Analys
SEB – Jordbruksprodukter vecka 8, 2012
Den senaste veckan har det varit små rörelser på marknaderna för jordbruksprodukter. Det betydande fallet i vetepriset efter den ”key reversal day” vi berättade om för två veckor sedan följdes av en liten rekyl uppåt i veckan som gått, men överlag står marknaderna för spannmål och väger, utan att vare sig köpare eller säljare har fått övertaget.
USDA:s Outlook Forum går av stapeln idag torsdag och på fredag och det väntas komma ny information från USDA från denna på fredag. Konferensen sänds som ”webinar” och mer om detta kan läsas på: www.usda.gov/oce/forum .”Plantings” väntas uppgå till 94 miljoner acres för majs, 74 miljoner acres för sojabönor och 56.5 miljoner acres för vete.
Informationen väntas allmänt av marknaden att vara ”bearish” för spannmål. Enligt USDA väntas amerikanska bönder så mest majs sedan 1944. Mer finns att läsa på Bloomberg.
Detsamma gäller sojabönor, men minutiösa gissningar om arealen för USAs areal om 1-2 miljoner acres måste förstås ställas mot skördeestimaten för Argentina som ligger på mellan 43 och 48 mt. Den skillnaden motsvarar nästan 5 miljoner acres.
Vete
Vi har haft en negativ tro på vetets prisutveckling framöver, främst baserat på att La Niña väntas klinga av. En stor del av ”marknaden” tycks dela vår negativa syn. Till bilden av betydande lager hör Australiens lagernivå som i januari uppgick till 25.6 mt. Kanada som de senaste två åren drabbats av översvämningar väntas i år inte råka ut för detta, eftersom det tvärtom är torrt.
Algeriet har annonserat en tender för leverans i maj på 125,000 ton. Frankrike väntas ta hem denna, men det är sannolikt den sista för säsongen och vi är bara i februari månad. Algeriet väntas importera 6.1 mt under 2011/12-säsongen som slutar i juni. Inköpen görs av Algeriets statliga Office Algerien Interprofessionnel de Cereales (”OAIC”).
Trots att det ännu är tidigt och därmed svårt att uttala sig om och bedöma konsekvenserna för grödor utsatta för den extrema kylan som drabbade Europa, med temperaturer under -30 grader i vissa delar, gör franska Strategie Grains ett försök och säger att köldknäppen inte kommer att orsaka någon allvarligare skada utan enligt deras första analys ”så kommer kylan inte att leda till större bortfall än vid ett normalår” men att en viss risk kvarstår. Där skador uppstått kommer dessa dock att ersättas med vårgrödor och de justerar upp sitt estimat för majsproduktion med 300 000 ton till 62.6 mt, vilket fortfarande är en minskning med 4 procent jämfört med 2011. Estimatet för korn ökades med 100 000 ton till 54.6 mt vilket återspeglar förhoppningar om en ökad sådd av vårgrödor i Tjeckien och Slovakien. Prognosen för EU’s ”mjuka” veteproduktion i år justeras ned med 600 000 ton till 132.7 mt vilket fortfarande är en ökning med 3 procent jämfört med förra året och lägger man till durumvete så estimeras den totala veteproduktion till 141.5 mt. Nedjusteringen beror huvudsakligen på förändringar i areal.
Produktionen av spannmål och oljeväxter i Kanada 2012/13 förväntas bli något lägre än vad som estimerades för en månad sedan, men kommer att överstiga produktionen för 2011/12 enligt uppdaterad statistik från Ag Canada.
Produktionen avser de åtta huvudsakliga spannmålen och oljeväxterna och beräknas uppgå till 70.12 mt under 2012/13, en nedjustering från 70.32 mt i januari och en jämförelse med 65.85 mt 2011/12. I detta inkluderas canola, linfrö, sojabönor, vete, havre, korn, majs och råg.
Utgående lager för 2012/13 justeras ned till 11.70 mt (från 13.28 mt i januari) och den totala exporten för samma period estimeras till 33.27 mt, en liten ökning från förra månadens 33.04 mt.
Egyptens GASC har återigen köpt vete från USA, denna gång 180 000 ton. USA:s vete är just nu billigare än franskt, även med frakten beaktad.
