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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 Lifted By Global Supply Outages

Oil refinery sunset

Sixty-two years after Roger Bannister broke the four-minute mile, and we are sprinting towards the end of another crazy week. The craziness continues today, for not only is it Kentucky Derby Eve, but it is also Nonfarm Friday, which means we get official monthly U.S. unemployment data. Hark, here are five things to consider on this sixth day of May.

1) Data has been light elsewhere, leaving the spotlight to shine on today’s Nonfarm payrolls report. Job creation last month was considerably lower than expectations, coming in at 160,000 compared to the consensus of 202,000. The unemployment rate remained at 5 percent. Average hourly earnings rose 0.3 percent YoY (good), while the participation rate dropped to 62.8 percent (bad).

2) The fire in Fort McMurray, Canada rages on. It is now estimated that up to 1 million barrels per day of Canadian production has been taken offline. To put the situation in context, Canada produces ~4 million bpd of crude oil, nigh on 80 percent of which is produced in Alberta. Oil sands production accounts for ~80 percent of Alberta’s oil output. Related: Why Gazprom’s ‘Monopoly’ in Europe is Far from Over

Canada is the largest supplier of crude oil to the U.S. sending approx.3million bpd – the vast majority of which moves by pipeline. While infrastructure is yet to be damaged, the evacuation of staff in combination with the precautionary closure of pipelines is what is driving the drop in production.

3) This piece today highlights how the U.S. Gulf is congested due to rising crude imports; we were quoted in the Wall Street Journal on Wednesday highlighting how there are over 28 million barrels of crude waiting to be discharged due to strong arrivals and weather delays.

While we’ve been highlighting of late how Saudi imports have climbed to their highest level in nearly a year, it would be remiss not to shine a light on Iraqi flows, which have reached their highest level since September 2014. Imports reached nearly 280,000 bpd in April, heading to various destinations on the East, West and Gulf Coasts:

(Click to enlarge) Related: Is This The Biggest Red Herring In Oil Markets?

4) This chart below is from EIA’s ‘today in energy’, highlighting the breakdown of U.S. crude production and imports by API gravity for 2015. More than 70 percent of domestic production last year is of light crude – oil with an API gravity of over 35:

(Click to enlarge)

Given Gulf Coast refineries are geared towards refining medium to heavy crude, it should come as no surprise that according to the EIA, 90 percent of U.S. crude imports last year had an API gravity below 35. We can see from our ClipperData that 74 percent of U.S. waterborne crude imports last year had an API of 31 or lower, as heavier foreign crude arrived on U.S. shores. Related: The Shale Sector Just Got Two Critical Wins – In Two Different States

5) Finally, there has been a militant attack on a Chevron platform off the coast of Nigeria, which has forced the closure of a Chevron oil facility. The militant group, the Niger Delta Avengers, have claimed responsibility for bombing Chevron’s Okan platform in what is being viewed as one of the most serious attacks since 2009.

This is hot on the heels of a force majeure on Nigeria’s Forcados blend due to pipeline sabotage in late February, which has dropped Nigerian crude exports to 1.7 million bpd, the lowest since late 2013, according to our ClipperData.

By Matt Smith

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