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Analys

SIP Nordic – Råvaruguiden – Mars 2012

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SIP Nordic - Analyser av råvarorNågra villor fyllda med guld

I början av 2011 publicerades en artikel om Sveriges dyraste villor som var ute till försäljning. De fyra dyraste villorna hade ett sammanlagt försäljningspris på runt 1,4 miljarder. En stor summa, men det skulle inte på långa vägar räcka till att köpa all världens guld.

Det som dock är intressant är att all världens guld skulle få plats i dessa villor. Denna månads krönika går i fysikens och matematikens tecken. Varje år produceras 50 miljoner troy ounces guld.

Trots att vi sedan urminnes tider producerat guld så antar jag att vi haft liknande produktion de senaste 110 åren. Det är självklart en siffra tagen ur luften men med tanke på aztekernas och faraonernas kärlek till guld så tror jag inte att den siffran är helt fel.

Volym guld - Storlek, mängden i världenSåledes uppskattar jag den totala mängden tillgängligt guld till 9 miljarder troy ounce guld.

Således finns det ungefär 166 miljoner kg guld i världen. Med dagens guldpris motsvarar detta närmare 67 biljoner kronor.

Det kan låta som en otrolig stor mängd och ett astronomsikt värde men faktum är att guldet skulle kunna få plats i de fyra dyraste villorna ute till försäljning under början av förra året.

Guld har en densitet på 19,3 g/kvadratcentimeter. Detta är ekvivalent med 19,3 kg per liter. Eller 19300 kg per kubikmeter. Med en total tillgänglig mängd på 166 miljoner kg guld får vi att all världens guld upptar en volym om ca 8 600 kubikmeter. Vad detta mynnar ut i är att all världens guld ryms i en kub med sidorna 20,5 meter (20,5*20,5*20,5 = 8 600 m3).

De fyra dyraste villorna, ute till försäljning under 2011, hade en sammanlagd boyta på 2 774 kvadratmeter. Dessa fyra villor skulle alltså få plats med all världens guld (2 774* 3,1 = 8 600 m3). Att ha råd med det är en helt annan femma.

Platina – för dig med mindre boende

Världens platinaproduktion uppgår till 3,6 miljoner troy once per år. Med samma metodik som tidigare skulle all producerat platina vara värt runt 4,7 triljoner kronor. Platina har dock en högre densitet och all världens platinaproduktion är ungefär 556 kubikmeter. Detta motsvarar fyra villor på 46 kvadratmeter vardera.

Guld – Trygg hamn eller inte

  • Den positiva korrelationen mellan guld och risk fortsätter.
  • Guld har under februari svängt kraftigt. Guldpriset följer således den globala marknadens växlande mellan risk på och risk av, till följd av greklandskrisen.
  • Den stärkta euron kontra dollar är också en starkt bidragande orsak till att guldpriset ökat. Ben Bernankes tal i slutet av månaden om långsam återhämtning gav dock guldet en liten törn

Prognos för pris på guld år 2012 - Analytikerkonsensus

Platina

  • Den positiva korrelationen med guld hjälper platina. Platina har dock utvecklats något starkare än guld under början av 2012.
  • Strejken i Impala Rustenburg gruvorna i Sydafrika, världens största platina gruva, fortsätter och det kommer ta tid innan produktionen återgår till det normala.
  • Strejken har lett till en ökning av platinapriset. Det har även hjälpt att minska prisskillnaderna mellan guld och platina.

Platina - Prognos på pris för år 2012 - Analytikerkonsensus

Silver

  • Silverpriset har under februari månad ökat och handlas nu på nivåer vi såg i september förra året. Det är dock drygt 12$ kvar till den höga noteringen 50$ under april förra året.
  • Analytikerkåren är överens om att ett stigande silverpris är troligt om utsikterna för den globala ekonomin fortsätter att se mörka ut.
  • Vi börjar även se att silver diskuteras flitigt utanför analyskåren – är ett liknande scenario som vi hade under våren 2011 på väg att upprepa sig?