Det amerikanska vetet har haft svårt att hävda sig under 2011/12 och förlorat marknadsandelar till i första hand Ryssland, eftersom ryskt vete flödat in på marknaden efter att exportförbudet hävdes förra sommaren, men har även haft svårt att konkurrera prismässigt med både Argentina och Frankrike.
I den senaste budgivningen fanns dock vare sig Ryssland eller Argentina med och det franska vetet som erbjöds var betydligt dyrare, trots högre fraktkostnad från USA till Egypten. Rysslands frånvaro denna gång kan troligtvis härledas till väderrelaterade logistik problem. Det är fruset i hamnarna och till och med lastade fartyg rapporteras ha svårt att segla ut.
Rysslands spannmålsexport har avtagit och uppgick endast till 250 000 ton under de två första veckorna i februari, en klar skillnad från en tidigare exporttakt på ungefär 2.8 mt per månad under 2011/12 fram till slutet på januari. Landet ska dock ha tillräckligt med spannmål för att täcka sitt eget behov och planerar därför att fortsätta med sin export som förväntas uppgå till 25 mt. Fram till idag har Ryssland exporterat ca 19.8 mt.
Ukraina har exporterat ca 600 000 ton spannmål, framförallt majs, de 15 första dagarna i februari till följd av den ovanligt stränga kylan och efter att regeringen bett handlare att vara restriktiva i sin export av vete. Det kan jämföras de 1.9 mt som exporterades under januari. Exporten av vete under första halvan av februari var lägre än 100 000 ton, jämfört med 540 000 ton under månaden innan.
Det sägs också att regeringen och landets spannmålshandlare nu har kommit överens om ett inofficiellt tak på 1.7 mt för export av vete under perioden februari till juli till följd av den svåra torkan i höstas. Med den begränsningen skulle den totala veteexporten komma att uppgå till 4.8 mt (jämfört med USDA’s prognos på 6.0 mt). Kazakstan räknar med en möjlig halvering av sin spannmålsskörd i år med en estimerad genomsnittlig nivå på 13-15 mt enligt landets jordbruksminister. Ett sådant resultat skulle ligga långt under de 27 mt spannmål som landet skördade förra året till följd av ett utmärkt väder under hela växtsäsongen, men det skulle fortfarande vara i linje med det 20-åriga genomsnittet. Vi har lite svårt att tolka detta påstående, eftersom Kazakstans jordbruksminister samtidigt påstår att arealen kommer att vara högre i år än förra året…. (Låter lite som ”Vremja” har återuppstått).
Pakistan kan komma att exportera upp till 1.5 mt vete i år, vilket matchar förra årets rekord, delvis tack vare en förväntad rekordskörd för tredje året i rad. Skörden förväntas uppgå till 24 mt ton i år, i stort sett oförändrad från förra året. Pakistan har en geografisk fördel i att exportera vete till Sydostasien och där kostnaderna för containerfrakt är försumbara. Landet var också en stor exportör förra året eftersom dess vete var bland det billigaste i världen under perioden maj-juli men exporten avtog efter att Ryssland hävde sitt exportförbud.
Nedan ser vi kursdiagrammet för marskontraktet på Matif. Uppgången den senaste veckan lyckades inte notera en ny toppnotering (över 225) och det får tolkas som ett svaghetstecken.
Nedan ser vi novemberkontraktet, som inte lyckats ta sig över huvudmotståndet på 205 euro per ton. Priset står och väger. 190 euro ser ut att utgöra ett förhållandevis starkt stöd och på ovansidan finns motståndet på 205. Just nu finns inga tecken på att marknaden på ett förestående utbrott från det här intervallet.
Maltkorn
Maltkornet har handlats ner kraftigt. Tekniska stöd är brutna och nästa finns först nere på 220 euro för novemberleverans. Terminen handlas just nu i 234 euro.
Potatis
Priset på industripotatis steg upp till 14.50 euro för leverans i april 2013, men rekylerade sedan ner till 14 euro per deciton. Pristrenden är uppåtriktad.
Majs
Nederbörden i norra Argentina, Paraguay och södra Brasilien ligger på en normal nivå för den här årstiden. Torkan är historia och odlingsförhållandena har stabiliserats. Uruguay är dock fortfarande torrt.
