Analys

Brent crude rises 0.8% on Syria but with no immediate risk to supply

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9 december, 2024

Down 2.5% last week despite OPEC+ delivering more than expected. Brent crude traded within USD 70.85 – 74.28/b last week. It ended down 2.5% (-USD 1.8/b) with a close of on Friday of USD 71.12/b. The lowest print since 1 October is USD 70.70/b and the low of last week came dangerously close to that level.

Bjarne Schieldrop, Chief analyst commodities, SEB

The bearish price action last week came despite the fact that OPEC+ delivered more than expected at its 5 Dec meeting. Its long heralded return of 2.2 mb/d of extraordinary cuts was pushed back from January to instead April. The return of the 2.2 mb/d will now be chopped up in 18 pieces of 122 kb/d/mth instead of 12 pieces of 183 kb/d. UAE was previously allowed to increase it production by an additional 300 kb/d. This increase is also pushed back to April next year and will be diced up in 18 increments. the Monthly increases starting in April will thus be close to 139 kb/d/mth.

Too much oil on the sideline with main objective to place it back into the market. The group delivered a highly credible plan and a strong show of cohesion. The group also reiterated that the new plan can both be paused and reversed according to market conditions. And still the Brent crude oil price fell 2.5% last week. The latest communication from OPEC+ is obviously not enough for the market to be fully comfortable. After all the group keeps insisting that 1) It has a lot of oil on the sideline and 2) It WILL put it back into the market over the coming two years or so (if market conditions allow). So if and whenever there is a pocket of deficit in the global supply/demand balance over the coming two years, then OPEC+ will step in and plug it. That doesn’t leave a lot of upside for the price even if OPEC+ largely still is protecting the downside.

OPEC+ has delivered credible action and plans but has likely run out of bullets to protect the downside. OPEC+ has delivered a highly consistent and credible action since it first announced its plan of returning the 2.2 mb/d and now also a new, credible plan. But with so much oil on the sideline and its stated main objective to return barrels to the market, it seems very unlikely that it will step in and make additional cuts to protect the downside if need be. The sense is thus that the group has run out of bullets in terms of cuts. Its current cuts are as deep as they get. They have come to the end of the line. They won’t give away more market share in exchange of price. Rather they plan to take back market share. This together with a lukewarm global economy, solid production growth by non-OPEC+ in 2025 and an upcoming tariff-war (Donald Trump) keeps the oil market sentiment subdued.

Market will likely continue to fight the 70-line as Trump tariff-war grows louder. The market has been fighting the 70-line repeatedly since early September and will likely to continue to do so over the coming months as the noise from Donald Trump’ tariff-war grows louder. Sell on geopolitical rallies thus seems to be the preferable trading strategy these days.

Rebels toppling Assad lifts Brent crude up 0.7% to USD 71.6/b this morning. There are no immediate consequences for oil except that the position of Iran and Russia in the region is significantly weakened while the outlook for the region is more foggy than ever.

Bearish market focus while US oil inventories keep falling. But while the focus in the oil market seems to be the downside risk, except for sporadic geopolitical driven rallies, we see that total US crude and product stocks keep falling. In mid-June they stood 16.1 mb above the seasonal 2015-19 average. Now they stand 34 mb below the seasonal average.

Our expectations for 2025: China oil demand growth will turn positive again. Oil demand growth in India heats up yet more. OPEC+ will spread its 2.2 mb/d increase all to December 2027. Oil market will be largely balanced. Brent crude will average USD 75/b with low of the year of USD 59/b

Total US crude and product stocks excl. SPR keeps falling faster than the seasonal 2015-19 normal.

Relaterade ämnen:bjarne schieldrop oil seb analys

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Stronger inventory build than consensus, diesel demand notable

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21 februari, 2025

Redaktionen

Yesterday’s US DOE report revealed an increase of 4.6 million barrels in US crude oil inventories for the week ending February 14. This build was slightly higher than the API’s forecast of +3.3 million barrels and compared with a consensus estimate of +3.5 million barrels. As of this week, total US crude inventories stand at 432.5 million barrels – ish 3% below the five-year average for this time of year.

Ole R. Hvalbye, Analyst Commodities, SEB

In addition, gasoline inventories saw a slight decrease of 0.2 million barrels, now about 1% below the five-year average. Diesel inventories decreased by 2.1 million barrels, marking a 12% drop from the five-year average for this period.