Silver - Prognos på pris för 2012 - Analytikerkonsensus

Brent olja

  • Oljan har efter en trevande start i januari både återhämtat sig och nått upp till nya höga nivåer under februari.
  • Hårda väderförhållanden men framförallt ökad spänning mellan Iran och västvärlden drev oljepriset till toppen 125$ den 24 februari.
  • Trots rapporter om ökad tillgång och högre produktion, kyls inte oljepriset ned. Oron i Iran och OPEC länderna bidrar till att oljan behåller sin höga kurs.
  • Skillnaden mellan Brent oljan och WTI oljan ökar återigen.

Olja (Brent) - Prognos på pris år 2012 - Analytikerkonsensus

Naturgas

  • Naturgas närmar sig nu historiskt låga nivåer. Så pass låga att produktionskostnaderna nu närmar sig priset på naturgas.
  • Medeltemperaturen har varit högre än vanligt i USA. Däremot spås tillgången av naturgas mer än halveras i USA under 2012.
  • Spekulanterna är fortsatt i korta positioner (spekulerar i nedgång) men de börjar successivt köpa tillbaka sina positioner vilket kan tyda på en vändning i marknaden.

Naturgas - Prognos på pris per kvartal år 2012

Koppar

  • Koppar har börjat året starkt efter ett ursvagt 2011. Koppar har gått upp ca. 12% i år. (Att jämföra med -21% under 2011)
  • Koppar är mycket konjunkturskänsligt och följer ofta negativa aktietrender. Med den positiva starten på aktiemarknaden följer även koppar med.
  • Kina, världens största kopparkonsument, sänkte under februari månad bankernas reservkrav vilket påverkade koppar positivt.

Koppar - Prognos på pris per kvartal år 2012

Zink

  • Likt koppar har zinkpriset kraftigt stigit under den första månaden av 2012.
  • Den årliga konsumtionen av zink förväntas växa med 3.6% samtidigt som tillgången bara förväntas växa med 3%. Det uppskattas dock att nuvarande zinktillgång skulle räcka 7,5 veckor, 0,5 veckor längre än 2011.
  • Likt andra basmetaller drivs zinkpriset av att riskaptiten nu ökar och utsikterna för den globala ekonomin är inte lika negativ som under början av året. Något som hjälper basmetallerna uppåt.

Zink - Prognos för pris per kvartal år 2012

Nickel

  • Nickel presterade sämst av alla basmetaller under 2011.
  • Nickel har dock följt med de andra basmetallerna i den positiva uppgången under januari 2012.
  • Produktionen väntas överstiga konsumtionen under 2012.
  • Mängden utvunnet nickel förväntas stiga med närmare 10% under 2012.
  • Trots att tillgången ökar behöver inte nickelpriset falla. Riskaptiten ökar även bland investerare vilket kan driva råvarupriserna mot högre höjder.

Nickel - Prognos på priset per kvartal år 2012

Socker

  • Dåliga väderförhållanden i Brasilien har fått analytiker att revidera sockerskörden med nästan 20%.
  • Det stigande oljepriset driver sockerpriset uppåt under februari månad. Då oljan ökar även produktionen av etanol, vilket framställs av bland annat sockerrör.
  • Köparna har återigen kopplat greppet om sockret. Summan av långa och korta positioner är nu positivt vilket tyder på att spekulanter nu i en högre grad tror på et fortsatt stigande sockerpris.

Socker - Prognos på pris kvartal för kvartal år 2012

Bomull

  • Bomull rör sig nu sidledsgående trend.
  • Viktig nivå för uppgång är 100 $/lb.
  • Trots extrem torka i USA har goda skördar i Kina och Indien täckt upp detta bortfall. Skördarna i Kina anses dock bli mindre varför Kina kan vara tvungna att importera bomull. Något som skulle kunna driva bomullspriset över 100$/lb.
  • Australien har reviderat ner sin skörd på grund av dåliga väderförhållanden.

