Analys

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

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9 år sedan

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27 januari, 2016

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

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Analys

Brent whacked down yet again by negative Trump-fallout

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6 dagar sedan

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26 februari, 2025

Redaktionen

Sharply lower yesterday with negative US consumer confidence. Brent crude fell like a rock to USD 73.02/b (-2.4%) yesterday following the publishing of US consumer confidence which fell to 98.3 in February from 105.3 in January (100 is neutral). Intraday Brent fell as low as USD 72.7/b. The closing yesterday was the lowest since late December and at a level where Brent frequently crossed over from September to the end of last year. Brent has now lost both the late December, early January Trump-optimism gains as well as the Biden-spike in mid-Jan and is back in the range from this Autumn. This morning it is staging a small rebound to USD 73.2/b but with little conviction it seems. The US sentiment readings since Friday last week is damaging evidence of the negative fallout Trump is creating.

Bjarne Schieldrop, Chief analyst commodities, SEB

Evidence growing that Trump-turmoil are having negative effects on the US economy. The US consumer confidence index has been in a seesaw pattern since mid-2022 and the reading yesterday was reached twice in 2024 and close to it also in 2023. But the reading yesterday needs to be seen in the context of Donald Trump being inaugurated as president again on 20 January. The reading must thus be interpreted as direct response by US consumers to what Trump has been doing since he became president and all the uncertainty it has created. The negative reading yesterday also falls into line with the negative readings on Friday, amplifying the message that Trump action will indeed have a negative fallout. At least the first-round effects of it. The market is staging a small rebound this morning to USD 73.3/b. But the genie is out of the bottle: Trump actions is having a negative effect on US consumers and businesses and thus the US economy. Likely effects will be reduced spending by consumers and reduced capex spending by businesses.

Brent crude falling lowest since late December and a level it frequently crossed during autumn.

White: US Conference Board Consumer Confidence (published yesterday). Blue: US Services PMI Business activity (published last Friday). Red: US University of Michigan Consumer Sentiment (published last Friday). All three falling sharply in February. Indexed 100 on Feb-2022.

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Analys

Crude oil comment: Price reaction driven by intensified sanctions on Iran

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7 dagar sedan

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25 februari, 2025

Redaktionen

Brent crude prices bottomed out at USD 74.20 per barrel at the close of trading on Friday, following a steep decline from USD 77.15 per barrel on Thursday evening (February 20th). During yesterday’s trading session, prices steadily climbed by roughly USD 1 per barrel (1.20%), reaching the current level of USD 75 per barrel.

Ole R. Hvalbye, Analyst Commodities, SEB

Yesterday’s price rebound, which has continued into today, is primarily driven by recent U.S. actions aimed at intensifying pressure on Iran. These moves were formalized in the second round of sanctions since the presidential shift, specifically targeting Iranian oil exports. Notably, the U.S. Treasury Department has sanctioned several Iran-related oil companies, added 13 new tankers to the OFAC (Office of Foreign Assets Control) sanctions list, and sanctioned individuals, oil brokers, and terminals connected to Iran’s oil trade.

The National Security Presidential Memorandum 2 now calls for the U.S. to ”drive Iran’s oil exports to zero,” further asserting that Iran ”can never be allowed to acquire or develop nuclear weapons.” This intensified focus on Iran’s oil exports is naturally fueling market expectations of tighter supply. Yet, OPEC+ spare capacity remains robust, standing at 5.3 million barrels per day, with Saudi Arabia holding 3.1 million, the UAE 1.1 million, Iraq 600k, and Kuwait 400k. As such, any significant price spirals are not expected, given the current OPEC+ supply buffer.

Further contributing to recent price movements, OPEC has yet to decide on its stance regarding production cuts for Q2 2025. The group remains in control of the market, evaluating global supply and demand dynamics on a monthly basis. Given the current state of the market, we believe there is limited capacity for additional OPEC production without risking further price declines.

On a more bullish note, Iraq reaffirmed its commitment to the OPEC+ agreement yesterday, signaling that it would present an updated plan to compensate for any overproduction, which supports ongoing market stability.

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Analys

Stronger inventory build than consensus, diesel demand notable

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2 veckor sedan

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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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