måste alltid modifieras och man vet egentligen inte hur mycket som den behöver justeras.
Kinas CNGOIC höjde i veckan sitt importestimat med 1 mt till 7.5 mt. De har redan köpt 6.1 mt. Man kan tolka detta som att översvämningen i norra Kina faktiskt haft en negativ effekt, precis som vi skrivit att den skulle ha. Priset på vete i Kina är på rekordhög nivå.
Argentina har drabbats av frost i norra delen av landet, där vete odlas. Australien är torrt och priset på vete där har handlats upp.
Högproteinvete i norra Europa steg i pris förra veckan. Vete med 14% protein och över handlades 25 euro över Matif i norra Tyskland. 12% protein handlades 12 euro över.
Det blev mycket vårvete skördat i år, men skördarna blev så stora att kvaliteten på gluten har blivit sämre, erfar vi.
Förra veckan skrev vi om att de höga sojapriserna bidrar till en ökad odling av soja i USA nästa år på bekostnad av majs och vete. Vi kan se av de låga kvävegödselpriset att efterfrågan har varit svag, vilket tyder på att valet av soja redan är gjort. Detta leder till minskat utbud av spannmål och därmed ett högre pris. Tekniskt har vi köpsignal i Chicagovetet och vi tror att Matif kommer att följa efter. Därför går vi över till
köprekommendation.
Maltkorn
Terminspriset (november) ligger nu under matifvetet (november). Det trodde vi inte skulle kunna ske, men det kunde det. Uppenbarligen finns det så väldigt mycket maltkorn i Europa, efter att så stor areal blev vårsådd. Vi vet också att höstsådden i år har skett med religiös nit, vilket tyder på att maltkornet kan få revansch nästa år.
Majs
Majspriset (december 2013) är nere på det tekniska stödet och vi tror att det kommer att hålla. Bryts det, ska man naturligtvis ha en stop-loss strax under.
Tillståndet för den amerikanska majsen förbättrades under förra veckan enligt måndagens Crop Progress från USDA. För de 18 stater som rapporterar så klassas nu 55% som ”good/excellent”, en ökning med 2% från veckan innan och nu marginellt över det 5-åriga genomsnittet på 54%.
Omkring 58% respektive 64% av grödorna i Illinois och Indiana klassas som ”good/excellent”, vilket är en förbättring jämfört med veckan innan för Illinois. Iowa ligger fortfarande kvar på en låg nivå, endast 37%, men även här är det en ökning med 2% från veckan innan.
Grödornas sena utveckling i år börjar nu visa sig i skördestatistiken. Enligt USDA var endast 7% av skörden avklarad per den 22 september jämfört med det 5-åriga genomsnittet på 16%. Tar man en närmare titt på ”Istaterna” så var bara 3% av Iowas skörd klar jämfört med snittet på 9%, medan endast 5% av skörden i Illinois var klar jämfört med det 5-åriga genomsnittet på 24% vid den här tiden.
IGC rapporterade i veckan som gick. Den globala produktionen av majs beräknas uppgå till 943 mt, vilket är en minskning med 2 mt sedan IGC’s förra rapport men fortfarande nytt rekord och en ökning med 9% på årsbasis. Utgående lager justeras också ner med 2 mt sedan augusti, men 148 mt är fortfarande väl över genomsnittet och lagren hos de största exportörerna (Argentina, Brasilien, Ukraina och USA) estimeras till ett 26-års högsta.
Cofco, det kinesiska livsmedelsföretaget, prognosticerade att Kinas självförsörjningsgrad på majs kommer att sjunka till 90% fram till år 2020. Det är nog mot den bakgrunden man ska se den förvirrade rapporteringen i veckan som gick om att ett kinesiskt företag köpt 5% av Ukraina.
Vi anser att priset har fallit tillräckligt och går över till köprekommendation.
Sojabönor
Novemberkontraktet på sojabönor uppvisar en så kallad ”flagga” enligt den tekniska analysen. Det är den lilla rekylen uppåt vi ser i prisdiagrammet efter prisfallet från 1350 cent. ”Flaggor” brukar ofta etableras halvvägs i en rörelse. Halvvägs mäts i det här fallet från 1400 till 1300 cent. Det finns alltså, enligt den tekniska analysen, ytterligare 100 cent till på nedsidan att göra färdigt. Det skulle ta priset ner till åtminstone 1250, kanske rentav till 1225 cent.
Sojamarknaden är naturligt uppdelad på sojamjöl och sojaolja och det är två helt olika världar. Sojamjölet uppvisar samma ”flagga” som i sojabönorna och vi tror att det kommer ett nytt kraftigt prisfall den här veckan.
Och nedan ser vi den mycket baissigare utvecklingen på sojaoljan. Priset ligger på en teknisk stödnivå.