Bomull - Prognos på pris per kvartal år 2012

Majs

  • USDA justerade, i början av året, ned sin prognos för den Argentinska skörden. Från tidigare 29 miljoner ton till 26 miljoner ton. Nu ser det ut som att dåliga väderförhållanden fortsatt kan sätta käppar i hjulet för den argentinska skörden.
  • Majs konsoliderar mellan 580 och 670 cent /bushel. Nu börjar majs närma sig motståndet på 670 cent. Frågan är om det bryter upp eller vänder ned.

Majs, prognos på pris per kvartal år 2012

Vete

  • Den globala produktionen av vete spås stiga med 5.3% under första halvåret 2012, samtidigt som efterfrågan endast kommer att öka 3.3%, med ett totalt överskott om 10 miljoner ton.
  • Vete har tappat närmre 25% under de senaste året men fortfarande är priset på ca. 6,5 dollar tillräckligt attraktivt för att bönder ska fortsätta plantera. Ett ökande överskott är således att vänta.
  • Kalla väderförhållanden i Ukraina kan komma att påverka vetepriset positivt. Nettopositionen, dvs summan av köpare och säljare, är fortsatt negativ. Säljarna har alltså fortfarande grepp om vetet.

Vete, prognos på pris för kvartal under 2012

Apelsinjuice

  • Apelsinjuice har stigit med hela 220% sedan 2009.
  • Senaste månaden har priset på apelsinjuice ökat kraftigt till följd av att USDA kan komma att förbjuda import av brasilianskt koncentrat. Svampbekämpningsmedel används flitigt i Brasilien men är förbjudet i USA.
  • Skörden spås dock bli väldigt god i Florida samtidigt som rapporter visar att efterfrågan på apelsinjuice minskar.

[box]Denna uppdatering är producerat av SIP Nordic och publiceras i samarbete och med tillstånd på Råvarumarknaden.se[/box]

Ansvarsbegränsning

Detta produktblad utgör endast marknadsföring och har sammanställts av SIP Nordic Fondkommission AB.

Innehållet ger inte fullständig information avseende det finansiella instrumentet. Investerare uppmanas att del av prospekt och slutliga villkor, vilka finns tillgängliga på: www.rbsbank.se/markets, innan ett investeringsbeslut tas.

Förekommande exempel är simulerade och baseras på SIP Nordics egna beräkningar och antaganden, en person som använder andra data eller antaganden kan nå andra resultat. Administrativa avgifter och transaktionsavgifter påverkar den faktiska avkastningen.

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Analys

Now it’s up to OPEC+

Publicerat

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SEB - analysbrev på råvaror

All eyes are now back at OPEC+ after the recent fall in oil prices along with weakening crude curve structures and weakening economic statistics. OPEC+ will have to step up the game and give solid guidance of what it intends to do in 2024. If Saudi Arabia is to carry the burden alone (with only a little help from Russia) it will likely need to keep its production at around 9.0 m b/d on average for 2024 and drop it down towards 8.5 m b/d in Q1-24. This may be too much to ask from Saudi Arabia and it may demand some of the other OPEC members to step up and join in on the task to regulate the market in 2024. More specifically this means Iraq, Kuwait and UAE. The oil market will likely be quite nervous until a firm message from Saudi/Russia/OPEC+ is delivered to the market some time in December.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Saudi Arabia may get some help from President Joe Biden though as his energy secretary adviser, Amos Hochstein, has stated that the US will enforce sanctions on Iran on more than 1 m b/d. 

Brent crude fell 4.6% ydy to USD 77.4/b and over the last three trading sessions it has lost USD 5.1/b. This morning it is trading only marginally higher at USD 77.6/b which is no vote of confidence. A good dose of rebound this morning would have been a signal that the sell-off yesterday possibly was exaggerated and solely driven by investors with long positions flocking to the exit. So there’s likely more downside to come.

In general there is a quite good relationship between net long speculative positions in Brent crude and WTI versus the global manufacturing cycle. Oil investors overall typically have an aversion of holding long positions in oil when the global economy is slowing down. As of yet there are few signs that the global economic cycle is about to turn. Rather the opposite seems to be the case. Global manufacturing fell in October and yesterday we saw US industrial production fall 0.6% MoM while continued jobless claims rose more than expected and to the highest level in two years. This matches well with the logic that the strong rise in interest rates since March 2022 is inflicting pain on the economy with more pain ahead as the effect comes with a lag.

