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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 Production Boom Is Not What It Seems As Future Investments Are Uncertain

Oil Production Boom Is Not What It Seems As Future Investments Are Uncertain

Amid a holiday-dappled week, we barrel in to Wednesday without the presence of the weekly oil inventory report; we will have to wait until tomorrow at 11am (EDT) for that. We do, however, get the API report after market close, although the EIA’s Short Term Energy Outlook is out in the meantime to provide us with something to get our teeth into.

Economic data again remains scant, with the only morsel of note already released from the UK in the form of a big miss for industrial production (-0.4% MoM vs. +0.1% expected). Despite a rampant rise in global equity markets overnight, the crude complex is staggering lower in the face of gale-force headwinds from a stronger US dollar.

Once again, we are playing pass the parcel of positive sentiment from continent to continent, with US equities rallying strongly yesterday on hopes of further stimulus out of China. China rallied in kind in response to this, while Japanese equities trumped them all. The Nikkei 225 index jumped 7.7% overnight – the biggest jump since October 2008 – as it played catch-up with other global benchmarks:

Nikkei 225 Equity Index

In terms of oil-related info, perhaps the scariest data point for the day comes out of the UK (not the industrial production number, we already mentioned that), for according to a UK industry lobby group, North Sea oil and gas investments could drop as much as 80% by 2017 amid the lower oil price environment. Related: Two Big Oil And Gas Finds In Unexpected Places

In less scary news, the below graphic from the EIA today shows Saudi Arabian oil exports for the first half of the year. It says Saudi Arabia sent 4.4 million barrels per day to seven major trading partners in Asia, which accounted for more than half of Saudi’s total crude oil exports. In percentage terms versus last year, it says Saudi is maintaining its market share:

(Click to enlarge)

Refreshing these numbers via our #ClipperData, we can see that Saudi Arabia exports to these seven Asian countries have averaged just over 4mn bpd through August. Related: The Biggest Red Herring In U.S. Shale

Exports for 2015 to these seven Asian trading partners have risen on the whole, averaging 4.01mn bpd through August this year – up from averaging 3.87mn bpd last year. That said, total global Saudi oil exports are actually slightly lower this year versus last, at 6.78mn bpd through August, compared to 6.82mn bpd in 2014. Despite Saudi’s apparent desire to steal market share, our #ClipperData illustrates it is not winning (as we have spoken about before, via Beyoncé).

(Click to enlarge)

Saudi Oil Exports (source: ClipperData)

Finally, rubber prices just can’t bounce (just…couldn’t….stop…myself…). Unlike other commodities such as Texas tea, copper, and sugar, rubber prices have been unable to muster a bounce in recent weeks due to overwhelmingly strong supply. Three countries account for 70% of all output – Thailand, Malaysia, and Indonesia- and they are in a cartel, the International Tripartite Rubber Council (think: an elastic OPEC). In terms of the largest consumer, would you believe, it is China, who accounts for 40% of global consumption. Related: Is Apple Banking On Fuel Cell Technology?

By Matt Smith

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