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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 Slides As Oil Majors Report Poor Results

Good day! Here are ten things to consider on this second day of February, 2016:

1) Punxsutawney Phil didn’t see his shadow, meaning an early start to spring. (If you are of the persuasion of taking your meteorological tips from a marmot). (I prefer the woolly worm).

2) The duplicitous nature of strong production versus production cuts is no better exemplified than by news out of Russia today. Preliminary government data show production hit a post-soviet era high of 10.88 million barrels per day last month. All the while, foreign minister Sergei Lavrov has gone on record to say Russia is willing to meet top oil producers to discuss cutting oil production.

3) BP has just released its quarterly earnings, and my gosh, they were poor. Its adjusted profits for Q4 were down 91 percent (no, really), coming in at $196 million, compared to $2.2 billion in Q4 of 2014 ($814 million was expected). This put full-year losses at $5.2 billion – a record. Job cuts await; BP is cutting 7,000 jobs by 2017, some ~9 percent of its workforce.

4) Not every company is under-performing in the low oil price environment. Dow Chemical has just released quarterly earnings, and has seen profits come in better than expected, driven by its plastics business. Lower oil prices outpacing Dow’s costs have meant it has seen a huge benefit; oil is the key raw material for its plastics business, which is its largest unit. Related: Is Non-OPEC Oil Production Beginning A Serious Decline?

5) We get the API report this afternoon, before the EIA report tomorrow morning. As planned maintenance is set to keep refinery utilization somewhat subdued in this month and next, we will see crude inventories continuing to push on to new 80-year highs in the coming weeks.

6) In terms of economic data, the German unemployment rate just ticked down to 6.2 percent, the lowest level since German reunification. The drop in unemployment has a good deal to do with rising female participation in the workforce, with 78 percent of German women now working. Only Sweden sees a higher rate in the EU, at 80 percent.

German unemployment rate (source: investing.com)

7) Not only are retail gasoline prices falling at their fastest pace in two months, down to $1.79/gal on the national average, but diesel is down to $2.04/gallon too – testing the lows of early 2009: Related: Sales Tax Dispute Could Send Billions to Texas Oil Industry

(Click to enlarge)

8) While much is being made of exports from Iran, Iraq and Saudi Arabia in the Middle East, it is interesting to note that Kuwaiti crude loadings in December reached a nine-month high. Nearly 80 percent of loadings in 2015 were heading to Asia, with South Korea the leading destination, followed by China, India and Japan. The U.S. was the fifth most popular destination.

(Click to enlarge)

Kuwait crude loadings, 2015 (source: ClipperData)

9) The chart below is from the EIA, and looks at how electricity generated from utility-scale renewable plants is expected to grow by 9 percent in 2016. Renewables account for 14 percent of total U.S. electricity generation; wind accounts for 5.2 percent, while solar accounts for 0.8 percent. Hydroelectric generation accounts for the majority of the rest, and its facilities are expected to give a boost to electricity generation this year due to higher precipitation from the recent El Niño weather pattern. Related: Congress Looks To Pass Energy Bill for First Time Since 2007

10) Finally, the number of tweets sent each day in January averaged 303 million, down a whopping 50 percent from the August 2014 peak. C’mon folks, get your tweet on! (and while you’re at it, follow ClipperData here!).

By Matt Smith

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