Kina importerade 750 kt majs i januari och det är den högsta noteringen för månaden på 12 år. Spreaden mellan kinesiska priser och importpriser ligger på rekordnivåer. Det finns ett sug efter majs in mot Kina.
Nedan ser vi decemberkontraktet på majs på CBOT, där priserna bildat en klassisk ”triangelformation”. När priserna lämnar den, brukar detta vara starten på en större kursrörelse. Vi har trott och tror på fallande priser, men vill inte ta några positioner just nu, utan vill avvakta utbrottet ur triangeln. I synnerhet Kinas efterfrågan är ett stort frågetecken.
Sojabönor
Sojabönorna gynnas av att vädret i Sydamerika har stabiliserats, eller rättare sagt, priset missgynnas. Priset har segat sig upp, efter att ha brutit en motståndslinje (den gröna i diagrammet nedan), men har inte på ett övertygande sätt gått över den röda motståndslinjen i diagrammet. Uppgången har förlorat momentum de senaste dagarna och det skulle kunna förebåda en kortsiktig rekyl nedåt.
Raps
Novemberkontraktet har visat exceptionell styrka. Vi ser dock i diagrammet att priset nu ligger ganska nära 440 euro per ton. Detta är toppnoteringen från maj förra året och också en jämn siffra. Folk brukar hänga upp sina ”take profit” ordrar på jämna siffror. Av denna anledning tycker vi att det är ett utmärkt tillfälle att sälja terminer på novemberraps på dagens kursnivå om 435 euro.
Mjölk
För två veckor sedan skrev vi att vi ansåg att prisfallet endast nått halvvägs och antog att fallet kunde nå 16. Det visade sig vara lite för försiktigt när vi nu ser att priset ligger på 15.37. Ser vi priset falla under februaris lägsta notering på marskontraktet finns potential att nå 15, men lejonparten av kursfallet bör vara över.
Gris
Priset på lean hogs som för majkontraktet nått 98.95 cent per pund, ligger precis under en motståndslinje (röd i diagrammet nedan). 100 cent borde vara ett hårt motstånd för priset att ta sig igenom. Det finns alltså gott om motstånd ansamlade precis ovanför dagens kurs. Om man måste välja, så väljer vi att vara sålda lean hogs här. Skulle priset bryta 100 måste vi omvärdera detta, naturligtvis.
Priset i Europa har för majleverans stigit sedan i oktober och ligger nu på 1.69 euro per kilo. Bakom ligger bland annat eurons svaghet, men det förklarar inte allt. För ett år sedan var priserna så låga att bland annat svensk produktion inte bar sig. Med dagens priser är branschen vid vattenytan. Det fundamentala ”golvet” för priset ligger alltså bara precis under eller vid den här prisnivån, trots prisuppgången. Med det sagt, så är det ovanligt med en så lång prisuppgång utan rekyl och tyska priser ligger långt över amerikanska.
Valutor
EURSEK
En ”triangelformation” har bildats sedan mitten av januari. Man bör invänta riktningen på utbrottet från den för att fatta beslut om att köpa eller sälja eursek.
8.70 har tidigare varit ett starkt ”golv” för växelkursen.
EURUSD
Kursen ligger inom ett intervall på 1.30 och 1.33.
USDSEK
Dollarn ligger för närvarande i sjunkande trend.
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Disclaimer
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Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All information contained in this report has been compiled in good faith from sources believed to be reliable. However, no representation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents and the information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of this document is urged to base his or her investment decisions upon such investigations as he or she deems necessary. This document is being provided as information only, and no specific actions are being solicited as a result of it; to the extent permitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this document or its contents.
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Analys
[If demand] ”comes around as forecast, Hallelujah, we can produce more”

