• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 1 day Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 2 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 1 day "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 1 day GREEN NEW DEAL = BLIZZARD OF LIES
  • 3 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 8 hours U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 3 days An Indian Opinion on What is Going on in China
  • 12 hours Nord Stream - US/German consultations
  • 3 days Can Technology Keep Coal Plants Alive and Well?
  • 4 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 6 days Perfect Energy Storm in Europe: turning our back on fossil fuels is easier said than done!
  • 5 hours Australia sues Neoen for lack of power from its Tesla battery
  • 3 days Storage of gas cylinders
  • 4 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Premium Content

Oil Retraces Amid Broader Market Volatility

Once again, the oil market is being whipsawed around by currency swings under the influence of Brexit sentiment. Amid dollar strength, Nigerian truce hopes, and some profit-taking after two days of leaping higher, crude retraces. Hark, here are five things to consider in crude oil markets:

1) Nigeria removed the peg on its currency yesterday, the naira, and it plummeted by 40 percent. The country had been holding a similar tack to Saudi Arabia in the recent low oil price environment, keeping its currency peg in place to the detriment of its foreign exchange reserves. Since the end of 2014, it has spent about 20 percent of its foreign exchange reserves to defend its peg. In similar fashion to Venezuela, Nigeria relies on crude for over 90 percent of its export revenues.

It has now changed tactics, adopting a similar path to Russia, in that it is sacrificing its currency in exchange for halting a drop in its reserves (they are at their lowest in more than a decade). The naira was unpegged at 199, and subsequently fell as low as 280 yesterday. As low oil prices and sabotage reign, Nigeria’s economy has been clobbered; its economy contracted 13.7 percent in the first quarter, and inflation is up 15.6 percent year-on-year.

2) The word on the street from a Nigerian petroleum ministry official is that a one-month ceasefire has been agreed with militants. As we have mentioned of late, despite an apparent significant drop-off in production, Nigerian crude oil exports continue apace. Related: Russia Considers Building A Hyperloop To China

The chart below shows some of the key grades which have been under force majeure in recent months; Forcados has been hurt the most, with this trend ongoing. On the flip side, Qua Iboe, which has had its force majeure lifted since the beginning of June, is seeing loadings at multi-year highs:

(Click to enlarge)

3) On the economic data front, the main news of note has been in the form of ZEW economic sentiment; both the German and the broader Eurozone economic indicators have come in better than expected. Sentiment for current conditions was the highest since January; the six-month forward view was the strongest since last August. Elsewhere, Brazilian mid-month inflation eased a wee bit lower, away from multi-year highs.

4) The chart below is from the Federal Reserve Bank of Dallas (h/t @TroyBVincent), and their study on drilling activity. While the survey of 200 companies indicates that oil prices are high enough to encourage new drilling in certain shale plays in Texas, Oklahoma and Louisiana, some areas need a considerably higher price. Related: Why China’s Energy Deregulation Is More Important Than The Aramco IPO

Another question posed has been what price of oil is needed to cover expenses from existing wells. The break-even point is seen below current prices across the board, with Permian Basin and Eagle Ford at $29/bbl, and onshore Gulf Coast the highest at $43/bbl.

(Click to enlarge)

5) As our ClipperData show Venezuelan crude oil exports dropping off, our concerns about domestic production from the ailing Latin American nation continue to rise. Approximately 200 kbd (~9 percent) of Venezuela’s production is dependent upon electricity, hence rolling blackouts and rationing in the country is detrimentally impacting production.

Additionally, as we have recently mentioned, Venezuela needs to purchase and import light crude or naphtha to mix with its bitumen to facilitate exports. As its funds run out amid an economy in freefall (hark grocery stores being ransacked, food shipped by armed guards), its ability to buy this crude diminishes – with the threat of this further reducing its crude oil exports.

By Matt Smith via ClipperData

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News