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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 Steadies Itself Ahead Of Big Week

Rig

And it's shaping up to be another fun week in the crude complex, with OPEC releasing its monthly oil market report on Tuesday, swiftly followed by the IEA's monthly oil market report the day after. As oil is looking a little steadier after reaching our downside target, hark, here are five things to consider in oil markets today:

1) We've been highlighting of late how OPEC producers have been favoring Asia in terms of their crude exports, and this is apparent with OPEC kingpin, Saudi Arabia. For the first two months of the year, Saudi loadings are up 3 percent to Asia versus 2016 levels, while flows to North America are down 4 percent.

Saudi Arabia has lowered its pricing into Asia for April, continuing to battle for market share in the key demand hub. That said, loadings so far this month bound for North America have risen to the highest level since December, as total Saudi exports rise once more.

(Click to enlarge)

2) United Arab Emirates, which has committed to cut production by 139,000 barrels per day, is showing little sign of this in their export volumes. This is because production cuts are still in the process of being implemented. Related: Rise Of U.S. Shale Could Jeopardize OPEC Deal Extension

Abu Dhabi National Oil Company (ADNOC) has announced a cut in its nominated loadings for both March and April, as maintenance is scheduled at UAE's oil fields where Murban and Das are produced. As our ClipperData illustrate below, Murban and Das loadings have been strong in the last three months, holding close to 2mn bpd. These two light sour grades account for two-thirds of UAE's exports, and production cuts in the coming months will likely be reflected through into lower loadings.

(Click to enlarge)

3) The chart below is pretty epic in highlighting how U.S. oil and product inventories remain a million miles away from the 2012-16 average, but just a smidge away from the record high set in the week ending February 10 at 1,359,941,000 barrels. Related: Can Oil Supply Keep Up With Surging Demand?

The IEA has confirmed that OECD oil and product inventories fell 800,000 bpd in Q4, the biggest drop in three years. So far in 2017, U.S. oil and product inventories are up 24.9mn bbls - or 400,000 bpd. As for crude inventories on their own, they are up 49.4mn bbls, or 800,000 bpd: last quarter's drop is being completely offset by the rise in U.S. crude inventories so far this year.

(Click to enlarge)

4) Oil services company Wood Group has just announced its acquisition of Amec Foster Wheeler in a deal worth $2.7 billion. The acquisition follows other consolidation in the industry (hark, GE & Baker Hughes last year), and is estimated to create $134 million of savings. As the chart below from Rystad Energy illustrates, combined synergies puts the company in a much more dominant position, with further consolidation across the sector likely.

5) Finally, the swift and sharp drop in oil prices in the last week is helping to rein in retail gasoline prices - right at the time that we see them seasonally pushing higher, amid seasonal maintenance ahead of driving season and the switch to the summer gasoline blend.

The national average has already started to totter, while South Carolina - one of the cheapest states in the U.S. - is holding below $2/gal. California, on the other hand, is breaking above $3/gal for the first time since 2015 amid refinery issues and tighter fuel standards.

(Click to enlarge)

By Matt Smith

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