Analys
USD weakness, inventory draws and a pinch of Venezuela concerns

Last week Brent crude gained 9.3% w/w with a close of $52.52/b on Friday. WTI gained comparably much (+8.6%) with a close of $49.71/b. The main gains were in the front end of the crude curves leading to a substantial flattening of the forward curves. Brent crude Dec 2020 only gained 2.6% with a close of $54.72/b and thus a way smaller gain than in the front end of the forward curves. For WTI the front end contract now only sits $0.34/b below the 18 mth forward WTI contracts which closed the week at $50.05/b.
Continued inventory draws last week underpinned the crude oil price rally and the flattening of the forward crude curves. Weekly inventory data last week saw draws of 16 mb of which 10 mb were in the US while a reduction of 8.6 mb in floating storage also took a solid bite. Over the past 5 weeks inventories have drawn down some 70 mb in weekly data. Thus inventory draws kicked in and accelerated almost on the clock as we entered stronger seasonal consumption in Q3-17. Since mid-March weekly data indicate an inventory draw of 104 mb of which 76 mb took place in the US while 18 mb were drawn in floating storage. Refineries are rapidly coming back online with increased crude oil consumption as a result. There are still more refineries to come back online both in Asia and LatAm while Europe and Africa are mostly all up and running. We expect continued draws in H2-17.
Saudi Arabia of course added some extra fuel on the fire last week as they promised exports of no more than 6.6 mb/d in August. That would be their lowest monthly export since early 2011 (not including oil products). From Jan-May Saudi Arabia exported 7.17 kb/d. If it sticks to 6.6 mb/d exports in August it will be a reduction of 705 kb/d y/y versus its pledged production cut of 490 kb/d. The lower export pledged in August of course coincide with high domestic summer demand in Saudi Arabia. As such it remains to be seen whether the export cap of 6.6 mb/d remains in place after August. What it shows more than anything is determination by the Saudi energy minister Al-Falih. Determination to draw inventories down and the time to do it is H2-17 before US shale oil revival extends too far in 2018. It is thus possible that Saudi Arabia maintains its export cap beyond August.
The softening in the US dollar has definitely underpinned the whole crude oil rally. It has underpinned a rally in the whole commodity complex. Over the past 5 weeks Bloomberg’s commodity index has gained 8.3% with 11.9% in Energy, 8.3% in Agri, 7% in Industrial metals and 1% in precious. The USD index has declined a substantial 4.1% over the period with half of the overall commodity index gain being a nominal impact from a softer dollar. IMF’s upgrade last week of growth in Europe, Japan and China while downgrading US growth from 2.3% to 2.1% (little hope for promised tax cuts) is the example in case which drives the dollar lower. US growth has been ahead of the curve for a long time and now the rest of the world is catching up. If the dollar weakness continues it will undoubtedly drive commodity prices in general and oil prices specifically higher in nominal terms. With the 4.1% USD Index decline over the past 5 weeks the Brent crude Dec 2020 contract has gained 5.5%. Thus almost all of this can be attributed to the dollar effect.
The deteriorating situation in Venezuela probably adds some support to oil prices as well. A national election was held this weekend to vote for members of a National Constituent Assembly. This Assembly will have no fixed term, it will have powers to rewrite the constitution. It will supersede the National Assembly and hand Nicolas Maduro close to dictatorial power and end close to six decades of democracy. At least 10 people were killed in clashes during the election this weekend and some 120 people have been killed in uprisings since April. Venezuela probably holds the world’s largest oil reserves (297 billion barrels) and produced 1.97 mb/d in June (Blberg) which is close to exactly equal to the production cap under the current OPEC production agreement. Its production has however deteriorated steadily due to lack of investments with production standing at 2.37 mb/d back in July 2015. The main concern in the oil market following the election is possible sanctions by Donald Trump. The US buys a third of Venezuela’s oil exports. Extensive US sanctions could make it almost impossible for international oil companies to work in Venezuela. For now the market is awaiting reactions from Donald Trump.
