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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 Wobbles As OPEC Deal Comes Under Scrutiny

Oil has got the wobbles after yesterday's rally, giving up gains as the dollar bounces from its lows. As OPEC compliance comes under scrutiny once more, hark, here are five things to consider in oil markets today.

1) Stat of the day comes from the EIA, which shows that crude by rail in the U.S. averaged 477,000 bpd last year (including shipments from Canada), down from 754,000 bpd in the year prior. The flow of crude from the Midwest to the East Coast accounted for 77 percent of this drop, down by 212,000 bpd in 2016 to average 158,000 bpd.

Here comes the cool bit. We can see in our ClipperData that U.S. East Coast waterborne imports increased in 2016 by.....213,000 bpd, perfectly offsetting the drop in crude by rail. Hark, 2016 imports were higher than year-ago levels in every month of last year:

(Click to enlarge)

2) As the chart above illustrates, January imports to the East Coast were really strong. The breakdown of the 13 different country grades are below, as per their import bills: 62 percent came from OPEC countries.

(Click to enlarge)

3) After January, however, our ClipperData show that crude imports dropped below year-ago levels in February, and are currently below both last year and 2015 volumes in March. As the chart below illustrates, this is due to low East coast (PADD1) refinery runs - the lowest since February 2015 in recent weeks. Lower crude demand, lower imports: Related: Natural Gas Prices Could Plunge Below $2

(Click to enlarge)

4) In terms of non-OPEC compliance - well, non-OPEC non-compliance, production at the Kashagan field in Kazakhstan continues to ramp up, now considered to be up to 180,000 bpd. At the same time, Fitch suggests that oil production from Azerbaijan is also on the up, with output set to increase by 4.7 percent this year.

The monthly OPEC report out this week pegs Kazakh production at 1.68mn bpd, with its oil ministry saying production won't climb by 180,000 bpd until the end of the year. Hum dee dum.

5) We have been fairly vocal about how we don't see OPEC / NOPEC in compliance with a production cut - at least from export volumes. A story today in the WSJ highlights this too. Saudi Arabia is sending strong signals - both publicly and privately - that other nations need to pull up their socks. Related: Can OPEC Resist The Temptation To Cheat?

As the graphic below illustrates, Saudi Arabia has been making up for non-compliance elsewhere, cutting by 800,000 bpd - according to OPEC secondary sources. Saudi is now warning that it won't continue to cut production unless other members start to fully comply.

(Click to enlarge)

By Matt Smith

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