Analys
Crude oil comment – Strong rise in US oil inventories, but oil companies’ spending cuts accelerates

In terms of my oil view: Repeated lows during H1-16. Gradual recovery medium term. Price recovery likely to be gradual rather than stellar. I think the oil price is going to have a rough time during H1-16 with a strong rise in global oil inventories and that we are probably going to see new lows in prices ahead. Thus I don’t think that from here onwards it is happy days are here again with a strong rise in the oil price from here. I think it would be negative for the oil market balance if the oil price repeated what it did last year with a rapid rise from January low to above $60/b in May/June last year. This would not induce the neccessary adjustments needed to balance the market and would push the point in time when the market finally moves into balance further out in time. HOWEVER, I do believe that there is good risk/reward in buying Brent crude oil with delivery December 2016 at $35/b. It saw a low close of $33.9/b last week and currently trades at $37.5/b and thus not too far away. I think that the longer dated contracts should not trade much lower than what we have recently witnessed. I did expect the 2020 Brent crude oil price to traded down towards $50/b before it would stabilize after long, long decline from $100/b in mid-2014. The contract traded down to $45.9/b last week and now trades at $49/b. So I think the sell-off in the longer dated contracts probably should be fairly done by now. So what remains from here is probably some more contango, more discount for front end contracts versus longer dated contracts, due to strongly rising inventories. The main argument why the price recovery is likely to be gradual rather than stellar is: 1) No quick fix balancing of the market from OPEC as in the previous two oil price cycles. The oil price needs to do the job of balancing the market and that is a more length process than an OPEC quick fix. 2) Flexible shale oil supply which can ramp up rather quickly is likely to restrict the oil price from moving up too quickly during the period when the market needs to run a deficit in order to draw down current record oil inventories.
Crude oil comment – Strong rise in US oil inventories, but oil companies’ spending cuts accelerates
Brent crude gained 4.3% yesterday with a close of $31.8/b. Thus the rise in oil prices which started Thursday last week was not all dead after all after Monday’s 5.2% decline. Intraday high yesterday was $31.8/b and thus only $1.3/b below the 30 dma line. While we do not in general place too much emphasis on such measures they certainly have an important role in the volatile short term picture. This morning the 30 dma sits at $33.8/b and not very far avway from the Brent crude oil price this morning of $31.2/b. The 30 dma still has the potential to work as a magnet on the oil price in the short term picture. One of the bullish drivers yesterday was a statement by Iraqi’s oil minister saying that Russia and Saudi Arabia had become more flexible regarding possible production cuts. In our view there is no chance at all that we are going to see a production cut from OPEC this spring. Saudi Arabia’s strategy of not cutting and instead demanding that a balancing of the market shall happen outside of OPEC is still intact. At the moment we are seeing massive capex cuts outside of OPEC, thus the strategy is obviously working. It just takes some time. The latest signals from the US oil space is that Hess cuts its capital spending for 2016 by 40%, Continental by 66% and Noble by 50% for 2016 which will lead to reduced production by up to 10% y/y already in 2016 in the US shale oil space. Such a decline in US shale oil production is however probably already factore into most oil market balance projections for 2016. This morning the oil price falls back 1.9% to $31.2/b on the back of bearish indicative oil inventory data in the US last night. The API yesterday indicated that US oil inventories changed as follows last week:
The API thus saw in its partial data set reported by its members a much stronger rise than what was consensus in Bloomberg yesterday. Usually the API data are in the ball-park correct. So do expect a solid rise in US inventory data today at 16.30 CET. As we have stated before, if global inventories outside of the US are starting to struggle to store more oil, then a major part of the running global oil surplus needs to be stored in the US. Assuming a running surplus of 1.5 mbpd on average in H1-16 it would indicated that US oil inventories could rise by some 10 mb per week. Total US crude and product inventories have risen by 5.5 mb per week on average during the last 10 weeks, but has average 9.9 mb per week the last 4 weeks. During the first 10 weeks of the year US total oil inventories normally rise by some 1.1 mb per week and by 2.4 mb per week the first 5 weeks of the year.
US oil inventories. Marker in organge is if API indicative numbers last night is what comes out of US data today at 16.30 CET.
Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking
Analys
OPEC+ in a process of retaking market share

Oil prices are likely to fall for a fourth straight year as OPEC+ unwinds cuts and retakes market share. We expect Brent crude to average USD 55/b in Q4/25 before OPEC+ steps in to stabilise the market into 2026. Surplus, stock building, oil prices are under pressure with OPEC+ calling the shots as to how rough it wants to play it. We see natural gas prices following parity with oil (except for seasonality) until LNG surplus arrives in late 2026/early 2027.