Today equities are up across the board, industrial metals are up 1% and Brent crude traded as much as 0.8% higher before now trading flat at $52.5/b. Thus so far this morning crude oil is lagging behind the gains in industrial metals. Crude oil is trading cautiously following five consecutive days of solid gains. A slight negative this morning is the USD Index which gains 0.3%. We expect to see further oil inventory draws also this week. If the USD Index also continues on its softening trend the two drivers are likely to push crude oil prices yet higher also this week. Money managers have added net long positions for 4 weeks in a row now but probably have room to add more. Producers are likely to sell into the forward crude prices. This is likely to hold back gains for medium term crude prices while inventory draws and investor appetite continues to push upwards in the front leading to a yet flatter crude curve. Potentially shifting the curves into backwardation.
The crude oil inventory draws taking place at the moment are of course real and they will draw down more during H2-17. Still it is important to remember that they are artificially managed by a 1.8 mb/d cut by OPEC and some non-OPEC members. Currently they help to draw down invnetories and to flatten curude curves. When needed however, the volumes will be put back into the market some time in 2018 or 2019.
Ch 1: Inventories in global weekly data drew 16 mb last week.
Over the past 5 weeks inventories have drawn down 70 mb in weekly data
Ch2: US crude and product stocks now well below last year
And down y/y first time since 2014
Ch3: The USD Index has moved down 9.6% since the start of the year
More specifically it has moved down 4.2% since crude oil prices bottomed out in June 21st.
It is now the weakest since a brief sell-off in February 2016.
However, it needs to decline another 15% to get down the the weakness it had in 2014.
Ch4: If we had had USD weakness as in 2014 we should nominally have had an oil price of close to $60/b
Ch5: Crude oil forward curves flattened substantially last week
As investors and refineries bought the front while producers probably sold into the rally out on the curve
Ch6: The 1 to 6mth crude time spreads got close to zero
Ch7: And crude time spreads of 1mth to 18mth were not far away either
With WTI 1mth closing just $0.34/b below the 18mth on Friday and trading just $0.19/b below today
Ch8: A word of caution though. The tightness is not so evident in the Brent crude oil spot market
Dated Brent still trades at a $0.5/b discount to the 1mth contract in a sign that deficit of crude oil is still not quite yet here
Ch9: US oil players added 2 rigs last week
Ch10: Global refineries are rapidly getting back on line consuming more crude oil
More to come in Asia, ME and LatAm
Ch11: Deteriorating crude production in Venezuela
Production could be hit hard by possible US sanctions
Ch12: Net long managed money probably has room to add more length
Even though length has been added 4 weeks in a row now
Kind regards
Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking
Analys
Tariffs deepen economic concerns – significantly weighing on crude oil prices

Brent crude prices initially maintained the gains from late March and traded sideways during the first two trading days in April. Yesterday evening, the price even reached its highest point since mid-February, touching USD 75.5 per barrel.
However, after the U.S. president addressed the public and unveiled his new package of individual tariffs, the market reacted accordingly. Overnight, Brent crude dropped by close to USD 4 per barrel, now trading at USD 71.6 per barrel.
Key takeaways from the speech include a baseline tariff rate of 10% for all countries. Additionally, individual reciprocal tariffs will be imposed on countries with which the U.S. has the largest trade deficits. Many Asian economies end up at the higher end of the scale, with China facing a significant 54% tariff. In contrast, many North and South American countries are at the lower end, with a 10% tariff rate. The EU stands at 20%, which, while not unexpected given earlier signals, is still disappointing, especially after Trump’s previous suggestion that there might be some easing.
Once again, Trump has followed through on his promise, making it clear that he is serious about rebalancing the U.S. trade position with the world. While some negotiation may still occur, the primary objective is to achieve a more balanced trade environment. A weaker U.S. dollar is likely to be an integral part of this solution.