Most estimates are that the global oil market is running a solid deficit in Q4-23. The IEA has an implied deficit in the global oil market of 1 m b/d in Q4-23 if we assume that OPEC will produce 28 m b/d vs. a call-on-OPEC at 29 m b/d. But prices in the oil market is telling a different story with weakening crude curves, weakening refining margins and a sharp sell-off in oil prices.

For 2024 the general forecasts are that global economic growth will slow, global oil demand growth will slow and also that the need for oil from OPEC will fall from 28.7 m b/d to 28.4 m b/d (IEA). This is a bearish environment for oil. The average Brent crude oil price so far this year is about USD 83/b. It should essentially be expected to deliver lower in 2024 with the negatives mentioned above.

Two things however will likely counter this and they are interconnected. US shale oil activity has been slowing with falling drilling rig count since early December 2022 and that has been happening at an average WTI price of USD 78/b. The result is that total US liquids production is set to grow by only 0.3 m b/d YoY in Q4-24. This allows OPEC+ to support the oil price at USD 80-90/b through 2024 without fear of loosing a significant market share to US oil production. Thus slowing US liquids production and active price management by OPEC+ goes hand in hand. As such we do expect OPEC+ to step up to the task.

So far it has predominantly been Saudi Arabia with a little help from Russia which together proactively have managed the oil market and the oil price through significant cuts. Saudi Arabia produced 10.5 m b/d in April but then cut production rapidly to only 9.0 m b/d which is what it still produces. Its normal production is about 10 m b/d.

What has made the situation more difficult for Saudi Arabia is the combination of solid growth in non-OPEC supply in 2023 (+2.1 m b/d YoY; IEA) but also a substantial revival in production by Venezuela and Iran. The two produced 660 k b/d more in October than they on average did in 2022. So the need for oil from Saudi Arabia is squeezed from both sides.

All eyes are now back at OPEC+ after the recent fall in oil prices along with weakening crude curve structures and weakening economic statistics.

OPEC+ will have to step up the game and give solid guidance of what it intends to do in 2024. If Saudi Arabia is to carry the burden alone (with only a little help from Russia) then it will likely need to keep its production at around 9.0 m b/d on average for 2024 and drop it down towards 8.5 m b/d in Q1-24. This may be too much to ask from Saudi Arabia and it may demand some of the other OPEC members to step up and join in on the task to regulate the market in 2024. More specifically this means Iraq, Kuwait and UAE.

The oil market will likely be quite nervous until a firm message from Saudi/Russia/OPEC+ is delivered to the market some time in December.

Saudi Arabia may get some help from President Joe Biden though as his energy secretary adviser, Amos Hochstein, has stated that the US will enforce sanctions on Iran on more than 1 m b/d.

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Analys

More from Venezuela and Iran means smaller pie for Saudi

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SEB - analysbrev på råvaror

Production in Venezuela and Iran is on the rise and is set to rise further in the coming months and in 2024. Combined their production could grow by 0.8 m b/d YoY to 2024 (average year to average year). The IEA projected in its latest OMR (Oct-2023) that call-on-OPEC will fall to 28.3 m b/d in 2024, a decline of 0.5 m b/d. This combination would drive implied call-on-Saudi from 10.4 m b/d in 2023 to only 9.1 m b/d in 2024 and as low as 8.6 m b/d in Q1-24 if Saudi Arabia has to do all the heavy lifting alone. Wider core OPEC cooperation may be required.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

The IEA is out in the news today projecting peak oil demand this decade with global demand standing at no more than 102 m b/d towards the end of this decade. If so it would imply a call-on-Non-OPEC of only 66.4 m b/d in 2028 assuming that OPEC in general will demand a market share of 30 m b/d + NGL of 5.6 m b/d. The IEA (Oct-23) projects non-OPEC production to average 68.8 m b/d in 2024. That’s already 2.4 m b/d more than what would be sustainable over time if global oil demand is set to peak later this decade. Oil producers in general cannot have a production growth strategy in a peak oil demand world.

