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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 Near One Month Lows As Gasoline Spikes

As gasoline charges higher due to another outage on the Colonial pipeline, crude prices are getting caught up in its slipstream, being dragged higher after yesterday's drubbing. Tomorrow brings another weekly inventory report, but for now, hark, here are five things to consider in oil markets today:

1) We've been discussing in recent days how exports from Middle East producers have been absolutely nutty. As we shuffle into a new month, we are set for various refreshed data to indicate that OPEC production is at a new record. (This is definitely the case for their exports). And this strength isn't just from Persian Gulf producers; it is due to rising exports from both North and West Africa too.

North African exports are led by OPEC members Algeria and Libya; last month saw them close to their combined high for the year.

(Click to enlarge)

2) As for West African exports, our ClipperData below show they rebounded last month. Not only have we seen Nigerian export loadings rebounding strongly, but total West African export loadings have climbed to their highest since February, as Angolan flows have rebounded - after dropping to their lowest level since late 2014 in September.

Exports have also ticked higher from other West African nations, including Congo (Brazzaville) - led by stronger Djeno Blend exports - and OPEC new kid on the block, Gabon, via higher Etame Marin and Oguendjo volumes.

(Click to enlarge)

3) Gasoline prices are ripping higher today as the Colonial pipeline has been shut down for a second time in as many months, due to an explosion last night in close proximity to the previous leak. Workers were conducting maintenance on part of the pipe at the time.

We have September's blueprint to tell us what happens next: PADD1 is starved while PADD3 is stranded. East coast gasoline stocks will be swiftly drawn down amid the supply loss - and particularly the Southeast.

Correspondingly, we should see Gulf coast stocks swell. Gasoline imports to the East coast should ramp up, as Rbob gasoline spikes higher, and European gasoline becomes ever more attractive. Finally, some of the Gulf coast stocks could be alleviated by higher exports. Colonial is responsible for supplying about a third of the 3.2 million bps of gasoline that is consumed on the East Coast.

Just as PADD1 gasoline inventories have seemingly recovered from the pipeline outage in September, clawing back much of the 8.5 million barrel draw seen in the week following the outage, stocks should again see a swift and sizable drawdown in next week's EIA report.

(Click to enlarge) Related: DiCaprio’s New Film Portrays Canada’s Oil Sands As “Terryfying”

4) Yesterday we discussed how deals for acreage in the Permian Basin has increased to $17 billion so far this year. Well, make that that $19 billion. Occidental just bought 35,000 acres in the Permian for $2 billion. (Feels like we have a bubble here, my friends).

5) Finally, the merging of GE's petroleum-related operations with oil services company, Baker Hughes, is a bet on a rebound by the oil and gas industry, with both players set to benefit from expanding their offerings.

Their combined capabilities will mean they surpass the revenues of Halliburton, putting them second behind the world's leading oil services provider, Schlumberger.

(Click to enlarge)

By Matt Smith

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