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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 Move Higher As OPEC Optimism Increases

As OPEC optimism continues to grow, and as the dollar eases lower, crude is moving higher today in this holiday-shortened week (woot woot!). Hark, here are five things to consider in oil markets today:

1) A headline over the weekend reads 'OPEC's strategy is about exports not cuts' - something which we here at ClipperData are most opportunely positioned to witness, and on a real-time basis. The article highlights how it is exports, not production that counts, given producers are dependent on these revenues.

The piece also points out that countries such as Kuwait - with strong production and a small population - are best positioned to benefit from price responses, while countries such as Iran and Nigeria currently face the inverse predicament, with large populations and stymied exports.

As we discussed last month, total OPEC weekly crude export loadings have been making new records, as the cartel puts the pedal to the metal ahead of a potential production cut at the end of the month.

Stripping out the six Middle East OPEC members - Iran, Iraq, Kuwait, Qatar, Saudi Arabia and U.A.E - export loadings last week climbed to the highest on our records. Although some of this move is due to timing, as export loadings in the week prior were soft, there is a distinct trend of higher highs in recent months:

2) While exports out of the Middle East continue to tick higher, the pace of Libyan exports also continues to accelerate. After loadings last month climbed above 12mn bbls for the first time since May last year, loadings in November are up to 10mn bbls (510,000 bpd), with still a third of the month left. Related: How Risky Are Oklahoma Earthquakes For The Oil Business?

(Click to enlarge)

3) While we discussed last week how Nigerian crude export loadings were rebounding this month, this may change on a dime given ongoing militant attacks. As oil exports have averaged 15 percent lower than last year's level, Nigeria's economic slump is deepening amid the loss of revenue.

As the chart below illustrates, lower oil prices and lower exports have meant that plunging revenues have only greased the wheels for its economy to enter a recession, dipping by 2.2 percent in Q3 versus year-ago levels, negative for a second consecutive quarter.

(Click to enlarge)

4) The latest CFTC data (hark, below - h/t @JKempEnergy) show that speculative net long positions increased last week, up by 9mn bbls. Long bets rose by 32mn bbls, while shorts increased by a lesser 23mn bbls. The increase to both highlights the current dichotomy: immediate bearish-tilted fundamentals, pitted against bullish expectations ahead of the OPEC meeting. Related: Morocco Pushes Huge Renewables Agenda In Disputed Western Sahara

Short positioning from producers also rose to a new multi-year high, amid rampant hedging activity.

(Click to enlarge)

5) Finally, today's blog out on RBN Energy not only has an awesome title - Kung Fu Fighting (For Market Share) - but is authored by ClipperData's fearless leader, Abudi Zein. It digs into rising Chinese product exports (after import and export restrictions were lifted on independent 'teapot' refiners late last year), and how they are impacting global product flows.

So far in 2016, Chinese middle distillate exports to the U.S. West Coast have accounted for nearly 10 percent of total deliveries. While Chinese exports are making it as far afield as Canada or Chile, key markets remain closer to home, such as Singapore.

(Click to enlarge)

By Matt Smith

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  • Marilyn Evans on November 21 2016 said:
    When investors realize that we can't burn all the know fossil fuel reserves without driving the earth's climate permanently out of control, the value of oil company stocks will follow the trajectory of Peabody Coal. Some will protest like the old guy down the street who said GM, Lucent, and AIG "would come back." He lost his savings, sold his house and moved in with his kids. It's so sad when good people lose all their money by trusting in old companies that paid high dividends twenty years ago and then went bankrupt when things change.

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