Yet, as the flow of physical goods to the U.S. declines, the natural question arises: where will these goods go? The EU may be forced to raise tariffs on China, mirroring U.S. actions to protect its industries from an influx of discounted Chinese goods.
Initially, we will observe the effects in soft economic data, such as sentiment indices reflecting investor, industry, and consumer confidence, followed by drops in equity markets and, very likely, declining oil prices. This will eventually be followed by more tangible data showing reductions in employment, spending, investments, and overall economic activity.
Ref oil prices moving forward, we have recently adjusted our Brent crude price forecast. The widespread imposition of strict tariffs is expected to foster fears of an economic slowdown, potentially reducing oil demand. Macroeconomic uncertainty, particularly regarding tariffs, warrants caution regarding the pace of demand growth. Our updated forecast of USD 70 per barrel for 2025 and 2026, and USD 75 per barrel for 2027, reflects a more conservative outlook, influenced by stronger-than-expected U.S. supply, a more politically influenced OPEC+, and an increased focus on fragile demand.
___
US DOE data:
Last week, U.S. crude oil refinery inputs averaged 15.6 million barrels per day, a decrease of 192 thousand barrels per day from the previous week. Refineries operated at 86.0% of their total operable capacity during this period. Gasoline production increased slightly, averaging 9.3 million barrels per day, while distillate (diesel) production also rose, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 6.5 million barrels per day, up by 271 thousand barrels per day from the prior week. Over the past four weeks, imports averaged 5.9 million barrels per day, reflecting a 6.3% year-on-year decline compared to the same period last year.
The focus remains on U.S. crude and product inventories, which continue to impact short-term price dynamics in both WTI and Brent crude. Total commercial petroleum inventories (excl. SPR) increased by 5.4 million barrels, a modest build, yet insufficient to trigger significant price movements.
Commercial crude oil inventories (excl. SPR) rose by 6.2 million barrels, in line with the 6-million-barrel build forecasted by the API. With this latest increase, U.S. crude oil inventories now stand at 439.8 million barrels, which is 4% below the five-year average for this time of year.
Gasoline inventories decreased by 1.6 million barrels, exactly matching the API’s reported decline of 1.6 million barrels. Diesel inventories rose by 0.3 million barrels, which is close to the API’s forecast of an 11-thousand-barrel decrease. Diesel inventories are currently 6% below the five-year average.
Over the past four weeks, total products supplied, a proxy for U.S. demand, averaged 20.1 million barrels per day, a 1.2% decrease compared to the same period last year. Gasoline supplied averaged 8.8 million barrels per day, down 1.9% year-on-year. Diesel supplied averaged 3.8 million barrels per day, marking a 3.7% increase from the same period last year. Jet fuel demand also showed strength, rising 4.2% over the same four-week period.
Analys
Brent on a rollercoaster between bullish sanctions and bearish tariffs. Tariffs and demand side fears in focus today

Brent crude rallied to a high of USD 75.29/b yesterday, but wasn’t able to hold on to it and closed the day at USD 74.49/b. Brent crude has now crossed above both the 50- and 100-day moving average with the 200dma currently at USD 76.1/b. This morning it is trading a touch lower at USD 74.3/b

Brent riding a rollercoaster between bullish sanctions and bearish tariffs. Biden sanctions drove Brent to USD 82.63/b in mid-January. Trump tariffs then pulled it down to USD 68.33/b in early March with escalating concerns for oil demand growth and a sharp selloff in equities. New sanctions from Trump on Iran, Venezuela and threats of such also towards Russia then drove Brent crude back up to its recent high of USD 75.29/b. Brent is currently driving a rollercoaster between new demand damaging tariffs from Trump and new supply tightening sanctions towards oil producers (Iran, Venezuela, Russia) from Trump as well.
