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Markets Impressed By Extra Saudi Production Cuts

Rig

After the uncertainty and stress of the past weeks, the mid-February oil market is definitely showing signs of a more favorable working environment for all of us. Saudi Arabia has provided some comfort to the markets, stating it would cut production below 10mpb, more than 0.5mbpd than it had initially agreed to during the OPEC/OPEC+ Vienna Agreement, easing concerns about global supply getting way out of balance. Even though US sanctions do continue to weigh on Venezuela, it has managed to reroute somewhat its exports, making the pressure on global benchmarks more manageable.

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Source: Reuters.

1. US Crude Stocks Rise Further

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- US Commercial crude stocks have risen 1.3 MMbbl w-o-w to 447.2 MMbbl during the week ended February 1, almost 25 MMbbl above the 5-year stock average.
- Robust exports have mitigated somewhat the stock buildup, increasing 0.93mbpd from the week earlier, to reach 2.9mbpd.
- In the meantime, the EIA raised its 2019 annual forecast for US crude production to 12.4mbpd, stating that Permian and eastern New Mexico will spearhead the output growth.
- The EIA estimates 2020 will witness a further 0.8mbpd production increase, bringing output levels at that point to 13.2mbpd.
- Gasoline inventories rose again by 0.5MMbbl to 258MMbbl, with net gasoline production dropping 48kbpd week-on-week.
- On the other hand, distillate stocks have dropped again during the week ended February 1, this time by 2.2 MMbbl to 139MMbbl, almost 5 MMbbl below the 5-year average.

2. NIOC Follows Saudi Lead with March Pricing

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- NIOC has moved its March-loading official selling prices according to the trend set up Saudi Aramco, rolling over the price of Iranian Light and hiking Iranian Heavy for Asia.
- Asia-bound Iranian Light remained at a premium of 40 cents to the Oman/Dubai average, whilst Iranian Heavy was increased by 45 cents month-on-month, 5 cents more than Aramco did with its Arab Medium March OSPs.
- Cargoes destined for NW Europe witnessed only cosmetic changes, with both Iranian Light and Iranian Heavy dropped by 5 cents to -3.85 and -6.45 USD per barrel vs ICE Bwave, respectively.
- The last time an Iranian cargo hit Northwest Europe was in July 2018 with a 2 MMBbl Iranian Light cargo arriving to the French port of Antifer.
- Following Saudi Aramco’s…




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