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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 Rises On EIA Data Despite OPEC Deal Doubts

Gas storage


Happy Thanksgiving Eve! A fairly neutral EIA report - tilted a wee bit bullish for crude, bearish for the products - has been a welcome distraction, before a surgical focus has returned to every rumor and murmur out of OPEC delegates. So to distract from all of this, hark, here are six things to consider in oil markets today:

1) This splendid CNBC article is based on our ClipperData. Via a number of charts it highlights the ramp up we have seen in Saudi, Iraqi - and particularly - Iranian oil exports. The chart below highlights how Iranian oil exports have flowed back into the EU after the lifting of sanctions at the beginning of the year.

Iranian flows have also increased into Europe as Nigerian flows have dropped off, with West African exports rising to the U.S. East Coast as Bakken production has drifted lower and as crude by rail economics have become increasingly unfavorable. The chart below also highlights the recent increase in Libyan exports as production returns. The vast majority of Libyan oil exports head to Europe:

(Click to enlarge)

2) A combination of higher refinery runs and lower imports have led to a draw down in crude inventories in this week's EIA inventory report. Gasoline inventories saw a solid build on the whole, amid higher gasoline production and lower implied demand on the week.

The East Coast saw a build, climbing to a new record for the time of year as the market normalizes after the most recent Colonial Pipeline outage. Gulf Coast gasoline stocks drew, however, as exports in the last two weeks have been considerably higher than 1 million barrels per day.

(Click to enlarge)

3) Last week we discussed how Venezuela was looking to cut back on its preferential petroleum sales to the Petrocaribe alliance, as it increasingly scrambles to raise cash. PdVSA, the state-run oil company, has now missed $404 million in coupon payments on three of its bonds. This means it is in technical default, but has a 30-day grace period in which to cover the payments. While the expectation is that this will be achieved, this situation highlights the tenuous nature of the Venezuelan economy. Related: U.S. LNG Is Changing The Global Gas Game

4) The below graphic is from Wood MacKenzie, and looks at the revenues and spending of various Middle East OPEC members. It shows that all five will run a fiscal deficit this year amid lower oil revenues; Iran's deficit is the smallest at 4.4 percent, while both Iraq and Saudi Arabia's are over 20 percent of GDP.

Even based on belt-tightening and a price recovery, it is projected that that all five won't be back running a fiscal surplus until 2020. But even this expectation is based on a huge caveat: it is on a price projection of $85/bbl at this time.

(Click to enlarge)

5) We last visited the chart below in late August, when the Q3 estimate for Norwegian oil company investment for 2017 was 151 billion kroner - dropping from 191 billion last year. The latest update a quarter on is even lower; it is down to 147 billion kroner. This now puts 2017 investment 13 percent lower than this year, and 34 percent lower than the 2014 peak.

Nonetheless, the National Petroleum Directorate said late last week that preliminary estimates for oil, natural gas liquids and condensate production in Norway last month was 30 percent above the previous month at 1.71mn bpd.

(Click to enlarge)

6) Finally, the chart below shows that solar and wind energy are still expected to grow by 33 percent over the next two years, adding 40 gigawatts. This is even if the Clean Power Plan is repealed. Related: Texas Oil Prices Could Rise As Asian Demand Grows Stronger

California and New York have goals to get half their power from clean energy by 2030; this comes amid the ability to build new wind farms for $22/MWh in West Texas, and solar projects for less than $40/MWh in places such as Arizona and Nevada. These numbers compare with $52/MWh for the average lifetime cost of a natural gas plant, and $65/MWh for a coal plant.

Wind and solar energy have been the biggest source of growth for electricity since 2014, and as the likes of Google, Amazon, and Walmart focus their efforts on power purchase agreements to source energy directly from wind and solar farms, economics are becoming as big a driver as price competitiveness increases - with or without subsidies.

(Click to enlarge)

By Matt Smith

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