• 1 hour Exxon Starts Production At New Refinery In Texas
  • 2 hours Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 20 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 21 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 21 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 22 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 23 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 23 hours VW Fails To Secure Critical Commodity For EVs
  • 1 day Enbridge Pipeline Expansion Finally Approved
  • 1 day Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 1 day OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 5 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 6 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 8 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
Alt Text

Aggressive OPEC Pushes Oil Prices Up

Oil prices are once again…

Alt Text

5 Players To Watch In The FinTech Revolution

Artificial Intelligence and Blockchain tech…

Bout Of Short Covering Propels Oil Prices

India refinery

As renewed rumors and murmurs rise up of another OPEC production freeze meeting, it is having the desired effect that certain OPEC members would want: oil is rallying like a mad thing. After short positions on WTI reached a record in the latest CFTC data, the production freeze rumor-mill has spurred on a solid bout of short-covering it would seem. Hark, here are five things to consider in oil markets today:

1) Let’s take a look at South Korea, as it is the fifth largest oil importer in the world, but remains in the shadow cast by the larger importing countries – U.S., China, India and Japan. Imports are currently tracking at just shy of 3 million barrels per day this year, and as our ClipperData illustrate below, some 64 percent of these imports this year have come from one region, the Middle East, and from four countries: Saudi Arabia, Iraq, Kuwait and Qatar. Of these four, Saudi is the leading source. It accounts for just less than 30 percent of South Korea’s total oil imports.

(Click to enlarge)

2) We have been vocal for a number of months about our expectation of slowing Chinese crude imports; China’s voracious appetite for crude so far this year has appeared unsustainable. It is therefore encouraging to see imports slowing in official Chinese customs data; July’s data is lower for a third consecutive month. The General Administration of Customs data showed that Chinese crude imports slowed to their lowest level since January – something we’ve been pointing to furiously in our ClipperData.

Affirming this bearish news and compounding its impact has been additional data that fuel exports in July surged to a record of 1.25 million bpd, up over 50 percent compared to year-ago levels. There is not enough domestic demand to soak up all the products.

(Click to enlarge)

3) One suggestion for China’s elevated imports this year has been to offset slowing output. In the grand scheme of things, however, the drop in domestic Chinese production has made a modest dent, little more. As capex is slashed at China’s aging oil and gas fields, output has dropped by 4.6 percent in the first half of this year. Although significant in percentage terms, this drop is less than 250,000 bpd.

(Click to enlarge)

4) Short positions in WTI have risen to a record in the latest CFTC report – the highest since data began in 2006. The rally in recent days therefore seems to be driven by short-covering as much as anything. Related: New York Nuclear Plants Deemed A “Public Necessity”

(Click to enlarge)

The CFTC data also show that hedge fund positioning for gasoline is still net short, although an increase in long positions has narrowed this (h/t @JKempEnergy):

(Click to enlarge)

5) Last Friday we discussed how the world’s largest oil companies are raising more debt in order to defend their dividends; the net debt of the top five biggest oil companies has risen tenfold since 2008 to $138 billion. But not only are oil companies borrowing more, they are continuing to spend less.

As the chart below illustrates, capital expenditure for 10 large publicly-traded oil companies has been slashed by $100 billion – or 40 percent – in the last two years, as belt-tightening persists. Inevitably, such drastic cost-cutting is going to impact production volumes going forward. In fact, it is already; the same 10 companies cutting capex are also expected to produce 10 percent less oil this year compared to analyst estimates back in August 2014.

(Click to enlarge)

By Matt Smith

More Top Reads From Oilprice.com:

 




Back to homepage


Leave a comment
  • Kr55 on August 08 2016 said:
    majority of the price drop from 50 was because of shorts selling barrels they don't own. Only fair that prices go back up off shorts paying those barrels back.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News