Saudi Arabia’s oil minister, Prince Abdulaziz bin Salman, last week stated at a conference in Calgary: ”I believe it when I see it. When reality comes around as it’s been forecast, Hallelujah, we can produce more” (Reuters, John Kemp). So Saudi Arabia wants to and will produce more once it is confident that there really is demand for additional crude. Saudi Arabia has good reason to be concerned for global oil demand. It is not the only one struggling to predict global demand amid the haze and turmoil in the global oil market following the Russian invasion of Ukraine and sanctions towards Russian crude and product stocks. Add a shaky Chinese housing market and the highest US rates since 2001. Estimates for global oil demand in Q4-23 are ranging from 100.6 m b/d to 104.7 m b/d with many estimates in between. Current crude and mid-dist inventories are low. Supply/demand is balanced to tight and clearly very tight for mid-dists (diesel, jet fuel, gasoil). But amid current speculative bullishness it is important to note that Saudi Arabia can undo the current upwards price journey just as quickly as it created the current bull-market as it drop in production from 10.5 m b/d in April to only 9.0 m b/d since July. Quickly resolving the current mid-dist crisis is beyond the powers of Saudi Arabia. But China could come to the rescue if increased oil product export quotas as it holds spare refining capacity.

The oil market is well aware that the main reasons for why oil has rallied 25% over the past months is reduced production by Saudi Arabia and Russia, global oil demand holding up better than feared together with still declining US shale oil activity. US oil drilling rig count fell by 8 rigs last week to 507 rigs which is the lowest since Feb 2022.
The big question is how strong is global oil demand and how will it hold up or even maybe increase in the coming quarters? And here the spread of estimates are still all over the place. For Q4-23 we have the following range of estimates for global oil demand in m b/d: 100.6; 101.8; 103.1; 103.2 and 104.7 from main oil market research providers. This wide spread of estimates is mindbogglingly and head-scratching both for analysts and for oil producers. It leads to a wide spread in estimates for Call-on-OPEC. Some say the current market is in a 2-3 m b/d deficit while others calculate that the global oil market today is nicely balanced.
The sanctions towards Russian crude and oil product exports with a ban on imports to the EU and UK has led to a large reshuffling of the global oil market flows which again has created a haze through which it is hard to gauge the correct state of the global oil market.
We have previously argued that there may be a significant amount of ”pent-up-demand” following the Covid-years with potential for global oil demand to surprise on the upside versus most demand forecasts. But there are also good reasons to be cautious to demand given Chinese property market woes and the highest US interest rates since 2001!
The uncertainty in global oil demand is clearly at the heart of Saudi Arabia’s production cuts since April this year. Saudi Arabia’s Energy Minister, Prince Abulaziz bin Salman, last week stated at a conference in Calgary: ”I believe it when I see it. When reality comes around as it’s been forecast, Hallelujah, we can produce more” (Reuters, John Kemp).
So if it turns out that demand is indeed stronger than Saudi Arabia fears, then we should see increased production from Saudi Arabia. Saudi could of course then argue that yes, it is stronger than expected right now, but tomorrow may be worse. Also, the continued decline in US oil drilling rig count is a home-free card for continued low production from Saudi Arabia.
Both crude stocks and mid-dist stocks (diesel, jet fuel, gasoil) are still significantly below normal and the global oil market is somewhere between balanced, mild deficit or large deficit (-2-3 m b/d). The global oil market is as such stressed due to low inventories and potentially in either mild or large deficit on top. The latter though can be undone by higher production from Saudi Arabia whenever it chooses to do so.
What is again getting center stage are the low mid-dist stocks ahead of winter. The war in Ukraine and the sanctions towards Russian crude and product stocks created chaos in the global oil product market. Refining margins went crazy last year. But they are still crazy. The global refining system got reduced maintenance in 2020 and 2021 due to Covid-19 and low staffing. Following decades of mediocre margins and losses, a lot of older refineries finally decided to close down for good during Covid as refining margins collapsed as the world stopped driving and flying. The global refining capacity contracted in 2021 for the first time in 30 years as a result. Then in 2022 refining margins exploded along with reviving global oil demand and the invasion of Ukraine. Refineries globally then ran as hard as they could, eager to make money, and reduced maintenance to a minimum for a third year in a row. Many refineries are now prone for technical failures following three years of low maintenance. This is part of the reason why mid-dist stocks struggle to rebuild. The refineries which can run however are running as hard as they can. With current refining margins they are pure money machines.
Amid all of this, Russia last week imposed an export ban for gasoline and diesel products to support domestic consumers with lower oil product prices. Russia normally exports 1.1 m b/d of diesel products and 0.2 m b/d of gasoline. The message is that it is temporary and this is also what the market expects. Russia has little oil product export storage capacity. The export ban will likely fill these up within a couple of weeks. Russia will then either have to close down refineries or restart its oil product exports.
The oil market continues in a very bullish state with stress both in crude and mid-dists. Speculators continues to roll into the market with net long positions in Brent crude and WTI increasing by 29 m b over the week to last Tuesday. Since the end of June it has increased from 330 m b to now 637 m b. Net-long speculative positions are now at the highest level in 52 weeks.
The market didn’t believe Saudi Arabia this spring when it warned speculators about being too bearish on oil and that they would burn their fingers. And so they did. After having held production at 9 m b/d since July, the market finally believes in Saudi Arabia. But the market still doesn’t quite listen when Saudi says that its current production is not about driving the oil price to the sky (and beyond). It’s about concerns for global oil demand amid many macro economic challenges. It’s about being preemptive versus weakening demand. The current oil rally can thus be undone by Saudi Arabia just as it was created by Saudi Arabia. The current refinery stress is however beyond the powers of Saudi Arabia. But China could come to the rescue as it holds spare refining capacity. It could increase export quotas for oil products and thus alleviate global mid-dist shortages. The first round effect of this would however be yet stronger Chinese crude oil imports.
Brent crude and ARA diesel refining premiums/margins. It is easy to see when Russia invaded Ukraine. Diesel margins then exploded. The market is not taking the latest Russian export ban on diesel and gasoline too seriously. Not very big moves last week.

