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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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Iran Enjoys Increased Oil Exports, U.S Shale Plays Face Structural Decline

One and a quarter centuries to the day after the birth of Agatha Christie, and markets remain shrouded in mystery ahead of Thursday’s potential US interest rate hike. Persistent fears about emerging market economies dominate sentiment; Chinese equities were spooked 3.5% by these fears overnight, while scary South Korean import and export data did little to firm up the market’s fragile disposition. From one emerging market to another, Brazil responded to last week’s credit rating cut by announcing austerity measures via spending cuts and tax hikes, with the goal of narrowing its budget deficit.

In terms of economic data today, the Eurozone economic sentiment index, the ZEW, showed its lowest print since last December. The index is a gauge for economic expectations for the Eurozone economy six months out. Although still positive, a sense of optimism is distinctly on the wane, driven by emerging market fears: Related: Low Oil Prices Throw North Sea Oil Into A State Of Crisis

(Click to enlarge)

Eurozone ZEW Economic Sentiment Index (source: investing.com)

The German-specific index mirrored the Eurozone view above, hitting its lowest level since December also. The ZEW assessment for current conditions was somewhat more rosy, showing its highest level since April (presumably as Greek fears dissipate). We have had inflation data out of the UK, which dropped back to zero last month…driven by falling fuel costs (n.b., all paths lead back to energy…). Related: Aussie PM Ousted As Commodities Pressure Proves Too Much

US retail sales were somewhat disappointing, up +0.2% versus the +0.3% expected, although there was an upward revision to last month to ease the pain. Regional manufacturing data from New York was absolutely horrible though, while industrial production for the US as a whole contracted last month by -0.4%, down more than the -0.2% expected.

Switching our full focus to black gold, Texas tea, yesterday’s monthly drilling productivity report from EIA projected that US production from key shale plays will drop again next month; this time by 80,000 barrels per day. The majority of this drop is set to come from the Eagle Ford shale play, falling 62,000 barrels. After peaking in March of this year at 1.72 mn barrels per day, Eagle Ford oil production has now sequentially dropped for seven straight months to 1.42 mn bpd, or down over 17%.

Natural gas production from the region is on a similar path, peaking in April at 7.34 Bcf/d and dropping for six consecutive months to 6.81 Bcf/d, down over 7% from its peak.

(Click to enlarge)

Mexico is preparing for its next round of auctions for its offshore oil fields at the end of this month after July’s less-than-successful outing. This time around it is sweetening the terms by lowering minimum bid prices. And in true Agatha Christie-style tension, bids must be submitted in a sealed envelope on September 30th. Related: Oil Price Increase Will Not Come Fast Enough To Save Alberta

Finally, yesterday’s OPEC report showed Iran’s oil production continues to edge up, now up to 2.86 mn bpd. Our #ClipperData show that August exports were up to over 1.5 mn bpd, and should September keep up its current pace of loadings through the rest of the month, we could be up to as high as 1.9 mn bpd:


(Click to enlarge)

Iran oil exports (source: ClipperData)

By Matt Smith

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