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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 Majors’ Earnings Highlight Wider Industry Woes

Three hundred and ninety-seven years after Sir Walter Raleigh was beheaded, and crude prices are getting the chop once more. After yesterday’s Federal Reserve FOMC rhetoric brings a December rate hike back into play, we get a ‘bad is good‘ flip-flop, and now ‘good is bad.‘ Broader markets are trading risk-off, and the crude complex switches its focus back to abundant supplies once more.

Japan overnight saw some relief from recent downbeat data, as preliminary industrial production ticked 1 percent higher on the prior month. Meanwhile, unemployment in Singapore remained at a minor 2 percent. Across to Europe, and an impressive Spanish retail sales print was the highlight (+4.3 percent, the highest since March), while year-on-year inflation data still showed it stumbling through deflationary terrain (although month-on-month it rebounded strongly).

German unemployment came in at consensus of 6.4 percent, the lowest level since at least the early 1990s (hark, below), while Eurozone consumer confidence came in line with expectations. Money supply in the UK shrank last month, indicating an ongoing battle against deflation, while lending rose. Related: These Private Equity Giants Are Selling Their Shale... To China

Across the pond to the U.S., and weekly jobless claims came in better than expected at a lowly 260,000, while preliminary Q3 GDP disappointed, coming in at +1.5 percent (annualized), versus the slightly higher expectation of 1.6 percent.

GermanUnemployment

German unemployment rate, percent (source: investing.com)

Onto energy-related stuff, and in an expected move, it was announced yesterday that Pemex has received a permit to swap 75,000 barrels per day of crude with the U.S. Mexico will import light U.S. crude oil, while sending a similar amount of heavy Mexican crude to refineries on the U.S. Gulf Coast.

As we have written about before, this arrangement is a marriage of convenience, with U.S. Gulf Coast refineries well-suited to process Mexican heavy sour crude, while three of Mexico’s six major refineries are much better configured to process lighter crude (think: U.S. shale oil). As our #ClipperData illustrates, Mexico already predominantly exports heavy Maya crude to U.S. Gulf Coast refineries. Related: SPR To Be Used To Raise Cash For US Gov

MexicoCrudeExports

Mexican Crude Exports to U.S. by grade (source: ClipperData)

The December natural gas contract steps onto the dance floor as prompt month today, and starts at a considerably higher level (~$2.30/MMBtu) than where the November contract settled out ($2.033/MMBtu). Today’s weekly natural gas storage report is set to yield an injection of +69 Bcf, which is shy of both last year’s +88 Bcf, and the five-year average of +73 Bcf.

Nonetheless, storage is currently sat at a lofty 3,814 Bcf, and with two additional solid injections after this week’s number, we are not only set to blast through the record level of 3,929 Bcf, but we’re going to get pretty close to 4 Tcf. Related: Policy, Coincidence Or Conspiracy: What’s Really Holding Oil Prices Down?

Today we have had the triumvirate of Shell, Total, and ConocoPhillips all reporting Q3 earnings, and as expected, they have had a tough time. Shell reported a Q3 net loss of $7.42 billion, compared to a profit of $4.46 billion a year ago, while Total said its Q3 net profit fell to $1.1 billion from $3.46 billion a year earlier. ConocoPhillips reported its widest loss since the last price crash, posting a loss of $1.07 billion, compared to a gain of $2.7 billion a year ago. Exxon Mobil and Chevron announce their results tomorrow.

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By Matt Smith

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