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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 Retreat As U.S. Abandons Paris Climate Agreement

As oil ventures into forty dollardom once more, today's blog takes a peek at a number of supply side influences, from Basrah buoyed to Brazil nuttiness, all via a 'call on shale'. Hark, here are a number of things to consider in oil markets today:

According to reports, Brazilian exports are set to ramp up super-strongly to 2.6 million barrels per day by 2026, up from just under 800,000 bpd last year. This is because domestic production is expected to double over the next decade, as offshore production ramps up amid improving logistics (i.e., higher involvement by IOCs), while limited refining capacity means higher exports.

Export loadings so far this year are already averaging nearly 950,000 bpd. Asia is currently the destination for ~40 percent of Brazilian exports. As exports rise going forward, these extra barrels are expected to continue to head towards this key global demand hub.

(Click to enlarge)

While Brazilian crude looks to increasingly favor Asia, Nigerian crude flows to the U.S. are looking as strong as an ox. As Nigerian production has increased of late, there has been a corresponding increase in export loadings.

Receipts to the U.S. in May have been just shy of 300,000 bpd, and all arriving into the Atlantic Coast. The vast majority of these barrels are light crude grades - with Agbami leading the way - as U.S. refiners pull in bargain basement imports rather than consuming more domestic barrels.

(Click to enlarge)

This nifty chart below is from Rystad Energy, illustrating how they project that supply will not be able to keep up with demand in the coming years without shale. Tweaking the term 'call on OPEC', the chart is pointing out how much shale production must grow to meet demand....aka, the 'call on shale'.

(Click to enlarge)

Iraqi oil minister Jabbar al-Luaibi has confirmed that Kurdistan will not be part of the OPEC production cut extension. This leaves the responsibility on the southern part of Iraq to cut production of Basrah Light and Basrah Heavy, to the tune of 210,000 bpd. Related: New BC Government Could Jeopardize Canadian Oil Exports

We have seen very steady loadings from southern Iraq so far this year. This has translated into Iraq's top five destinations receiving ~2.6 million barrels per day. After a strong start to the year, Chinese receipts have dropped off, while imports into both India and the U.S. have ticked higher:

(Click to enlarge)

Finally, stat of the day comes from our very own ClipperData. US crude export loadings to Asia last year accounted for 7 percent of flows. However, with the emergence of the trend of reverse-lightering onto VLCCs in the Gulf of Mexico, this percentage has jumped to over 40 percent so far in 2017.

By Matt Smith

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