ARA mid-dist margins still exceptionally high at USD 35-40/b versus a more normal USD 12-15/b. We are now heading into the heating season, but the summer driving season is fading and so are gasoline margins.

ARA mid-dist margins still exceptionally high at USD 35-40/b versus a more normal USD 12-15/b. Here same graph as above but with longer perspective to show how extreme the situation is.

US crude and product stocks vs. the 2015-19 average. Very low mid-dist stocks.

Speculators are rolling into long positions. Now highest net long spec in 52 weeks.

Analys
The ”normal” oil price is USD 97/b

The Dated Brent crude oil price ydy closed at USD 96/b. Wow, that’s a high price! This sensation however depends on what you think is ”normal”. And normal in the eyes of most market participants today is USD 60/b. But this perception is probably largely based on the recent experience of the market. The average Brent crude oil price from 2015-2019 was USD 58.5/b. But that was a period of booming non-OPEC supply, mostly shale oil. But booming shale oil supply is now increasingly coming towards an end. Looking more broadly at the last 20 years the nominal average price was USD 75/b. But in inflation adjusted terms it was actually USD 97/b.

Saudi Arabia’s oil minister, Abdulaziz bin Salman, yesterday stated that its production cuts was not about driving the price up but instead it was preemptive versus the highly uncertain global economic development. In that respect it has a very good point. The US 2yr government bond rate has rallied to 5.06% which is the highest since 2006 and just a fraction away of being the highest since December 2000. The Chinese property market is struggling and global PMIs have been downhill since mid-2021 with many countries now at contractive, sub-50 level. Thus a deep concern for the health of the global economy and thus oil demand going forward is absolutely warranted. And thus the preemptive production cuts by Saudi Arabia. But killing the global economy off while it is wobbling with an oil price of USD 110-120/b or higher is of course not a smart thing to do either.
At the same conference in Canada yesterday the CEO of Aramco, Amin H. Nasser, said that he expected global oil demand to reach 110 m b/d in 2030 and that talk about a near term peak in global oil demand was ”driven by policies, rather than the proven combination of markets, competitive economics and technology” (Reuters).
With a demand outlook of 110 m b/d in 2030 the responsible thing to do is of course to make sure that the oil price stays at a level where investments are sufficient to cover both decline in existing production as well as future demand growth.
In terms of oil prices we tend to think about recent history and also in nominal terms. Most market participants are still mentally thinking of the oil prices we have experienced during the shale oil boom years from 2015-2019. The average nominal Brent crude price during that period was USD 58.5/b. This is today often perceived as ”the normal price”. But it was a very special period with booming non-OPEC supply whenever the WTI price moved above USD 45/b. But that period is increasingly behind us. While we could enjoy fairly low oil prices during this period it also left the world with a legacy: Subdued capex spending in upstream oil and gas all through these years. Then came the Covid-years which led to yet another trough in capex spending. We are soon talking close to 9 years of subdued capex spending.
If Amin H. Nasser is ballpark correct in his prediction that global oil demand will reach 110 m b/d in 2030 then the world should better get capex spending rolling. There is only one way to make that happen: a higher oil price. If the global economy now runs into an economic setback or recession and OPEC allows the oil price to drop to say USD 50/b, then we’d get yet another couple of years with subdued capex spending on top of the close to 9 years with subdued spending we already have behind us. So in the eyes of Saudi Arabia, Amin H. Nasser and Abdulaziz bin Salman, the responsible thing to do is to make sure that the oil price stays up at a sufficient level to ensure that capex spending stays up even during an economic downturn.
