Följ oss

Analys

Crude oil comment – All is good near term with more upside to come

Publicerat

den

SEB - analysbrev på råvaror

SEB - Prognoser på råvaror - CommodityFollowing some intraday swings with Brent trading as low as $54.82/bl it closed the day with only a slight loss of 0.3% at $55.48/bl. The whole forward curve lost slightly more with Brent Dec-2020 loosing 0.6% with a close of $55.53/b. During the day there were clearly some concerns that the bull-rally we have had since early September and which has handed us the highest Brent price since April should topple over. It did however hold with Brent closing above the earlier resistance at $55.33/bl. This morning Brent is trading steady at $55.5/bl. It takes little note of the Caribbean hurricane Maria since it is not projected to enter the US Gulf. Iraq and some other producers are calling out for an additional 1% output cut but that does not give any resonance in higher prices either. We don’t really see the point in cutting more as the current cuts currently are highly effective with declining inventories and most crude and product curves already having moved into backwardation at the front end of the forward curves.

The US EIA yesterday released its monthly drilling productivity report and DUCs report. Of interest was the fact that the number of drilled wells came in at the highest level since March 2015 reaching 1267 wells drilled. Today’s wells are however twice as productive. Thus real drilling is actually way higher than in March 2015. Drilling continued to run ahead of completions also in August just as has been the trend all since December last year. Both drilling and completions rose but the gap widened and led to an increase in DUCs (Drilled but uncompleted wells) of 231 with total number of DUCs reaching 7048 wells. That was the largest monthly increas in DUCs since January this year. Marginal, annualized production growth was projected to fall back slightly to a rate of 960 k bl/d/yr in October from 1,151 k bl/d/yr in Sepember.

We maintain the view that there is more upside near term in crude oil prices with the same arguments we have pitched lately: Net long specs are fairly low, inventories are falling, OPEC in general and Saudi specifically are firm on cuts and do deliver, curves have shifted into backwardation (enticing more long specs to enter into positive roll-yield), US oil rig count is declining (adds bullish sentiment) and technicals points to a revisit of earlier highs of the year.

If you spice it up with a continued softening in the USD and potentially another hurricane heading for the US Gulf, then higher prices are on your plate.

Short term price gains the nearest months should however not be taken at face value in terms of indications for what one should expect in 2018 where we still see the need for OPEC intervention all through 2018. Thus oil producers looking to hedge their production for 2018 should bide their time for the likely upside near term.

Ch1: US shale oil production continues to rise, but losses in existing production is rising as well

US shale oil production continues to rise, but losses in existing production is rising as well

Ch2: Legacy losses in existing production has increased faster than US shale oil production since production bottomed out last year
But end-point is not far away from the trend line.
If it moves more and more to the upside of the trend it means that legacy losses are accelerating versus total production.
I.e. would be a sign that it is more and more difficult to maintain production or to drive it higher

Legacy losses in existing production has increased faster than US shale oil production since production bottomed out last year

Ch3: Marginal, annualized shale oil production growth to fall back slightly in October to just below 1 m bl/d
Producers do however have a lot to gain from speeding up completions as they have A LOT of DUCs to take from

Marginal, annualized shale oil production growth to fall back slightly in October to just below 1 m bl/d

Ch4: Drilling continues to run ahead of completions. Both rose in August but gap widened to 231 and highest gap since Jan this year
As a consequence the DUC inventory continues to rise and rise
In perspective we have that the 1510 DUC which has been added to the DUC inventory since December last year implicitly contains some 500 m bl of producible oil within a three year time horizon.
In addition comes the other 5538 DUCs (out of the total 7048) being of unknown quality and quantity
In reference the OECD inventories were down 85 m bl YoY in July

Drilling continues to run ahead of completions. Both rose in August but gap widened to 231 and highest gap since Jan this year

Ch5: Brent crude Cal-2018 has ticked higher and higher now just a little more than 3 dollar below year high
Producers should probably target and act if Brent Cal-2018 hits ytd high of $58.52/bl (high close)