The US has decided to lift sanctions towards Venezuela for six months (18 April) as a measure to tempt it to move towards more democratic processes. And if it does, then the lifting of sanctions could continue after the 6 months. A primary opposition election took place this weekend with lawmaker Maria Corina Machado currently holding 93% of the vote count. Venezuela will next year hold a presidential election but fair play seems unlikely with Maduro in charge. The lifting of sanctions allows Venezuela’s PdV to resume exports to all destinations. Bans on new, foreign investments in the oil and gas sector are also lifted though Russian entities and JV’s are still barred.

Venezuela produced 0.8 m b/d in September and indicates that it can lift production by 0.2 m b/d by year and with more rigs and wells by 0.5 m b/d to 1.3 m b/d in the medium term.

Oil production in Iran has been on a steady rise since its low-point of 2.0 m b/d in 2020. Last year it produced 2.5 m b/d. In September it produced 3.1 m b/d, but Iran’s oil minister says production now is at 3.3 m b/d. Iran’s rising production and exports is not about the US being more lenient in its enforcement of sanctions towards Iran. It is more about Iran finding better ways to circumvent them but even more importantly that China is importing more and more oil from Iran.

Production by Iran and Venezuela is recovering. YoY production from the two could rise by close to 0.8 m b/d in 2024. This will lead to a decline in call-on-Saudi oil. 

Oil production by Iran and Venezuela
Source: SEB graph and asessments, Blbrg data and news

The IEA estimated in its latest OMR report that call-on-OPEC will fall from 28.8 m b/d in 2023 to 28.3 m b/d in 2024. If all OPEC members except Saudi Arabia produces the same amount in 2024 as in 2023, then the need for Saudi Arabia’s oil (call-on-Saudi) will fall from a healthy 10.4 m b/d in 2023 to a still acceptable 9.9 m b/d in 2024. Its normal production is roughly 10 m b/d.

If however production by Iran and Venezuela rise by a combined 0.5 m b/d YoY in 2024, then call-on-Saudi will fall to 9.4 m b/d which is not so good but still manageable. But if Iran’s oil minister is correct when he says that its current production now is at 3.3 m b/d, then it is not far fetched to assume that Iran’s oil production may average maybe 3.4-3.5 m b/d in 2024. That would yield a YoY rise of 0.6 m b/d just for Iran. If we also assume that Venezuela manages to lift its production from 0.8 m b/d this year to 1.0 m b/d in 2024, then the combined growth from the two is closer to 0.8 m b/d. That would push call-on-Saudi down to only 9.1 m b/d which is not good at all. It would require Saudi Arabia to produce at its current production of 9.0 m b/d all through 2024.

The IEA further estimates that call-on-OPEC will average 27.7 m b/d in Q1-24. If we assume Iran @ 3.4 m b/d and Venezuela @ 1.0 m b/d then call-on-Saudi in Q1-24 will only be 8.6 m b/d. I.e. Saudi Arabia will have to cut production further to 8.6 m b/d in Q1-24. At that point Saudi Arabia will likely need or like other core OPEC members like Iraq, Kuwait and UAE as well as Russia to join in.

Implied call-on-Saudi. Call-on-OPEC is set to decline from 28.8 m b/d to 28.3 m b/d to 2024. If all OPEC members produced the same in 2024 as in 2023 then call-on-Saudi would fall by 0.5 m b/d to 9.9 m b/d. But if Venezuela and Iran increases their combined production by 0.8 m b/d YoY in 2024 then call-on-Saudi falls to 9.1 m b/d.

