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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 Slammed By Higher OPEC Exports

Oil tanker at sea

Happy Halloween! Crude is definitely spooked today, running scared as non-OPEC countries met over the weekend to discuss potential production cuts - but were unable to commit to anything concrete (sounds awfully familiar). Further encouraged by a stronger dollar, oil prices trudge on lower in forty dollardom; hark, here are five things to consider in oil markets today.

1) On Friday we discussed how Saudi Arabia, Iran and Iraq exports accounted for nearly half of India's oil imports. As our ClipperData illustrate below, exports from the three OPEC members continue to blow the prior year's volume out of the water.

Iran's export loadings so far in October are just a smidge lower than 3 million barrels per day, the highest level since sanctions were lifted earlier in the year, and a country mile above the corresponding level of 1.26 million bpd seen in October last year.

It is not just Iran leading the charge, however. Saudi export loadings for October are at their highest level for the year, while Iraq has consistently exported over 3 million bpd in 2016 - above any level seen in the year prior. Signs of any slippage in production ahead of next month's OPEC meeting remain elusive...

(Click to enlarge)

2) Permian land prices are skyrocketing, with the West Texas / New Mexico shale play seeing as much as $40,000 an acre paid in recent weeks for drilling leases. To put that in context, this is about eight times the value that similar properties fetched two years ago, when prices were close to $100/bbl.

There have been $17 billion of deals made relating to the Permian Basin this year, compared to $7 billion in the whole of last year. The number of active rigs in the shale play is up to 212, from a low of 133 in May.

3) As the chart below illustrates, the three key Chinese producers - PetroChina, Sinopec and Cnooc - are actually spending even less than expected. While the signs were all there that the producers would be tightening their purse strings (super-tight) this year, the big three have scrimped even more, only spending half of their capex targets through the first three-quarters of this year. Related: Saudi Arabia’s Oil War Gained It 1% Market Share – Which It Is About To Lose

Sinopec has shown the biggest drop in terms of spending, down a third versus year-ago levels, with its domestic output down 14 percent over this time frame. According to the National Bureau of Statistics, the nation’s total production has fallen 6.1 percent this year, although production managed to stabilize last month at 3.9mn bpd, ticking slightly higher than August's level.

(Click to enlarge)

4) Despite the E&P side of its business losing money, Sinopec has seen its profit jump in the last quarter, as operating profits from refining, marketing and chemicals more than doubled last quarter.

(Click to enlarge)

5) Finally, as the chart below illustrates, ExxonMobil's output has dropped to a seven-year low. Not only this, but it could be making its biggest revision to reserves in its history. If low energy prices persist, it may have to write down some 19 percent of its reserves - 3.6 billion barrels of reserves in the Canadian oil sands, and another 1 billion barrels of oil in other North American fields.

To offset some of this downbeat news flow, Exxon announced a discovery off the coast of Nigeria last Thursday, which could be as much as one billion barrels.

(Click to enlarge)

By Matt Smith

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