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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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3.1 Million Barrel Draw In U.S Stockpiles Stimulates Oil Prices

3.1 Million Barrel Draw In U.S Stockpiles Stimulates Oil Prices

Crude prices are ripping higher today thus far, egged on by a surprise draw from last night’s API report. A 3.1 million barrel draw was seen, which is in contrast to the modest build expected from today’s EIA report of around 1 million barrels. Distillates are expected to see a similar build to crude this morning (although last night’s API print was a prodigious +3.1 mb build), while a minor draw is expected to gasoline stockpiles.

Overnight markets saw Chinese equities rebound with gusto, rallying late in the day to close 4.9% higher (whiffs of gov’t intervention). We had negative news out of Japan as it joined Brazil in having its credit rating cut by S&P, while across in Europe, the UK unemployment rate dropped to 5.5%, the lowest level since 2008 (jolly hockey sticks!).

Eurozone inflation data was an oxymoron as it was flat month-on-month, and only up 0.1% year-on-year. Zipping across the pond, and US inflation numbers showed empathy, edging 0.2% higher year-on-year, but actually dropping 0.1% versus the prior month (falling fuel costs, me thinks).

(Click to enlarge)

US CPI YoY (source: investing.com)

The Federal Reserve meeting starts today, culminating with an interest rate hike or holding pattern tomorrow at 2pm EDT. Interest rates haven’t budged from 0.25% since December 2008; current probabilities point to a ~30% likelihood of a hike tomorrow. (Dear Fed – please hike rates and let’s be done with it). Related: OPEC Keeps Up Production In August, Takes Over Market Share

(Click to enlarge)

Back to black gold, Texas tea, and Venezuela’s President Nicolas Maduro won’t give up the ghost of an interim OPEC / non-OPEC meeting to discuss ongoing low prices, saying in a televised address that he will continue to push for such an outcome. Hum dee dum.

The below graphic illustrates the swift pace that Saudi Arabia’s electricity use is increasing at. It has doubled since 2000, and the nation is now looking to add nuclear energy to its generation mix (which is currently at 45% natural gas, 55% oil) to meet growing demand. Sixteen nuclear reactors are planned, to meet 15% of its electricity needs as early as 2032. Costs are projected at ~$80 billion, or $5 billion per reactor:

Research out today from the RAC foundation highlights a growing disparity faced by the UK in the coming decades, as it consumes twice as much diesel as petrol (gasoline, my ‘Murican friends), with this mismatch set to accelerate. Diesel demand is up 76% in the last two decades, and could rise by a further 20% by 2030. All the while, the UK becomes increasingly more reliant on imports. They currently account for nearly a half of its diesel needs, but UK refineries continue to be closed due to poor economics and investment costs. In 2009 there were nine major refineries, now there are only six. Related: Midweek Sector Update: This Key OPEC Member Could Soon See Production Cuts

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Last month we discussed here how oversupply plagues the global LNG market, and IEA’s Fatih Birol has been affirming a downbeat view on the industry in a speech today in Tokyo (n.b., Japan accounts for ~35% of global LNG market). As LNG export projects come to fruition (think: Australia), and Asian demand for LNG wanes, Birol delivers our quote of the day:

‘The energy industry assumed that Asian consumers would take any amount of LNG at any price because Asia is the center of global demand growth, but this assumption was a grave mistake….cheap coal and increasing competitiveness of renewables are squeezing gas in many markets…for many, this means the golden age of gas remains more of a dream than reality’. Ouch. Related: Is This The End Of The LNG Story?


Finally, the below map highlights how gasoline prices have moved in the last ten months across 76 countries in percentage terms (i.e., lower everywhere). While prices in Saudi Arabia remain unchanged (due to them being subsidized anyway), even the cheapest nation – Venezuela – has seen cheaper prices. Further subsidies from the South American nation means a fleet of two dozen SUVs can be filled up for…wait for it….less than $1.

(Click to enlarge)

By Matt Smith

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