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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 Prices Fall From Fresh Highs As OPEC Talks Hit A Snag

Oil refinery

And it is Groundhog Day again, as the OPEC rumor-mill gets cranked up once more. Fortunately we get the welcome distraction of an inventory report tomorrow, while some respite follows that in the form of Thanksgiving. But for now, hark, here are five things to consider in oil markets today:

1) Looking for some sense in the current oil market kerfuffle, a seemingly timeless quote resonates from Ahmed Zaki Yamani, the Saudi oil minister from 1962 to 1986: 'in the short run, oil prices are determined by politics, in the long run, they are determined by economics'.

2) As an OPEC agreement is seemingly edging closer to becoming a reality, it is worth considering who relies most on the cartel for their crude.

The top five destinations of OPEC crude account for ~16 million barrels per day of deliveries. As we have discussed recently, U.S. imports of OPEC crude are up nearly 20 percent compared to year-ago levels, at an average of 3.2mn bpd - putting the U.S. in third place. But is the demand hubs of China and India that pull in more crude from the cartel; together they account for 7.4 million barrels per day, with China pulling in slightly more.

Japan is the fourth largest importer of OPEC crude, although volumes are flat on year-ago levels at 2.75mn bpd. South Korea is fifth, pulling in 2.45mn bpd, up 7.5 percent on year-ago levels. Eighty-eight countries have imported OPEC crude since the beginning of last year.

(Click to enlarge)

3) Our ClipperData below show U.S. LPG exports continue to show strength, rebounding from summer lows. Last week's LPG exports were a split of ~84 percent propane and ~16 percent butane, with volume boosted by the first export from Phillips 66' Freeport LPG terminal.

The first ever VLEC (Very Large Ethane Carrier) is on its way to Enterprise Product Partners' Morgan's Point terminal - the world's largest ethane export terminal. The VLEC is expected to arrive in the second week of December with a 48,600 MT cargo, after passing through the Panama Canal.

(Click to enlarge)

4) The chart below relates to the IEA's world energy outlook released last week, highlighting how global gasoline consumption is expected to level off from here, as growing emerging market demand is offset by an increase in electric vehicles. The IEA projects there will be more than 150 million electric vehicles by 2040. Related: Will We Ever See $100 Oil Again?

Although petroleum demand in transportation is projected to increase through to 2040, this is to come from the maritime, aviation and freight sectors - and their higher consumption of diesel, fuel oil and jet fuel. The petrochemicals sector is projected to be the leading source of demand growth over the coming decades.

(Click to enlarge)

5) Through to 2040, renewable energy is still expected to see the most growth in energy use for heating and electricity, than it is for transportation:



By Matt Smith

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