Implied call-on-Saudi.
Source: SEB graph and calculations, IEA data

If we look a little broader on this topic and also include Libya, Nigeria and Angola we see that this group of OPEC members produced 11.4 m b/d in 2010, 10.1 m b/d in 2017 and only 5.1 m b/d at the low-point in August 2020. The decline by these OPEC members has of course the other OPEC and OPEC+ members to stem the rising flood of US shale oil production. The production from this unfortunate group of OPEC-laggards is however now on the rise reaching 7.5 m b/d in September. With more from Iran and Venezuela it could rise to 8.0 m b/d in 2024. Production from Nigeria and Angola though still looks to be in gradual decline while Libya looks more sideways. So for the time being it is all about the revival of Iran and Venezuela.

The unfortunate OPEC-laggards had a production of 11.4 m b/d in 2010. But production then fell to only 5.1 m b/d in August 2020. It helped the rest of OPEC’s members to manage the huge increase in US shale oil production. Production from these countries are now on the rebound. Though Nigeria and Angola still seems to be in gradual decline.

Oil production of some OPEC countries
Source: SEB graph, Blbrg data

What everyone needs to be attentive to is that call-on-OPEC and even more importantly call-on-Saudi can only erode to a limit before Saudi/OPEC/Russia will have to take action. Especially if the forecast for needed oil from OPEC/Saudi for the nearest 2-3 years is in significant decline. Then they will have to take action in the sense that they stop defending the price and allows the price to fall sharply along with higher production. And yet again it is US shale oil producers who will have to take the brunt of the pain. They are the only oil producers in the world who can naturally and significantly reduce their production rather quickly. I.e. the US shale oil players will have to be punished into obedience, if possible, yet one more time.

We don’t think that it is any immediate risk for this to happen as US shale oil activity is slowing while global oil demand has rebounded following Covid-lockdowns. But one needs to keep a watch on projections for call-on-OPEC and call-on-Saudi stretching 1-2-3 years forward on a continuous basis. 

In its medium term oil market outlook, Oil2023, the IEA projected a fairly healthy development for call-on-OPEC to 2028. First bottoming out at 29.4 m b/d in 2024 before rising gradually to 30.6 m b/d in 2028. The basis for this was a slowing though steady rise in global oil demand to 105.7 m b/d in 2028 together with stagnant non-OPEC production due to muted capex spending over the past decade. But this projection has already been significantly dented and reduced in IEA’s latest OMR from October where call-on-OPEC for 2024 is projected at only 28.3 m b/d.

In a statement today the IEA projects that global oil demand will peak this decade and consume no more than 102 m b/d in the late 2020ies due to (in large part) rapid growth in EV sales. This would imply a call-on-OPEC of only 26.9 m b/d in 2028. It is not a viable path for OPEC to produce only 26.9 m b/d in 2028. Especially if production by Iran and Venezuela is set to revive. I.e. OPEC’s pie is shrinking while at the same time Iran and Venezuela is producing more. In this outlook something will have to give and it is not OPEC. 

One should here turn this on its head and assume that OPEC will produce 30 m b/d in 2028. Add OPEC NGLs of 5.6 m b/d and we get 35.6 m b/d. If global oil demand in 2028 stands at only 102 m b/d then call-on-Non-OPEC equates to 66.4 m b/d. That is 3.1 m b/d less than IEA’s non-OPEC production projection for 2028 of 69.5 m b/d but also higher than non-OPEC production projection of 68.8 m b/d (IEA, Oct-23) is already 2.4 m b/d too high versus what is a sustainable level.

What this of course naturally means is that oil producers in general cannot have production growth as a strategy in a peak-oil-demand-world with non-OPEC in 2024 already at 2.4 m b/d above its sustainable level.

The US is set to growth its hydrocarbon liquids by 0.5 m b/d YoY in 2024. But in a zero oil demand growth world that is way, way too much.