Marknadens förväntningar på att USDA skulle justera upp tillståndet för sojabönor, efter förra veckans spridda regnskurar, kom av sig efter måndagens Crop Progress rapport där USDA istället lämnade siffrorna oförändrade för ”good/excellent” på 50%. Hälften av grödorna i Illinois klassas som ”good/excellent”, och i Indiana ligger siffran på 58%. För Iowa ligger siffran på blygsamma 34%. För Indiana och Iowa är detta en ökning med 1%-2% från veckan innan.
IGC rapporterade i veckan som gick. För sojabönor förväntas den globala produktionen att stiga för andra året i rad till rekordhöga 280 mt för 2013/14, en ökning med 4% på årsbasis, framförallt tack vare estimerade jätteskördar i Sydamerika. Globala utgående lager justeras ner med 3 mt från förra månaden till 29 mt, vilket bl.a reflekterar fortsatta nedjusteringar för USA, men beräknas öka med 12% på årsbasis med de stora exportörerna Argentina och Brasilien i täten. Den globala handeln med sojabönor väntas expandera med 9% på årsbasis drivet av en fortsatt stark efterfrågan från Kina (med en ökad import på 14%).
Den globala produktionen av raps / canola beräknas öka med 5% på årsbasis under 2013/14 till rekordhöga 66.5 mt, samtidigt som utgående lager beräknas öka med 17% på årsbasis – den första uppgången på 4 år.
Vi behåller säljrekommendation.
Raps
Rapspriset (november 2013) fann stöd på 360 euro, men vi tror att den rekyl som följde efter det kommer att bli kort och att ett nytt test av 360 euro är förestående.
Att EU beslutat att lägga sig på 5% inblandning av biodiesel istället för 10%, tror vi inte fullt ut återspeglas i priserna än. Det finns de som lyckas visa att biobränsleefterfrågan inte haft någon påverkan på priserna, men det är ganska lätt att visa att de har haft det och har det även när biobränsleefterfrågan minskar.
Vi behåller säljrekommendationen på raps.
Potatis
Potatispriset av årets skörd, som handlas i april-kontraktet på Eurex, har fortsatt varit volatilt i veckan. Efter en ganska stor prisuppgång, föll priset tillbaka och stängde veckan på 20.30 euro per deciton. Det finns intresse för nästa års skörd, som alltså handlas på april 2015-kontraktet, men handeln har ännu inte riktigt kommit igång.
VD:n för brittiska firman Greenvale sade i veckan att Storbritannien kommer att behöva importera potatis i år. Odlad areal i Storbritannien blev låg i en historisk jämförelse. Shore Capital, en mäklarfirma, prognosticerade skörden till 5.3 mt, högre än förra årets 4.5 mt. Det historiska medelvärdet är 6 mt. Konsumtionen uppgår till ca 5.7 mt / år, vilket innebär att det finns ett importbehov. På grund av den torra sommaren i norra Europa finns sannolikt ett underskott även här.
Odlingen i EU har minskat med 40 mha till 1 775 mha i år enligt den tyska jordbrukarorganisationen DBV. Polen är den största producenten med 350,000 ha, följt av Tyskland och Rumänien.
Gris
Prist på Lean Hogs fortsatte att stiga i veckan, men trenden ser ut att ha tappat momentum. Slaktstatistiken visar på minskad utslaktning. Det talas i USA om spridningen av PEDv-viruset och nyheterna tyder på att minskningen är relaterad till sjukdomar eller rädsla för spridning av sjukdomar i USA.
I Kina är priserna relativt höga i ett historiskt perspektiv.
Å andra sidan förbättras marginalerna nu, när foderpriserna faller och priset på kött stiger.
Mjölk
Terminerna på smör och skummjölkspulver vid Eurex-börsen var lite försiktigare i veckan som gick. Medan priset på smör behöll sin nivå, föll SMP relativt kraftigt. Fonterra-noteringen fortsatte gå ner i rask takt.
Socker
Marskontraktet på råsocker föll kraftigt i fredags, efter att inte ha orkat ta sig över toppen från juni. Rädslan uppstod när det stod klart att det blir stora leveranser på oktoberkontraktet som förfaller på måndag.
Thailand prognosticerar en produktion om 11 mt. Det är högre än ISO estimerat, men mindre än analysfirman Kingsman.
Ytterligare negativa nyheter kom från Brasilien, där konsultfirman Job Economia flaggade för att Brasilien kan tänka sig att importera etanol från USA.
Vi fortsätter dock att ha en positiv vy på prisutvecklingen framöver. Priset har gått ner i nästan tre år och har troligtvis en lång uppgångsfas framför sig. En rekyl nedåt mot 17 cent på marskontraktet betraktar jag som ett köptillfälle.
Gödsel
Priset på kväve / urea fortsatte att sega sig uppåt i veckan som gick. Priset noteras nu 15 dollar högre per ton på 295 dollar.
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Analys
[If demand] ”comes around as forecast, Hallelujah, we can produce more”