This brings us back to the question of what is a high oil price. We remember the shale oil boom years with an average nominal price of USD 58.5/b. We tend to think of it as the per definition ”normal” price. But we should instead think of it as the price depression period. A low-price period during which non-OPEC production boomed. Also, adjusting it for inflation, the real average price during this period was actually USD 72.2/b and not USD 58.5/b. If we however zoom out a little and look at the last 20 years then we get a nominal average of USD 75/b. The real, average inflation adjusted price over the past 20 years is however USD 97/b. The Dated Brent crude oil price yesterday closed at USD 96/b.
Worth noting however is that for such inflation adjustment to make sense then the assumed cost of production should actually rise along with inflation and as such create a ”rising floor price” to oil based on rising real costs. If costs in real terms instead are falling due to productivity improvements, then such inflation adjusted prices will have limited bearing for future prices. What matters more specifically is the development of real production costs for non-OPEC producers and the possibility to ramp up such production. Environmental politics in OECD countries is of course a clear limiting factor for non-OPEC oil production growth and possibly a much more important factor than the production cost it self.
But one last note on the fact that Saudi Arabia’s energy minister, Abdulaziz bin Salman, is emphasizing that the cuts are preemptive rather then an effort to drive the oil price to the sky while Amin H. Nasser is emphasizing that we need to be responsible. It means that if it turns out that the current cuts have indeed made the global oil market too tight with an oil price spiraling towards USD 110-120/b then we’ll highly likely see added supply from Saudi Arabia in November and December rather than Saudi sticking to 9.0 m b/d. This limits the risk for a continued unchecked price rally to such levels.
Oil price perspectives. We tend to think that the nominal average Brent crude oil price of USD 58.5/b during the shale oil boom years from 2015-19 is per definition the ”normal” price. But that period is now increasingly behind us. Zoom out a little to the real, average, inflation adjusted price of the past 20 years and we get USD 97/b. In mathematical terms it is much more ”normal” than the nominal price during the shale oil boom years

Is global oil demand about to peak 1: OECD and non-OECD share of global population

Is global oil demand about to peak 2: Oil demand per capita per year

Analys
USD 100/b in sight but oil product demand may start to hurt

Some crude oil grades have already traded above USD 100/b. Tapis last week at USD 101.3/b. Dated Brent is trading at USD 95.1/b. No more than some market noise is needed to drive it above USD 100/b. But a perceived and implied oil market deficit of 1.5 to 2.5 m b/d may be closer to balance than a deficit. And if so the reason is probably that oil product demand is hurting. Refineries are running hard. They are craving for crude and converting it to oil products. Crude stocks in US, EU16 and Japan fell 23 m b in August as a result of this and amid continued restraint production by Saudi/Russia. But oil product stocks rose 20.3 m b with net draws in crude and products of only 2.7 m b for these regions. Thus indicating more of a balanced market than a deficit. Naturally there has been strong support for crude prices while oil product refinery margins have started to come off. Saudi/Russia is in solid control of the market. Both crude and product stocks are low while the market is either in deficit or at best in balance. So there should be limited down side price risk. But oil product demand is likely to hurt more if Brent crude rises to USD 110-120/b and such a price level looks excessive.