’Liberation day’ is today putting demand concerns in focus. Today we have ’Liberation day’ in the US with new, fresh tariffs to be released by Trump. We know it will be negative for trade, economic growth and thus oil demand growth. But we don’t know how bad it will be as the effects comes a little bit down the road. Especially bad if it turns into a global trade war escalating circus.
Focus today will naturally be on the negative side of demand. It will be hard for Brent to rally before we have the answer to what the extent these tariffs will be. Republicans lost the Supreme Court race in Wisconsin yesterday. So maybe the new Tariffs will be to the lighter side if Trump feels that he needs to tread a little bit more carefully.
OPEC+ controlling the oil market amid noise from tariffs and sanctions. In the background though sits OPEC+ with a huge surplus production capacity which it now will slice and dice out with gradual increases going forward. That is somehow drowning in the noise from sanctions and tariffs. But all in all, it is still OPEC+ who is setting the oil price these days.
US oil inventory data likely to show normal seasonal rise. Later today we’ll have US oil inventory data for last week. US API indicated last night that US crude and product stocks rose 4.4 mb last week. Close to the normal seasonal rise in week 13.
Analys
Oil gains as sanctions bite harder than recession fears

Higher last week and today as sanctions bite harder than recession fears. Brent crude gained 2% last week with a close on Friday of USD 73.63/b. It traded in a range of USD 71.8-74.17/b. It traded mostly higher through the week despite sharp, new selloffs in equities along with US consumer expectations falling to lowest level since 2013 (Consumer Conf. Board Expectations.) together with signals of new tariffs from the White House. Ahead this week looms the ”US Liberation Day” on April 2 when the White House will announce major changes in the country’s trade policy. Equity markets are down across the board this morning while Brent crude has traded higher and lower and is currently up 0.5% at USD 74.0/b at the moment.

New US sanctions towards Iran and Venezuela and threats of new sanctions towards Russia. New sanctions on Venezuela and Iran are helping to keep the market tight. Oil production in Venezuela reached 980 kb/d in February following a steady rise from 310 kb/d in mid-2020 while it used to produce 2.3 mb/d up to 2016. Trump last week allowed Chevron to import oil from Venezuela until 27 May. But he also said that any country taking oil or gas from Venezuela after 2 April will face 25% tariffs on any goods exported into the US. Trump is also threatening to sanction Russian oil further if Putin doesn’t move towards a peace solution with Ukraine.
The OPEC+ to meet on Saturday 5 April to decide whether to lift production in May or not. The OPEC+ Joint Ministerial Monitoring Committee will meet on Saturday 5 April to review market conditions, compliance by the members versus their production targets and most importantly decide whether they shall increase production further in May following first production hike in April. We find it highly likely that they will continue to lift production also in May.
OPEC(+) crashed the oil price twice to curb US shale, but it kicked back quickly. OPEC(+) has twice crashed the oil price in an effort to hurt and disable booming US shale oil production. First in 2014/15/16 and then in the spring of 2020. The first later led to the creation of OPEC+ through the Declaration of Cooperation (DoC) in the autumn of 2016. The second was in part driven by Covid-19 as well as a quarrel between Russia and Saudi Arabia over market strategy. But the fundamental reason for that quarrel and the crash in the oil price was US shale oil producers taking more and more market share.
The experience by OPEC+ through both of these two events was that US shale oil quickly kicked back even bigger and better yielding very little for OPEC+ to cheer about.
OPEC+ has harvested an elevated oil price but is left with a large spare capacity. The group has held back large production volumes since Spring 2020. It yielded the group USD 100/b in 2022 (with some help from the war in Ukraine), USD 81/b on average in 2023/24 and USD 75/b so far this year. The group is however left with a large spare capacity with little room to place it back into the market without crashing the price. It needs non-OPEC+ in general and US shale oil especially to yield room for it to re-enter.
