Analys

Stretched long positions and rising Libyan crude oil production

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8 år sedan

den

4 januari, 2017

Brent crude oil jumped into the year by gaining as much as 2.7% during the first part of the day yesterday. It broke above last year’s high ($57.89/b) and reached an intraday high of $58.37/b before tumbling down again ending the day at a 2.3% loss at $55.47/b. Positive Chinese statistics, equity gains in Asia, Europe and the US was part of the tailwind helping crude oil higher at the start of the day yesterday. Signals that Oman and Kuwait are fulfilling their OPEC cut obligations together with expectations that Saudi Arabia will lift its official selling prices (OSPs) for February loadings also helped drive the positive gain at the start of the day. The gains didn’t hold however and Brent crude just went downhill in the afternoon with no obvious headline driving it lower. What is clear though is that we have entered the year with a record high level of net long speculative positions in WTI making the price very vulnerable for set-backs and what we saw yesterday was clearly such a setback. This morning Brent crude is recovering 0.2% to $55.6/b as it rebounds after yesterday’s sell-off. Positive equities and gains in industrial metals this morning as well as expectations that US crude oil stocks will show a decline of 2.3 mb in tomorrow’s statistics are ingredients helping to drive a slight gain in Brent crude this morning.

Even though OPEC now has started its cuts which will be constructive for oil prices in H1-17 we are not necessarily set for an immediate price take-off. One problem is the very high OPEC production in Q4-16 of more than 34 mb/d which will linger in the oil market through parts of Q1-17. Another is the still probably record high WTI speculative positions which opens up for price set back vulnerability. The still rising crude oil production in Libya is also creating concerns that OPEC’s cuts might be less effective. Lastly we also have the fact that it usually takes 6-8 weeks from when oil prices rise until this leads to a stronger rise in US oil rigs. Thus even if there was a strong rise in US oil rig additions in December (+51 rigs and highest monthly rig addition since March 2014) this was most likely not due to OPEC’s decision to cut and the $5/b higher crude oil price following from that. It is still only 5 weeks since OPEC decided to cut. This means that a boost to US rig count following OPEC’s decision to cut production is still ahead of us. Thus January and February should probably show strong gains in US rig count. This will sentiment wise weight on oil prices. Hedging by the oil producers adding these rigs will also weight on the 12-24 mth price curve.

Kind regards
Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking

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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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Higher on confidence OPEC+ won’t lift production. Taking little notice of Trump sledgehammer to global free trade

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4 dagar sedan

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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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Brent looks to US production costs. Taking little notice of Trump-tariffs and Ukraine peace-dealing

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6 dagar sedan

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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.