Saudi Arabia’s oil minister, Prince Abdulaziz bin Salman, last week stated at a conference in Calgary: ”I believe it when I see it. When reality comes around as it’s been forecast, Hallelujah, we can produce more” (Reuters, John Kemp). So Saudi Arabia wants to and will produce more once it is confident that there really is demand for additional crude. Saudi Arabia has good reason to be concerned for global oil demand. It is not the only one struggling to predict global demand amid the haze and turmoil in the global oil market following the Russian invasion of Ukraine and sanctions towards Russian crude and product stocks. Add a shaky Chinese housing market and the highest US rates since 2001. Estimates for global oil demand in Q4-23 are ranging from 100.6 m b/d to 104.7 m b/d with many estimates in between. Current crude and mid-dist inventories are low. Supply/demand is balanced to tight and clearly very tight for mid-dists (diesel, jet fuel, gasoil). But amid current speculative bullishness it is important to note that Saudi Arabia can undo the current upwards price journey just as quickly as it created the current bull-market as it drop in production from 10.5 m b/d in April to only 9.0 m b/d since July. Quickly resolving the current mid-dist crisis is beyond the powers of Saudi Arabia. But China could come to the rescue if increased oil product export quotas as it holds spare refining capacity.

The oil market is well aware that the main reasons for why oil has rallied 25% over the past months is reduced production by Saudi Arabia and Russia, global oil demand holding up better than feared together with still declining US shale oil activity. US oil drilling rig count fell by 8 rigs last week to 507 rigs which is the lowest since Feb 2022.
The big question is how strong is global oil demand and how will it hold up or even maybe increase in the coming quarters? And here the spread of estimates are still all over the place. For Q4-23 we have the following range of estimates for global oil demand in m b/d: 100.6; 101.8; 103.1; 103.2 and 104.7 from main oil market research providers. This wide spread of estimates is mindbogglingly and head-scratching both for analysts and for oil producers. It leads to a wide spread in estimates for Call-on-OPEC. Some say the current market is in a 2-3 m b/d deficit while others calculate that the global oil market today is nicely balanced.
The sanctions towards Russian crude and oil product exports with a ban on imports to the EU and UK has led to a large reshuffling of the global oil market flows which again has created a haze through which it is hard to gauge the correct state of the global oil market.
We have previously argued that there may be a significant amount of ”pent-up-demand” following the Covid-years with potential for global oil demand to surprise on the upside versus most demand forecasts. But there are also good reasons to be cautious to demand given Chinese property market woes and the highest US interest rates since 2001!
The uncertainty in global oil demand is clearly at the heart of Saudi Arabia’s production cuts since April this year. Saudi Arabia’s Energy Minister, Prince Abulaziz bin Salman, last week stated at a conference in Calgary: ”I believe it when I see it. When reality comes around as it’s been forecast, Hallelujah, we can produce more” (Reuters, John Kemp).
So if it turns out that demand is indeed stronger than Saudi Arabia fears, then we should see increased production from Saudi Arabia. Saudi could of course then argue that yes, it is stronger than expected right now, but tomorrow may be worse. Also, the continued decline in US oil drilling rig count is a home-free card for continued low production from Saudi Arabia.