A quick crash and painful blow to US shale oil is no longer the strategy. The strategy this time is clearly very different from the previous two times. It is no longer about trying to give US shale oil producers a quick, painful blow in the hope that the sector will stay down for an extended period. It is instead a lengthier process of finding the pain-point of US shale oil players (and other non-OPEC+ producers) through a gradual increase in production by OPEC+ and a gradual decline in the oil price down to the point where non-OPEC+ in general and US liquids production especially will gradually tick lower and yield room to the reentry of OPEC+ spare capacity. It does not look like a plan for a crash and a rush, but instead a tedious process where OPEC+ will gradually force its volumes back into the market.
Where is the price pain-point for US shale oil players? The Brent crude oil price dropped from USD 84/b over the year to September last year to USD 74/b on average since 1 September. The values for US WTI were USD 79/b and USD 71/b respectively. A drop of USD 9/b for both crudes. There has however been no visible reaction in the US drilling rig count following the USD 9/b fall. The US drilling rig count has stayed unchanged at around 480 rigs since mid-2024 with the latest count at 484 operating rigs. While US liquids production growth is slowing, it is still set to grow by 580 kb/d in 2025 and 445 kb/d in 2026 (US EIA).
US shale oil average cost-break-even at sub USD 50/b (BNEF). Industry says it is USD 65/b. BNEF last autumn estimated that all US shale oil production fields had a cost-break-even below USD 60/b with a volume weighted average just below USD 50/b while conventional US onshore oil had a break-even of USD 65/b. A recent US Dallas Fed report which surveyed US oil producers did however yield a response that the US oil industry on average needed USD 65/b to break even. That is more than USD 15/b higher than the volume weighted average of the BNEF estimates.
The WTI 13-to-24-month strip is at USD 64/b. Probably the part of the curve controlling activity. As such it needs to move lower to curb US shale oil activity. The WTI price is currently at USD 69.7/b. But the US shale oil industry today works on a ”12-month drilling first, then fracking after” production cycle. When it considers whether to drill more or less or not, it is typically on a deferred 12-month forward price basis. The average WTI price for months 13 to 24 is today USD 64/b. The price signal from this part of the curve is thus already down at the pain-point highlighted by the US shale oil industry. In order to yield zero growth and possibly contraction in US shale oil production, this part of the curve needs to move below that point.
The real pain-point is where we’ll see US drilling rig count starting to decline. We still don’t know whether the actual average pain-point is around USD 50/b as BNEF estimate it is or whether it is closer to USD 65/b which the US shale oil bosses say it is. The actual pain-point is where we’ll see further decline in US drilling rig count. And there has been no visible change in the rig count since mid-2024. The WTI 13-to-24-month prices need to fall further to reveal where the US shale oil industry’ actual pain-point is. And then a little bit more in order to slow production growth further and likely into some decline to make room for reactivation of OPEC+ spare capacity.
The WTI forward price curve. The average of 13 to 24 month is now USD 64.3/b.
The average 13-to-24-month prices on the WTI price curve going back to primo January 2022. Recently dropping below USD 65/b for some extended period.
-
Nyheter3 veckor sedan
USA är världens största importör av aluminium
-
Analys4 veckor sedan
Oversold. Rising 1-3mth time-spreads. Possibly rebounding to USD 73.5/b before downside ensues
-
Analys3 veckor sedan
Crude oil comment: Unable to rebound as the US SPX is signaling dark clouds on the horizon
-
Analys3 veckor sedan
Crude oil comment: Not so fragile yet. If it was it would have sold off more yesterday
-
Nyheter3 veckor sedan
Priset på koppar skiljer sig åt efter tariffer
-
Analys2 veckor sedan
Oil prices climb, but fundamentals will keep rallies in check
-
Analys2 veckor sedan
Crude oil comment: Ticking higher as tariff-panic eases. Demand growth and OPEC+ will be key
-
Nyheter2 veckor sedan
Ett samtal om råvarorna som behövs för batterier