Oil market: Q4/25 and 2026 will be all about how OPEC+ chooses to play it
OPEC+ is in a process of unwinding voluntary cuts by a sub-group of the members and taking back market share. But the process looks set to be different from 2014-16, as the group doesn’t look likely to blindly lift production to take back market share. The group has stated very explicitly that it can just as well cut production as increase it ahead. While the oil price is unlikely to drop as violently and lasting as in 2014-16, it will likely fall further before the group steps in with fresh cuts to stabilise the price. We expect Brent to fall to USD 55/b in Q4/25 before the group steps in with fresh cuts at the end of the year.

Natural gas market: Winter risk ahead, yet LNG balance to loosen from 2026
The global gas market entered 2025 in a fragile state of balance. European reliance on LNG remains high, with Russian pipeline flows limited to Turkey and Russian LNG constrained by sanctions. Planned NCS maintenance in late summer could trim exports by up to 1.3 TWh/day, pressuring EU storage ahead of winter. Meanwhile, NE Asia accounts for more than 50% of global LNG demand, with China alone nearing a 20% share (~80 mt in 2024). US shale gas production has likely peaked after reaching 104.8 bcf/d, even as LNG export capacity expands rapidly, tightening the US balance. Global supply additions are limited until late 2026, when major US, Qatari and Canadian projects are due to start up. Until then, we expect TTF to average EUR 38/MWh through 2025, before easing as the new supply wave likely arrives in late 2026 and then in 2027.
Analys
Manufacturing PMIs ticking higher lends support to both copper and oil

Price action contained withing USD 2/b last week. Likely muted today as well with US closed. The Brent November contract is the new front-month contract as of today. It traded in a range of USD 66.37-68.49/b and closed the week up a mere 0.4% at USD 67.48/b. US oil inventory data didn’t make much of an impact on the Brent price last week as it is totally normal for US crude stocks to decline 2.4 mb/d this time of year as data showed. This morning Brent is up a meager 0.5% to USD 67.8/b. It is US Labor day today with US markets closed. Today’s price action is likely going to be muted due to that.

Improving manufacturing readings. China’s manufacturing PMI for August came in at 49.4 versus 49.3 for July. A marginal improvement. The total PMI index ticked up to 50.5 from 50.2 with non-manufacturing also helping it higher. The HCOB Eurozone manufacturing PMI was a disastrous 45.1 last December, but has since then been on a one-way street upwards to its current 50.5 for August. The S&P US manufacturing index jumped to 53.3 in August which was the highest since 2022 (US ISM manufacturing tomorrow). India manufacturing PMI rose further and to 59.3 for August which is the highest since at least 2022.
Are we in for global manufacturing expansion? Would help to explain copper at 10k and resilient oil. JPMorgan global manufacturing index for August is due tomorrow. It was 49.7 in July and has been below the 50-line since February. Looking at the above it looks like a good chance for moving into positive territory for global manufacturing. A copper price of USD 9935/ton, sniffing at the 10k line could be a reflection of that. An oil price holding up fairly well at close to USD 68/b despite the fact that oil balances for Q4-25 and 2026 looks bloated could be another reflection that global manufacturing may be accelerating.
US manufacturing PMI by S&P rose to 53.3 in August. It was published on 21 August, so not at all newly released. But the US ISM manufacturing PMI is due tomorrow and has the potential to follow suite with a strong manufacturing reading.

Analys
Crude stocks fall again – diesel tightness persists

U.S. commercial crude inventories posted another draw last week, falling by 2.4 million barrels to 418.3 million barrels, according to the latest DOE report. Inventories are now 6% below the five-year seasonal average, underlining a persistently tight supply picture as we move into the post-peak demand season.

While the draw was smaller than last week’s 6 million barrel decline, the trend remains consistent with seasonal patterns. Current inventories are still well below the 2015–2022 average of around 449 million barrels.
Gasoline inventories dropped by 1.2 million barrels and are now close to the five-year average. The breakdown showed a modest increase in finished gasoline offset by a decline in blending components – hinting at steady end-user demand.
Diesel inventories saw yet another sharp move, falling by 1.8 million barrels. Stocks are now 15% below the five-year average, pointing to sustained tightness in middle distillates. In fact, diesel remains the most undersupplied segment, with current inventory levels at the very low end of the historical range (see page 3 attached).
Total commercial petroleum inventories – including crude and products but excluding the SPR – fell by 4.4 million barrels on the week, bringing total inventories to approximately 1,259 million barrels. Despite rising refinery utilization at 94.6%, the broader inventory complex remains structurally tight.
On the demand side, the DOE’s ‘products supplied’ metric – a proxy for implied consumption – stayed strong. Total product demand averaged 21.2 million barrels per day over the last four weeks, up 2.5% YoY. Diesel and jet fuel were the standouts, up 7.7% and 1.7%, respectively, while gasoline demand softened slightly, down 1.1% YoY. The figures reflect a still-solid late-summer demand environment, particularly in industrial and freight-related sectors.


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