Both crude stocks and mid-dist stocks (diesel, jet fuel, gasoil) are still significantly below normal and the global oil market is somewhere between balanced, mild deficit or large deficit (-2-3 m b/d). The global oil market is as such stressed due to low inventories and potentially in either mild or large deficit on top. The latter though can be undone by higher production from Saudi Arabia whenever it chooses to do so.
What is again getting center stage are the low mid-dist stocks ahead of winter. The war in Ukraine and the sanctions towards Russian crude and product stocks created chaos in the global oil product market. Refining margins went crazy last year. But they are still crazy. The global refining system got reduced maintenance in 2020 and 2021 due to Covid-19 and low staffing. Following decades of mediocre margins and losses, a lot of older refineries finally decided to close down for good during Covid as refining margins collapsed as the world stopped driving and flying. The global refining capacity contracted in 2021 for the first time in 30 years as a result. Then in 2022 refining margins exploded along with reviving global oil demand and the invasion of Ukraine. Refineries globally then ran as hard as they could, eager to make money, and reduced maintenance to a minimum for a third year in a row. Many refineries are now prone for technical failures following three years of low maintenance. This is part of the reason why mid-dist stocks struggle to rebuild. The refineries which can run however are running as hard as they can. With current refining margins they are pure money machines.
Amid all of this, Russia last week imposed an export ban for gasoline and diesel products to support domestic consumers with lower oil product prices. Russia normally exports 1.1 m b/d of diesel products and 0.2 m b/d of gasoline. The message is that it is temporary and this is also what the market expects. Russia has little oil product export storage capacity. The export ban will likely fill these up within a couple of weeks. Russia will then either have to close down refineries or restart its oil product exports.
The oil market continues in a very bullish state with stress both in crude and mid-dists. Speculators continues to roll into the market with net long positions in Brent crude and WTI increasing by 29 m b over the week to last Tuesday. Since the end of June it has increased from 330 m b to now 637 m b. Net-long speculative positions are now at the highest level in 52 weeks.
The market didn’t believe Saudi Arabia this spring when it warned speculators about being too bearish on oil and that they would burn their fingers. And so they did. After having held production at 9 m b/d since July, the market finally believes in Saudi Arabia. But the market still doesn’t quite listen when Saudi says that its current production is not about driving the oil price to the sky (and beyond). It’s about concerns for global oil demand amid many macro economic challenges. It’s about being preemptive versus weakening demand. The current oil rally can thus be undone by Saudi Arabia just as it was created by Saudi Arabia. The current refinery stress is however beyond the powers of Saudi Arabia. But China could come to the rescue as it holds spare refining capacity. It could increase export quotas for oil products and thus alleviate global mid-dist shortages. The first round effect of this would however be yet stronger Chinese crude oil imports.
Brent crude and ARA diesel refining premiums/margins. It is easy to see when Russia invaded Ukraine. Diesel margins then exploded. The market is not taking the latest Russian export ban on diesel and gasoline too seriously. Not very big moves last week.

