Analys

Full Permian oil pipelines is bullish for Brent

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7 år sedan

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1 juni, 2018

The current oil market is both strong and weak. It is weak in terms of rising inventories and floating storage over the past two weeks with Dated Brent crude spot trading at a discount to the 1 mth contract amid rising production in the US, Kazakhstan and Saudi Arabia while Asian refineries are off-line doing refinery maintenance as well. It is strong given that the latest correction from a recent high of $80.5/bl has been fairly shallow mostly disregarding signals that Russia wants to revive production, disregarding a stronger USD as well as a softer global growth momentum and an Italy scare.

Bjarne Schieldrop, Chief analyst commodities

A drama is however unfolding in the US shale oil market. The number of shale oil wells completed in April is now 40% above the average 2014 level in real terms and both drilling and completions of wells is on a rising path. US shale oil production is now growing at a marginal annualized growth rate of 1.6 m bl/d. Permian alone accounts for 60% of this growth.

There is no lack of oil resources in the ground or in capital or rigs and completions. There is however a lack of pipes to get the oil to market. Strong growth in production has now crashed into the pipeline capacity out of Permian resulting in a collapse in the local Permian crude price to more than $20/bl below the Brent crude oil price.

This is however probably just the start with more downside to come for the local Permian crude price in order to halt the ongoing booming production growth as there is nowhere to store the local surplus production and limited means to get it to market.

Permian production growth probably has to slow to only 30% of current growth pace. That means an overall US shale oil production growth of about 1.0 m bl/d over the coming year. That is 0.5 m bl/d lower than our current projection. It means a tighter global oil market and that is bullish for Brent crude oil prices. Permian can however probably still grow at around 25 k bl/d/mth versus today’s 80 k bl/d as trucks and trains and more pipelines probably will allow this kind of growth pace.

Adding the Permian problems to declining production in Venezuela and renewed US sanctions towards Iran we’ll now need OPEC+ to put cuts back into the market. We think that the current 1.8 m bl/d production-cut-buffer will be all gone in 2019 with the global oil market still running a deficit. And with Permian pipeline problems that deficit could be closer to 0.8 m bl/d rather than our latest estimated 0.3 m bl/d deficit.

So now we both need a higher Brent crude oil price in order to ration and slow down global demand growth as well as a lower Permian crude price in order to slow down local production growth there. So OPEC+, give us your cuts back. We need them now or at least later in H2-18.

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Total pushed Brent above $80/bl

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Analys

Stronger inventory build than consensus, diesel demand notable

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1 dag 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.

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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3 dagar sedan

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19 februari, 2025

Redaktionen

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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Analys

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

Redaktionen

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.