Analys

Brent stabilizes, yet upside potential persists

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4 månader sedan

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18 oktober, 2024

Brent crude prices have traded sideways since opening on Tuesday, consistently hovering around USD 74.2 per barrel for three consecutive days. However, since yesterday evening, prices have risen by USD 0.5 per barrel and are currently trading at USD 74.5. This increase primarily reflects core market fundamentals, and another bullish US inventory report released yesterday at 16:30 CEST.

Ole R. Hvalbye, Analyst Commodities, SEB

The highly anticipated Israeli retaliation remains muted for now, easing the risk premium and reducing the severe tensions in the Middle East. However, the conflict continues: Israel’s Foreign Minister confirmed yesterday that Hamas leader Yahya Sinwar had been killed by Israeli forces in Gaza.

Media reports suggest that the US might use this opportunity to attempt to broker an end to the fighting, although Netanyahu emphasized in a speech yesterday that the conflict is far from over. Consequently, markets will remain volatile pending further developments.

Independently of the scale and strategy of the Israeli retaliation, we may currently be witnessing a shift in the oil market. The focus is moving from widespread fear of impacts on critical Iranian oil infrastructure to an expectation that the US will enforce sanctions on Iranian oil exports more strictly post-US elections. Both scenarios could lead to reduced Iranian oil production in 2025, thus potentially balancing the oil market and allowing OPEC+ to return barrels to the market without significantly lowering prices.

In recent years, the US has been reluctant to impose strict sanctions on Iranian oil exports to avoid driving up prices. Now, the situation has changed. Should Iran’s entire oil export capacity be disabled, the global market would lose roughly 2 million barrels per day of Iranian crude and condensate. Yet, with OPEC+ holding nearly 6 million barrels per day in spare capacity – with Saudi Arabia alone capable of boosting production by nearly 3 million barrels per day – the global oil supply remains robust, making it easier to enforce strict sanctions on Iran.

However, any significant reduction in spare capacity would naturally diminish the global balancing buffer and potentially elevate oil prices in the future. Thus, regardless of the situation, ongoing tensions in the Middle East are likely to persist, with a higher probability of oil prices trending upward rather than downward.

In terms of fundamentals, the latest US DOE report revealed a bullish drawdown of 2.2 million barrels in US commercial crude inventories. Currently, at 420.5 million barrels, US crude oil inventories are about 5% below the five-year average for this time of year.

Gasoline and distillate inventories also decreased by 2.2 million and 3.5 million barrels, respectively, both significantly below seasonal averages. Total commercial petroleum inventories decreased by 7 million barrels last week, indicating continued tightness in the US market.

US refinery inputs averaged 15.8 million barrels per day, a slight increase from the previous week, with refineries operating at 87.7% capacity. Gasoline production decreased to 9.3 million barrels per day, while distillate production dipped to 4.8 million barrels per day. Meanwhile, there was an uptick in implied demand for total products, up nearly 3% compared to the same period last year. Over the past four weeks, gasoline products supplied averaged 9.0 million barrels a day, up by 5.4% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels a day over the past four weeks, up by 0.2% from the same period last year. Jet fuel product supplied increased by a substantial 10.4% compared with the same four-week period last year.

In summary, while we continue to see a reduced geopolitical risk premium, more upside potential remains. The ongoing tight fundamentals in the US also support this view. Hence, although prices have stabilized, the potential for upside risks outweighs the downside, supporting a short-term buy recommendation.

Relaterade ämnen:oil Ole R. Hvalbye seb analys

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Crude oil comment: Market battling between spike-risk versus 2025 surplus

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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.

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.

Bjarne Schieldrop, Chief analyst commodities, SEB

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

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5 dagar sedan

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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.