Refinery utilization averaged 84.9% of operable capacity, a slight decrease from the previous week. Refinery inputs averaged 15.4 million barrels per day, down by 15 thousand barrels per day from the prior week. Gasoline production decreased to an average of 9.2 million barrels per day, while diesel production increased to 4.7 million barrels per day.

Total products supplied (implied demand) over the last four-week period averaged 20.4 million barrels per day, reflecting a 3.7% increase compared to the same period in 2024. Specifically, motor gasoline demand averaged 8.4 million barrels per day, up by 0.4% year-on-year, and diesel demand averaged 4.3 million barrels per day, showing a strong 14.2% increase compared to last year. Jet fuel demand also rose by 4.3% compared to the same period in 2024.

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Analys

Higher on confidence OPEC+ won’t lift production. Taking little notice of Trump sledgehammer to global free trade

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19 februari, 2025

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Ticking higher on confidence that OPEC+ won’t lift production in April. Brent crude gained 0.8% yesterday with a close of USD 75.84/b. This morning it is gaining another 0.7% to USD 76.3/b. Signals the latest days that OPEC+ is considering a delay to its planned production increase in April and the following months is probably the most important reason. But we would be surprised if that wasn’t fully anticipated and discounted in the oil price already. News this morning that there are ”green shots” to be seen in the Chinese property market is macro-positive, but industrial metals are not moving. It is naturally to be concerned about the global economic outlook as Donald Trump takes a sledgehammer smashing away at the existing global ”free-trade structure” with signals of 25% tariffs on car imports to the US. The oil price takes little notice of this today though.

Kazakhstan CPC crude flows possibly down 30% for months due to damaged CPC pumping station. The Brent price has been in steady decline since mid-January but seems to have found some support around the USD 74/b mark, the low point from Thursday last week. Technically it is inching above the 50dma today with 200dma above at USD 77.64/b. Oil flowing from Kazakhstan on the CPC line may be reduced by 30% until the Krapotkinskaya oil pumping station is repaired. That may take several months says Russia’s Novak. This probably helps to add support to Brent crude today.

The Brent crude 1mth contract with 50dma, 100dma, 200dma and RSI. Nothing on the horizon at the moment which makes us expect any imminent break above USD 80/b

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Analys

Brent looks to US production costs. Taking little notice of Trump-tariffs and Ukraine peace-dealing

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17 februari, 2025

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Brent crude hardly moved last week taking little notice of neither tariffs nor Ukraine peace-dealing. Brent crude traded up 0.1% last week to USD 74.74/b trading in a range of USD 74.06 – 77.29/b. Fluctuations through the week may have been driven by varying signals from the Putin-Trump peace negotiations over Ukraine. This morning Brent is up 0.4% to USD 75/b. Gain is possibly due to news that a Caspian pipeline pumping station has been hit by a drone with reduced CPC (Kazaksthan) oil flows as a result.

Brent front-month contract rock solid around the USD 75/b mark. The Brent crude price level of around USD 75/b hardly moved an inch week on week. Fear that Trump-tariffs will hurt global economic growth and oil demand growth. No impact. Possibility that a peace deal over Ukraine will lead to increased exports of oil from Russia. No impact. On the latter. Russian oil production at 9 mb/band versus a more normal 10 mb/d and comparably lower exports is NOT due to sanctions by the EU and the US. Russia is part of OPEC+, and its production is aligned with Saudi Arabia at 9 mb/d and the agreement Russia has made with Saudi Arabia and OPEC+ under the Declaration of Cooperation (DoC). Though exports of Russian crude and products has been hampered a little by the new Biden-sanctions on 10 January, but that effect is probably fading by the day as oil flows have a tendency to seep through the sanction barriers over time. A sharp decline in time-spreads is probably a sign of that.

Longer-dated prices zoom in on US cost break-evens with 5yr WTI at USD 63/b and Brent at USD 68-b. Argus reported on Friday that a Kansas City Fed survey last month indicated an average of USD 62/b for average drilling and oil production in the US to be profitable. That is down from USD 64/b last year. In comparison the 5-year (60mth) WTI contract is trading at USD 62.8/b. Right at that level. The survey response also stated that an oil price of sub-USD 70/b won’t be enough over time for the US oil industry to make sufficient profits with decline capex over time with sub-USD 70/b prices. But for now, the WTI 5yr is trading at USD 62.8/b and the Brent crude 5-yr is trading at USD 67.7/b.

Volatility comes in waves. Brent crude 30dma annualized volatility.