Call-on-OPEC
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Analys

Reloading the US ’oil-gun’ (SPR) will have to wait until next downturn

Publicerat

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SEB - analysbrev på råvaror

Brent crude traded down 0.4% earlier this morning to USD 91.8/b but is unchanged at USD 92.2/b at the moment. Early softness was probably mostly about general market weakness than anything specific to oil as copper is down 0.7% while European equities are down 0.3%. No one knows the consequences of what a ground invasion of Gaza by Israel may bring except that it will be very, very bad for Palestinians, for Middle East politics for geopolitics and potentially destabilizing for global oil markets. As of yet the oil market seems to struggle with how to price the situation with fairly little risk premium priced in at the moment as far as we can see. Global financial markets however seems to have a clearer bearish take on this. Though rallying US rates and struggling Chinese property market may be part of that.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

The US has drawn down its Strategic Petroleum Reserves (SPR) over the latest years to only 50% of capacity. Crude oil prices would probably have to rally to USD 150-200/b before the US would consider pushing another 100-200 m b from SPR into the commercial market. As such the fire-power of its SPR as a geopolitical oil pricing tool is now somewhat muted. The US would probably happily re-load its SPR but it is very difficult to do so while the global oil market is running a deficit. It will have to wait to the next oil market downturn. But that also implies that the next downturn will likely be fairly short-lived and also fairly shallow. Unless of course the US chooses to forgo the opportunity.  

The US has drawn down its Strategic Petroleum Reserves (SPR) to only 50% of capacity over the latest years. Most of the draw-down was in response to the crisis in Ukraine as it was invaded by Russia with loss of oil supply from Russia thereafter.

The US has however no problems with security of supply of crude oil. US refineries have preferences for different kinds of crude slates and as a result it still imports significant volumes of crude of different qualities. But overall it is a net exporter of hydrocarbon liquids. It doesn’t need all that big strategic reserves as a security of supply any more. Following the oil crisis in the early 70ies the OECD countries created the International Energy Agency where all its members aimed to have some 100 days of forward oil import coverage. With US oil production at steady decline since the 70ies the US reached a peak in net imports of 13.4 m b/d in 2006. As such it should have held an SPR of 1340 million barrels. It kept building its SPR which peaked at 727 m b in 2012. But since 2006 its net imports have been in sharp decline and today it has a net export of 2.9 m b/d.

Essentially the US doesn’t need such a sizable SPR any more to secure coverage of its daily consumption. As a result it started to draw down its SPR well before the Russian invasion of Ukraine in February 2022. But then of course it fell fast and is today at 351 m b or about 50% of capacity.

The US is the largest oil consumer in the world. As such it is highly vulnerable to the price level of oil. The US SPR today is much more of a geopolitical tool than a security of supply tool. It’s a tool to intervene in the global oil market. To intervene in the price setting of oil. The US SPR is now drawn down to 50% but it still holds a sizable amount of oil. But it is little in comparison to the firepower of OPEC. Saudi Arabia can lower its production by 1 m b/d for one year and it will have eradicated 365 million barrels in global oil inventories. And then it can the same the year after and then the year after that again.

The US has now fired one big bullet of SPR inventory draws. It really helped to balance the global oil market last year and prevented oil prices from going sky high. With 350 m b left in its SPR it can still do more if needed. But the situation would likely need to be way more critical before the US would consider pushing yet another 100-200 m b of oil from its SPR into the global commercial oil market. An oil price of USD 150-200/b would probably be needed before it would do so.

With new geopolitical realities the US probably will want to rebuild its SPR to higher levels as it is now an important geopolitical tool and an oil price management tool. But rebuilding the SPR now while the global oil market is running a deficit is a no-go as we see it.

An oil market downturn, a global recession, a global oil market surplus where OPEC no longer want to defend the oil price with reduced supply is needed for the US to be able to refill its SPR again unless it wants to drive the oil price significantly higher.

But this also implies that the next oil price downturn will likely be short-lived and shallow as the US will have to use that opportunity to rebuild its SPR. It’s kind off like reloading its geopolitical oil gun. If it instead decides to forgo such an opportunity then it will have to accept that its geopolitical maneuverability in the global oil market stays muted.

Net US oil imports in m b/d and US Strategic Petroleum Reserves (SPR) in million barrels. The US doesn’t need strategic petroleum reserves for the sake of security of supply any more. But it is a great geopolitical energy-tool to intervene in the price setting of oil in the global market place.

Net US oil imports in m b/d and US Strategic Petroleum Reserves (SPR) in million barrels
Source: SEB graph, EIA data from Blbrg
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