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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 Under Fire From Rogue OPEC Members

Oil tanker at open sea

Oil is retracing for a second day, as OPEC's monthly oil report showed the cartel's production rising last month. As markets mentally limber up for the double whammy of weekly inventories and the EIA's monthly short term energy outlook tomorrow, hark, here are five things to consider in oil markets today:

1) After yesterday's IEA report, and ahead of tomorrow's EIA report, today we get OPEC's monthly oil market report. Still with me? Good deal.

The cartel has tweaked world oil demand growth a smidge higher for this year to +1.24 million barrels per day, while leaving next year unchanged at +1.15 million bpd. Meanwhile, it has lifted non-OPEC supply growth for next year to +0.24 million bpd, driven by an upward revision to Russian output.

In terms of OPEC's scores on the doors, secondary sources report Saudi production in September was (seasonally) down to 10.49 million bpd (although direct communication shows it rising slightly to 10.65 million bpd !?!), while Iraq's output is up by 105,000 bpd to 4.455 million bpd.

The disparity versus Iraq's direct communication has widened, however, to 320,000 bpd, from 272,000 bpd last month - now at 4.775 million bpd. Bet that has done little to improve the mood of Iraqi oil minister Jabar al-Luaibi et al. The chart below highlights the discrepancies across the various members of the cartel, on a primary versus secondary basis:

(Click to enlarge)

2) It is interesting to see in the above chart that direct communications from Angola actually pegged production some 117,000 bpd below secondary sources. This jibes with our ClipperData, which shows Angolan crude loadings at their lowest for the year in September, as loadings of medium sweet Cabinda were again weak - but not offset by stronger loadings of medium sweet Girassol, medium sour Saturno or heavy sweet Dalia like they were in July:

(Click to enlarge)

3) Yesterday we highlighted how Indian demand is a bright spot in the current oil market - and how crude imports had reached a record last month. Others have followed our lead today in reporting record imports, while today's OPEC report highlights the broad-based demand strength the emerging market is showing - across predominantly diesel, gasoline and LPG (all up >20% year-on-year).

(Click to enlarge)

4) Last week we looked at how U.S. oil inventories had narrowed on a year-over-year basis in recent months to below 40 million barrels for the first time this year, after five consecutive draws from the weekly inventory report.

Gasoline inventories have followed a similar trajectory of late, narrowing considerably compared to year-ago levels to below 4 million bbls, after peaking in mid-July at just shy of a 25 million bbls surplus. Nonetheless, as refinery runs outpace last year's levels, we could see the surplus widen in the coming weeks - especially with the East Coast seeing strong counter-seasonal gasoline imports.

(Click to enlarge)

5) Finally...Kashagan is going according to plan! According to Kazakhstan's energy minister, four wells at the Kashagan oil field are producing a total of 90,000 boe. It is expected to produce 75,000 bpd in October, rising to as much as 180,000 bpd by December.

By Matt Smith

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  • Terry on October 12 2016 said:
    It is hard to know if this latest "deal" between OPEC members with Russia's support will hold. However I don't think the production numbers from Sept. are an indication that the deal will fail since the deal was announced in late Sept. and Russia only agreed a few days after that. Oct./Nov. numbers will give us a clearer picture whether the deal will hold or not.
    By the way, that should have been obvious to the author of this article.

    Terry

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