ARA mid-dist margins still exceptionally high at USD 35-40/b versus a more normal USD 12-15/b. We are now heading into the heating season, but the summer driving season is fading and so are gasoline margins.

ARA mid-dist margins still exceptionally high at USD 35-40/b versus a more normal USD 12-15/b. Here same graph as above but with longer perspective to show how extreme the situation is.

US crude and product stocks vs. the 2015-19 average. Very low mid-dist stocks.

Speculators are rolling into long positions. Now highest net long spec in 52 weeks.

Analys
The ”normal” oil price is USD 97/b

The Dated Brent crude oil price ydy closed at USD 96/b. Wow, that’s a high price! This sensation however depends on what you think is ”normal”. And normal in the eyes of most market participants today is USD 60/b. But this perception is probably largely based on the recent experience of the market. The average Brent crude oil price from 2015-2019 was USD 58.5/b. But that was a period of booming non-OPEC supply, mostly shale oil. But booming shale oil supply is now increasingly coming towards an end. Looking more broadly at the last 20 years the nominal average price was USD 75/b. But in inflation adjusted terms it was actually USD 97/b.

Saudi Arabia’s oil minister, Abdulaziz bin Salman, yesterday stated that its production cuts was not about driving the price up but instead it was preemptive versus the highly uncertain global economic development. In that respect it has a very good point. The US 2yr government bond rate has rallied to 5.06% which is the highest since 2006 and just a fraction away of being the highest since December 2000. The Chinese property market is struggling and global PMIs have been downhill since mid-2021 with many countries now at contractive, sub-50 level. Thus a deep concern for the health of the global economy and thus oil demand going forward is absolutely warranted. And thus the preemptive production cuts by Saudi Arabia. But killing the global economy off while it is wobbling with an oil price of USD 110-120/b or higher is of course not a smart thing to do either.
At the same conference in Canada yesterday the CEO of Aramco, Amin H. Nasser, said that he expected global oil demand to reach 110 m b/d in 2030 and that talk about a near term peak in global oil demand was ”driven by policies, rather than the proven combination of markets, competitive economics and technology” (Reuters).
With a demand outlook of 110 m b/d in 2030 the responsible thing to do is of course to make sure that the oil price stays at a level where investments are sufficient to cover both decline in existing production as well as future demand growth.
In terms of oil prices we tend to think about recent history and also in nominal terms. Most market participants are still mentally thinking of the oil prices we have experienced during the shale oil boom years from 2015-2019. The average nominal Brent crude price during that period was USD 58.5/b. This is today often perceived as ”the normal price”. But it was a very special period with booming non-OPEC supply whenever the WTI price moved above USD 45/b. But that period is increasingly behind us. While we could enjoy fairly low oil prices during this period it also left the world with a legacy: Subdued capex spending in upstream oil and gas all through these years. Then came the Covid-years which led to yet another trough in capex spending. We are soon talking close to 9 years of subdued capex spending.
If Amin H. Nasser is ballpark correct in his prediction that global oil demand will reach 110 m b/d in 2030 then the world should better get capex spending rolling. There is only one way to make that happen: a higher oil price. If the global economy now runs into an economic setback or recession and OPEC allows the oil price to drop to say USD 50/b, then we’d get yet another couple of years with subdued capex spending on top of the close to 9 years with subdued spending we already have behind us. So in the eyes of Saudi Arabia, Amin H. Nasser and Abdulaziz bin Salman, the responsible thing to do is to make sure that the oil price stays up at a sufficient level to ensure that capex spending stays up even during an economic downturn.
This brings us back to the question of what is a high oil price. We remember the shale oil boom years with an average nominal price of USD 58.5/b. We tend to think of it as the per definition ”normal” price. But we should instead think of it as the price depression period. A low-price period during which non-OPEC production boomed. Also, adjusting it for inflation, the real average price during this period was actually USD 72.2/b and not USD 58.5/b. If we however zoom out a little and look at the last 20 years then we get a nominal average of USD 75/b. The real, average inflation adjusted price over the past 20 years is however USD 97/b. The Dated Brent crude oil price yesterday closed at USD 96/b.
Worth noting however is that for such inflation adjustment to make sense then the assumed cost of production should actually rise along with inflation and as such create a ”rising floor price” to oil based on rising real costs. If costs in real terms instead are falling due to productivity improvements, then such inflation adjusted prices will have limited bearing for future prices. What matters more specifically is the development of real production costs for non-OPEC producers and the possibility to ramp up such production. Environmental politics in OECD countries is of course a clear limiting factor for non-OPEC oil production growth and possibly a much more important factor than the production cost it self.
But one last note on the fact that Saudi Arabia’s energy minister, Abdulaziz bin Salman, is emphasizing that the cuts are preemptive rather then an effort to drive the oil price to the sky while Amin H. Nasser is emphasizing that we need to be responsible. It means that if it turns out that the current cuts have indeed made the global oil market too tight with an oil price spiraling towards USD 110-120/b then we’ll highly likely see added supply from Saudi Arabia in November and December rather than Saudi sticking to 9.0 m b/d. This limits the risk for a continued unchecked price rally to such levels.
Oil price perspectives. We tend to think that the nominal average Brent crude oil price of USD 58.5/b during the shale oil boom years from 2015-19 is per definition the ”normal” price. But that period is now increasingly behind us. Zoom out a little to the real, average, inflation adjusted price of the past 20 years and we get USD 97/b. In mathematical terms it is much more ”normal” than the nominal price during the shale oil boom years

