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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 Up 3% But Bearish News Is On The Way

Sixty years to the day after Buddy Holly’s first official recording session took place, and “Blue Days, Black Nights” have become a common occurrence for the crude complex of late. Prices are bucking that trend for now, however, and we are seeing a morning in the green.

Last night was certainly dark times for the Chinese equity market, as it fell by 6.4 percent to a 13-month low. This caused considerable whipsawing for crude: headwinds have been provided by ongoing weakness in equity markets (which, in turn, are being stoked by economic concerns), while rumors and murmurs of potential collusion in the crude complex is lending some support. Kuwait’s OPEC governor is the latest to bring up the subject of potential cooperation by OPEC and others to cut production. And once again, this is met with guarded skepticism.

We have had little in the way of economic data out, although the Federal Reserve kicks off its latest interest rate meeting today. We get the weekly API inventory report later ahead of tomorrow’s EIA release; an impending build to crude stocks seems to be the order of the day. This comes at a time when we are just 4.4 million barrels shy of the record of 490.9 million barrels for total inventories, while Cushing stocks already sit at a record of 64 million barrels.

Hot on the heels of news that Chinese steel production shrank 2.3 percent last year (which means global steel production shrank…China is the world’s largest consumer and producer of steel…by a country mile) is news that problems in the so-called engine room of global growth is having a considerable impact on energy demand.

As Chinese economic growth dropped to 6.9 percent last year, the lowest level in a quarter of a century, Chinese energy consumption only rose by a mere 0.9 percent. As we here at ClipperData are seeing Chinese oil imports drop year-over-year, it leads us to consider a rather bizarre scenario: that Chinese energy demand could shrink this year. Related: Why Surge In Renewables Investment Is Unrelated To Oil Prices

Exxon Mobil has released its latest long-term energy outlook out to 2040. Although this is to be taken with a pinch or ten of salt, it provides an indication of how global fuel demand may trend in the coming years. Exxon estimates that total energy demand will grow by 25 percent by 2040, as a rising population and improving living standards more than offset energy saved through improving efficiency. Related: Oil Crash Only The Tip Of The Iceberg

The key takeaways are that 1) oil is projected to remain as the leading fuel consumed by 2040, 2) natural gas makes the most headway, overtaking coal, and 3) nuclear and renewables are to account for more than 20 percent of supply by 2040.

Finally, one positive and one negative. Retail gasoline prices are at $1.83 on the national average, having held below $2/gallon for 25 days now, and having fallen in all 50 states last week (woot woot). On the downside (for fish lovers, at least), salmon prices are reaching a record, surpassing the price of a barrel of oil: Related:Security Woes Threaten OPEC’s Second Largest Producer

By Matt Smith

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