Brent crude Cal-2018 has ticked higher and higher now just a little more than 3 dollar below year high

Kind regards

Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking

Analys

Tightening fundamentals – bullish inventories from DOE

Publicerat

den

SEB - analysbrev på råvaror

The latest weekly report from the US DOE showed a substantial drawdown across key petroleum categories, adding more upside potential to the fundamental picture.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

Commercial crude inventories (excl. SPR) fell by 5.8 million barrels, bringing total inventories down to 415.1 million barrels. Now sitting 11% below the five-year seasonal norm and placed in the lowest 2015-2022 range (see picture below).

Product inventories also tightened further last week. Gasoline inventories declined by 2.1 million barrels, with reductions seen in both finished gasoline and blending components. Current gasoline levels are about 3% below the five-year average for this time of year.

Among products, the most notable move came in diesel, where inventories dropped by almost 4.1 million barrels, deepening the deficit to around 20% below seasonal norms – continuing to underscore the persistent supply tightness in diesel markets.

The only area of inventory growth was in propane/propylene, which posted a significant 5.1-million-barrel build and now stands 9% above the five-year average.

Total commercial petroleum inventories (crude plus refined products) declined by 4.2 million barrels on the week, reinforcing the overall tightening of US crude and products.

US DOE, inventories, change in million barrels per week
US crude inventories excl. SPR in million barrels
Fortsätt läsa

Analys

Bombs to ”ceasefire” in hours – Brent below $70

Publicerat

den

SEB - analysbrev på råvaror

A classic case of “buy the rumor, sell the news” played out in oil markets, as Brent crude has dropped sharply – down nearly USD 10 per barrel since yesterday evening – following Iran’s retaliatory strike on a U.S. air base in Qatar. The immediate reaction was: “That was it?” The strike followed a carefully calibrated, non-escalatory playbook, avoiding direct threats to energy infrastructure or disruption of shipping through the Strait of Hormuz – thus calming worst-case fears.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

After Monday morning’s sharp spike to USD 81.4 per barrel, triggered by the U.S. bombing of Iranian nuclear facilities, oil prices drifted sideways in anticipation of a potential Iranian response. That response came with advance warning and caused limited physical damage. Early this morning, both the U.S. President and Iranian state media announced a ceasefire, effectively placing a lid on the immediate conflict risk – at least for now.

As a result, Brent crude has now fallen by a total of USD 12 from Monday’s peak, currently trading around USD 69 per barrel.

Looking beyond geopolitics, the market will now shift its focus to the upcoming OPEC+ meeting in early July. Saudi Arabia’s decision to increase output earlier this year – despite falling prices – has drawn renewed attention considering recent developments. Some suggest this was a response to U.S. pressure to offset potential Iranian supply losses.

However, consensus is that the move was driven more by internal OPEC+ dynamics. After years of curbing production to support prices, Riyadh had grown frustrated with quota-busting by several members (notably Kazakhstan). With Saudi Arabia cutting up to 2 million barrels per day – roughly 2% of global supply – returns were diminishing, and the risk of losing market share was rising. The production increase is widely seen as an effort to reassert leadership and restore discipline within the group.

That said, the FT recently stated that, the Saudis remain wary of past missteps. In 2018, Riyadh ramped up output at Trump’s request ahead of Iran sanctions, only to see prices collapse when the U.S. granted broad waivers – triggering oversupply. Officials have reportedly made it clear they don’t intend to repeat that mistake.

The recent visit by President Trump to Saudi Arabia, which included agreements on AI, defense, and nuclear cooperation, suggests a broader strategic alignment. This has fueled speculation about a quiet “pump-for-politics” deal behind recent production moves.

Looking ahead, oil prices have now retraced the entire rally sparked by the June 13 Israel–Iran escalation. This retreat provides more political and policy space for both the U.S. and Saudi Arabia. Specifically, it makes it easier for Riyadh to scale back its three recent production hikes of 411,000 barrels each, potentially returning to more moderate increases of 137,000 barrels for August and September.