Is global oil demand about to peak 1: OECD and non-OECD share of global population

Is global oil demand about to peak 2: Oil demand per capita per year

Analys
USD 100/b in sight but oil product demand may start to hurt

Some crude oil grades have already traded above USD 100/b. Tapis last week at USD 101.3/b. Dated Brent is trading at USD 95.1/b. No more than some market noise is needed to drive it above USD 100/b. But a perceived and implied oil market deficit of 1.5 to 2.5 m b/d may be closer to balance than a deficit. And if so the reason is probably that oil product demand is hurting. Refineries are running hard. They are craving for crude and converting it to oil products. Crude stocks in US, EU16 and Japan fell 23 m b in August as a result of this and amid continued restraint production by Saudi/Russia. But oil product stocks rose 20.3 m b with net draws in crude and products of only 2.7 m b for these regions. Thus indicating more of a balanced market than a deficit. Naturally there has been strong support for crude prices while oil product refinery margins have started to come off. Saudi/Russia is in solid control of the market. Both crude and product stocks are low while the market is either in deficit or at best in balance. So there should be limited down side price risk. But oil product demand is likely to hurt more if Brent crude rises to USD 110-120/b and such a price level looks excessive.

Crude oil prices have been on a relentless rise since late June when it became clear that Saudi Arabia would keep its production at 9 m b/d not just in July but also in August. Then later extended to September and then lately to the end of the year. On paper this has placed the market into a solid deficit. Total OPEC production was 27.8 m b/d in August and likely more or less the same in September. OPEC estimates that the need for oil from OPEC in Q3-23 is 29.2 m b/d which places the global market in a 1.4 m b/d deficit when OPEC produces 27.8 m b/d.
The proof of the pudding is of course that inventories actually draws down when there is a deficit. A 1.4 m b/d of deficit for 31 days in August implies a global inventory draw of 43.4 m b/d. If we assume that OECD countries accounts for 46% of global oil demand then OECD could/should have had a fair share of inventory rise of say 20 m b in August. Actual inventory data are however usually a lagging set of data so we have to work with sub sets of data being released on a higher frequency. And non-OECD demand and inventory data are hard to come by.
If we look at oil inventory data for US, EU16 and Japan we see that crude stocks fell 23 m b in August while product stocks rose 20.3 m b with a total crude and product draw of only 2.7 m b. I.e. indicating close to a balanced market in August rather than a big deficit. But it matters that crude stocks fell 23 m b. That is a tight crude market where refineries are craving and bidding for crude oil together with speculators who are buying paper-oil. So refineries worked hard to buy crude oil and converting it to oil products in August. But these additional oil products weren’t gobbled up by consumers but instead went into inventories.
Rising oil product inventories is of course a good thing since these inventories in general are low. And also oil product stocks are low. The point is more that the world did maybe not run a large supply/demand deficit of 1.5 to 2.5 m b/d in August but rather had a more balanced market. A weaker oil product demand than anticipated would then likely be the natural explanation for this. Strong refinery demand for crude oil, crude oil inventory draws amid a situation where crude inventories already are low is of course creating an added sense of bullishness for crude oil.
