It is Margaret Atwood’s 76th birthday, and her 2009 novel ‘The Year of the Flood‘ seems an appropriate way to sum up the crude market this year. We await the weekly EIA inventory report this morning, with oil inventories less than 4 million barrels shy of the record of 490.9 mn bbls seen earlier in the year (…in itself an 80-year high).
While a near-2 million barrel build is expected from today’s report, last night’s API report has put the cat among the pigeons by yielding a surprise draw of 0.4 mn bbls. The API report also showed a build for Cushing, indicating that we could be seeing the congestion on the Gulf Coast backing up to the pipeline crossroads of the world.
While total inventories are set to come up shy of a new record today, PADD3 (aka the Gulf Coast, where nearly half of U.S. refining capacity is) stocks are already into unchartered territory in terms of record inventories:
As PADD3 inventories pursue new record highs, and Canadian pipeline flows to the U.S. Gulf Coast continue to ascend, our dearly beloved #ClipperData illustrate that waterborne imports remain fairly steady. The chart below illustrates that Venezuelan imports have been holding up exceptionally well this year, while all the banter around spiking Iraqi imports is set to come to fruition in the coming weeks. All the while, last month’s volume from Iraq kicked higher, and this month’s arrivals have already been strong. Related: Elon Musk's Hyperloop: Expensive, But Doable
Nonetheless, while the latest JODI data highlight that Saudi Arabian exports increased in September, our numbers show they have remained subdued instead. If Saudi exports are increasing, they are not making their way to the U.S. Gulf Coast. We see their imports for September, October, and thus far in November at levels not seen since January:
Related: Could The Tide Be Turning Against North American Natural Gas?
In other news, OPEC’s board of governors have been unable to agree on a long-term strategy for the cartel, which they were expected to present at the next OPEC meeting on December 4th in Vienna. The board has been considering implementing such measures as setting production quotas, or a production ceiling, or curtailing output.
Yesterday we mentioned how Texas is seeing near-record low electricity prices for ERCOT North as wind power reaches a new record. California, on the other hand, has been experiencing price spikes throughout Q3, as the onset of El Niño is making demand difficult to predict.
Despite lower prices on the average versus last year due to a larger share of natural gas in the generation mix, extra cloudiness and sporadic storms in combination with temperature spikes have caused California’s usually predictable weather to be much more erratic. Price spikes have been seen in excess of $1000/MWh:
(Click to enlarge)
As we fast approach the UN Climate Change Conference in Paris next month, the EIA today highlights how the U.S. and China are battling to lower emissions. The two countries account for ~40 percent of total global emissions, with China surpassing the U.S. in 2008 to become the leading emitter. Related: No Move In Oil Prices As French Bombs Hit Syrian Soil
In its favor, China’s CO2 emissions per capita are one-third of what they are in the U.S. To its detriment, emissions per unit of economic output are ~70 percent more than in the U.S. This is due to both the industrial focus of its economy, as well as its reliance on coal.
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China relies on coal to meet nearly two-thirds of its power generation needs. In a timely announcement, the NDRC announced today that it is cutting natural gas prices for businesses and industrial users to encourage a move away from coal. Beijing sees price cuts of 26 percent, while Shanghai and Guangdong see cuts of 24 percent.
By Matt Smith
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