In short: with no major loss of Iranian supply to the market, OPEC+ – led by Saudi Arabia – no longer needs to compensate for a disruption that hasn’t materialized, especially not to please the U.S. at the cost of its own market strategy. As the Saudis themselves have signaled, they are unlikely to repeat previous mistakes.

Conclusion: With Brent now in the high USD 60s, buying oil looks fundamentally justified. The geopolitical premium has deflated, but tensions between Israel and Iran remain unresolved – and the risk of missteps and renewed escalation still lingers. In fact, even this morning, reports have emerged of renewed missile fire despite the declared “truce.” The path forward may be calmer – but it is far from stable.

Fortsätt läsa

Analys

A muted price reaction. Market looks relaxed, but it is still on edge waiting for what Iran will do

Publicerat

den

SEB - analysbrev på råvaror

Brent crossed the 80-line this morning but quickly fell back assigning limited probability for Iran choosing to close the Strait of Hormuz. Brent traded in a range of USD 70.56 – 79.04/b last week as the market fluctuated between ”Iran wants a deal” and ”US is about to attack Iran”. At the end of the week though, Donald Trump managed to convince markets (and probably also Iran) that he would make a decision within two weeks. I.e. no imminent attack. Previously when when he has talked about ”making a decision within two weeks” he has often ended up doing nothing in the end. The oil market relaxed as a result and the week ended at USD 77.01/b which is just USD 6/b above the year to date average of USD 71/b.

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

Brent jumped to USD 81.4/b this morning, the highest since mid-January, but then quickly fell back to a current price of USD 78.2/b which is only up 1.5% versus the close on Friday. As such the market is pricing a fairly low probability that Iran will actually close the Strait of Hormuz. Probably because it will hurt Iranian oil exports as well as the global oil market.

It was however all smoke and mirrors. Deception. The US attacked Iran on Saturday. The attack involved 125 warplanes, submarines and surface warships and 14 bunker buster bombs were dropped on Iranian nuclear sites including Fordow, Natanz and Isfahan. In response the Iranian Parliament voted in support of closing the Strait of Hormuz where some 17 mb of crude and products is transported to the global market every day plus significant volumes of LNG. This is however merely an advise to the Supreme leader Ayatollah Ali Khamenei and the Supreme National Security Council which sits with the final and actual decision.

No supply of oil is lost yet. It is about the risk of Iran closing the Strait of Hormuz or not. So far not a single drop of oil supply has been lost to the global market. The price at the moment is all about the assessed risk of loss of supply. Will Iran choose to choke of the Strait of Hormuz or not? That is the big question. It would be painful for US consumers, for Donald Trump’s voter base, for the global economy but also for Iran and its population which relies on oil exports and income from selling oil out of that Strait as well. As such it is not a no-brainer choice for Iran to close the Strait for oil exports. And looking at the il price this morning it is clear that the oil market doesn’t assign a very high probability of it happening. It is however probably well within the capability of Iran to close the Strait off with rockets, mines, air-drones and possibly sea-drones. Just look at how Ukraine has been able to control and damage the Russian Black Sea fleet.

What to do about the highly enriched uranium which has gone missing? While the US and Israel can celebrate their destruction of Iranian nuclear facilities they are also scratching their heads over what to do with the lost Iranian nuclear material. Iran had 408 kg of highly enriched uranium (IAEA). Almost weapons grade. Enough for some 10 nuclear warheads. It seems to have been transported out of Fordow before the attack this weekend. 

The market is still on edge. USD 80-something/b seems sensible while we wait. The oil market reaction to this weekend’s events is very muted so far. The market is still on edge awaiting what Iran will do. Because Iran will do something. But what and when? An oil price of 80-something seems like a sensible level until something do happen.

Fortsätt läsa

Centaur

Guldcentralen

Fokus

Annons

Gratis uppdateringar om råvarumarknaden

*

Populära