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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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Oil Gives Up Gains As Traders Fear Rising U.S. Supply

And crude continues to be more choppy than Chuck Norris fighting Hong Kong Phooey fighting Bruce Lee, selling off today after yesterday's rally (after selling off on Wednesday after rallying on Tuesday...). Hark, here are five things to consider in energy markets today:

1) Let's take a look at Mexico, in relation to all the talk of import tariffs and taxes that has been swirling in recent days. Some 84 percent of Mexico's total exports go to its fellow NAFTA members, the U.S. or Canada. As recently as 2009, crude accounted for 30 percent of its export earnings, but amid diversification, this number has dropped to 6 percent in 2015.

In terms of exports from Mexico last year, vehicles are number one (at 24 percent), electronic equipment (21 percent), machines / engines / pumps are third (15.5 percent) followed by oil (again, 6).

Our ClipperData show the U.S. accounted for 60 percent of Mexican crude exports in 2015, before dropping to 48 percent last year. Nonetheless, 575,000 bpd of Mexican crude was imported last year, with 97 percent of it being heavy crude. Some 97 percent of it headed into the U.S. Gulf, with the vast majority of it being heavy Maya crude.

(Click to enlarge)

2) While Mexican crude exports to the U.S. could be hurt by a border tax or tariff, natural gas exports to our neighbors in the south are unlikely to come under pressure. Natural gas exports have more than doubled in the last two years, climbing above 4 Bcf/d. With further pipeline expansions and access to cheap LNG exports from the U.S. Gulf, this volume is only set to rise.

(Click to enlarge)

3) After discussing U.S. imports of Arab Gulf crude earlier in the week, there was a request to show these volumes by grade, so here it is below. The three Saudi Arabian grades - Arab Light, Arab Medium and Arab Extra Light - account for nearly 60 percent of all arrivals.

As Arab Light has dropped through the year, the other two grades have stepped up to fill this gap. Iraqi crude (Basrah Light, Basrah Heavy) account for 24 percent of the volume. The majority of the rest is made up of Kuwaiti crude, accounting for 13 percent of deliveries.

(Click to enlarge)

4) ...aaaand back we go to the BP energy outlook outlook, which is full of more interesting stats than we can shake a stick at. Today's tidbit comes from oil demand and supply projections out to 2035 (again, grab the salt shaker and take a grain or two), highlighting how oil demand is projected to reach 110mn bpd, driven by emerging markets, but in part offset by a material 8mn bpd drop from the OECD. Related: Keystone XL Still Faces Obstacles Even With Trump’s Approval

In terms of supply growth, is seen coming from the holders of low-cost, large-scale resources (think: Middle East, U.S., Russia), with OPEC accounting for nearly 70 percent of this growth.

(Click to enlarge)

5 ) Finally, earlier in the week we highlighted how 240 million people in India were lacking access to electricity. As Prime Minister Modi focuses on eradicating this issue, and as he prioritizes solar to reach India's renewables target (hark, 40 percent by 2030), the world's largest solar power station in a single location has been completed in the southern state of Tamil Nadu.

The solar power station comprises of 2.5 million solar panel modules, 576 inverters, and 6,000 kilometers of cables; it has the capacity to power 150,000 homes. Should India stick to its 10-year blueprint for renewables, released last month, 57 percent of total electricity capacity should come from non-fossil fuels by 2027.

By Matt Smith

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