Crude oil prices have been on a relentless rise since late June when it became clear that Saudi Arabia would keep its production at 9 m b/d not just in July but also in August. Then later extended to September and then lately to the end of the year. On paper this has placed the market into a solid deficit. Total OPEC production was 27.8 m b/d in August and likely more or less the same in September. OPEC estimates that the need for oil from OPEC in Q3-23 is 29.2 m b/d which places the global market in a 1.4 m b/d deficit when OPEC produces 27.8 m b/d.
The proof of the pudding is of course that inventories actually draws down when there is a deficit. A 1.4 m b/d of deficit for 31 days in August implies a global inventory draw of 43.4 m b/d. If we assume that OECD countries accounts for 46% of global oil demand then OECD could/should have had a fair share of inventory rise of say 20 m b in August. Actual inventory data are however usually a lagging set of data so we have to work with sub sets of data being released on a higher frequency. And non-OECD demand and inventory data are hard to come by.
If we look at oil inventory data for US, EU16 and Japan we see that crude stocks fell 23 m b in August while product stocks rose 20.3 m b with a total crude and product draw of only 2.7 m b. I.e. indicating close to a balanced market in August rather than a big deficit. But it matters that crude stocks fell 23 m b. That is a tight crude market where refineries are craving and bidding for crude oil together with speculators who are buying paper-oil. So refineries worked hard to buy crude oil and converting it to oil products in August. But these additional oil products weren’t gobbled up by consumers but instead went into inventories.
Rising oil product inventories is of course a good thing since these inventories in general are low. And also oil product stocks are low. The point is more that the world did maybe not run a large supply/demand deficit of 1.5 to 2.5 m b/d in August but rather had a more balanced market. A weaker oil product demand than anticipated would then likely be the natural explanation for this. Strong refinery demand for crude oil, crude oil inventory draws amid a situation where crude inventories already are low is of course creating an added sense of bullishness for crude oil.
On the one hand strong refinery demand for crude oil has helped to drive crude oil prices higher amid continued production cuts by Saudi Arabia. Rising oil product stocks have on the other hand eased the pressure on oil products and thus softened the oil product refinery margins.
The overall situation is that Saudi Arabia together with Russia are in solid control of the oil market. Further that the global market is either balanced or in deficit and that both crude and product stocks are still low. Thus we have a tight market both in terms of supplies and inventories. So there should be limited downside in oil prices. We are highly likely to see Dated Brent moving above USD 100/b. It is now less than USD 5/b away from that level and only noise is needed to bring it above. Tupis crude oil in Asia traded at USD 101.3/b last week. So some crude benchmarks are already above the USD 100/b mark.
While Dated Brent looks set to hit USD 100/b in not too long we are skeptical with respect to further price rises to USD 110-120/b as oil product demand likely increasingly would start to hurt. Unless of course if we get some serious supply disruptions. But Saudi Arabia now has several million barrels per day of reserve capacity as it today only produces 9.0 m b/d. Thus disruptions can be countered. Oil product demand, oil product cracks and oil product inventories is a good thing to watch going forward. An oil price of USD 85-95/b is probably much better than USD 110-120/b for a world where economic activity is likely set to slow rather than accelerate following large interest rate hikes over the past 12-18 months.
OPEC’s implied call-on-OPEC crude oil. If OPEC’s production stays at 27.8 m b/d throughout Q3-23 and Q4-23 then OPECs numbers further strong inventory draws to the end of the year.

Net long speculative positions in Brent crude and WTI. Speculators have joined the price rally since end of June.

End of month crude and product stocks in m b in EU16, US and Japan. Solid draw in crude stocks but also solid rise in product stocks. In total very limited inventory draw. Refineries ran hard to convert crude to oil products but these then went straight into inventories alleviating low oil product inventories there.

ARA oil product refinery margins have come off their highs for all products as the oil product situation has eased a bit. Especially so for gasoline with now fading summer driving. But also HFO 3.5% cracks have eased back a little bit. But to be clear, diesel cracks and mid-dist cracks are still exceptionally high. And even gasoline crack down to USD 17.6/b is still very high this time of year.

ARA diesel cracks in USD/b. Very, very high in 2022. Almost normal in Apr and May. Now very high vs. normal though a little softer than last year.

US crude and product stocks vs. 2015-2019 average. Still very low mid-dist inventories (diesel) and also low crude stocks but not all that low gasoline inventories.

US crude and product stocks vs. 2015-2019 averages. Mid-dist stocks have stayed persistently low while gasoline stocks suddenly have jumped as gasoline demand seems to have started to hurt due to higher prices.

Total commercial US crude and product stocks in million barrels. Rising lately. If large, global deficit they should have been falling sharply. Might be a blip?

Source: SEB graph and calculations, Blbrg data feed, EIA data
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