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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 Markets Unshaken By Rising Geopolitical Tensions

As pockets of geopolitical tension leave the crude market neither shaken nor stirred, hark, today we dig into some of these hotspots to see what their energy flows look like, and how they could be impacted:

Fears have been stoked in recent days about the impact to U.S. imports of Venezuelan crude amid possible sanctions being applied on Venezuela's energy sector. While this can't be ruled out, it seems highly (highly highly) unlikely, given the reliance of the U.S. on Venezuelan crude deliveries.

Venezuelan flows to the U.S. this year are averaging just over 700,000 bpd. This is down by about 6 percent versus last year. The vast majority of these flows head to U.S. Gulf Coast refiners, with deliveries to nineteen different destinations so far this year, with the leading beneficiaries being refineries run by Valero, Phillips 66, Chevron and, not surprisingly, Citgo.

Two destinations on the Atlantic Coast have received Venezuelan barrels this year: PBF's Delaware City refinery, and Axeon SP's Paulsboro Asphalt refinery. No Venezuelan crude has been delivered to the West Coast since December. Some 74 percent of Venezuelan deliveries go to six refineries:

(Click to enlarge)

From one geopolitical hot potato to another, this article on CNBC yesterday is powered by our ClipperData, showing Qatari exports of crude and condensate. While Qatar may be one of the smallest oil producers in OPEC, it still exports more than one million barrels per day of crude and condensates combined. Related: Oil Markets On Edge As Arab States Cut Ties With Qatar

The implications of Qatar exiting from the OPEC production cut deal would be minimal, given their commitment to cut by 30,000 bpd - or by 2.5 percent. Their exports to leading destinations are also likely to be unaffected. Asia is overwhelmingly the biggest beneficiary of Qatari crude and condensate flows, with Japan the leading destination over the last year and a half, swiftly followed by South Korea.

That said, Qatar sends both condensate and LNG exports into UAE, as well as natural gas via the Dolphin pipeline. The cutting of diplomatic ties by UAE with Qatar may have significant ramifications for these flows.

(Click to enlarge)

While Qatar may be a smaller player when it comes to OPEC, it is the biggest player of them all in terms of LNG. It is the world's largest LNG exporter, with flows predominantly heading to Asia:

(Click to enlarge)

Switching gears, the charts below highlight global wind and solar capacity additions over the last decade. Capacity is ten-fold what it was a decade ago. While falling costs have played their part, the key driver behind their growth have been policy decisions and government support: the IEA estimates that $750 billion in economic incentives have been provided to renewables over the past decade. Related: Worst Hurricane Season In A Decade Threatens Gulf Coast Production

(Click to enlarge)

Finally, in yesterday's feature on NPR's Texas Standard we discussed offshore drilling, and how lower costs are enabling a rebound in activity. The interview and article are here, while here are five takeaways:

--Offshore costs are dropping, according to Wood MacKenzie - down from $75/bbl in 2014 to potentially $50/bbl next year

--This is not just due to improving efficiencies, but cost-cutting by service companies

--Rental rates for drilling rigs have been cut in half since 2014, amid a lack of demand

--Offshore projects are shifting focus, copying a blue-print of U.S. shale - focused on being cost efficient rather than on maximizing output

--Offshore costs are still much higher than onshore projects.... but the gap is closing

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  • Erin on June 06 2017 said:
    Hahahahahah I, loving this cheap oil.

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