On the one hand strong refinery demand for crude oil has helped to drive crude oil prices higher amid continued production cuts by Saudi Arabia. Rising oil product stocks have on the other hand eased the pressure on oil products and thus softened the oil product refinery margins.
The overall situation is that Saudi Arabia together with Russia are in solid control of the oil market. Further that the global market is either balanced or in deficit and that both crude and product stocks are still low. Thus we have a tight market both in terms of supplies and inventories. So there should be limited downside in oil prices. We are highly likely to see Dated Brent moving above USD 100/b. It is now less than USD 5/b away from that level and only noise is needed to bring it above. Tupis crude oil in Asia traded at USD 101.3/b last week. So some crude benchmarks are already above the USD 100/b mark.
While Dated Brent looks set to hit USD 100/b in not too long we are skeptical with respect to further price rises to USD 110-120/b as oil product demand likely increasingly would start to hurt. Unless of course if we get some serious supply disruptions. But Saudi Arabia now has several million barrels per day of reserve capacity as it today only produces 9.0 m b/d. Thus disruptions can be countered. Oil product demand, oil product cracks and oil product inventories is a good thing to watch going forward. An oil price of USD 85-95/b is probably much better than USD 110-120/b for a world where economic activity is likely set to slow rather than accelerate following large interest rate hikes over the past 12-18 months.
OPEC’s implied call-on-OPEC crude oil. If OPEC’s production stays at 27.8 m b/d throughout Q3-23 and Q4-23 then OPECs numbers further strong inventory draws to the end of the year.

Net long speculative positions in Brent crude and WTI. Speculators have joined the price rally since end of June.

End of month crude and product stocks in m b in EU16, US and Japan. Solid draw in crude stocks but also solid rise in product stocks. In total very limited inventory draw. Refineries ran hard to convert crude to oil products but these then went straight into inventories alleviating low oil product inventories there.

ARA oil product refinery margins have come off their highs for all products as the oil product situation has eased a bit. Especially so for gasoline with now fading summer driving. But also HFO 3.5% cracks have eased back a little bit. But to be clear, diesel cracks and mid-dist cracks are still exceptionally high. And even gasoline crack down to USD 17.6/b is still very high this time of year.

ARA diesel cracks in USD/b. Very, very high in 2022. Almost normal in Apr and May. Now very high vs. normal though a little softer than last year.

US crude and product stocks vs. 2015-2019 average. Still very low mid-dist inventories (diesel) and also low crude stocks but not all that low gasoline inventories.

US crude and product stocks vs. 2015-2019 averages. Mid-dist stocks have stayed persistently low while gasoline stocks suddenly have jumped as gasoline demand seems to have started to hurt due to higher prices.

Total commercial US crude and product stocks in million barrels. Rising lately. If large, global deficit they should have been falling sharply. Might be a blip?

Source: SEB graph and calculations, Blbrg data feed, EIA data
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