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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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Saudi Oil Exports To U.S. Reach 11-Month High

One hundred and six years after Claude Grahame-White performed the first night flight, and today’s oil market is flying blind once more, supported by macro factors while immediate fundamentals remain a blind spot. Hark, here are seven things to consider in the oil market today:

1) The Japanese yen is doing its best to support oil prices today, as the yen has rallied like a mad thing on inaction by the Bank of Japan. Many were expecting the announcement of further stimulus measures to counteract recent strength in the yen, but the central bank decided against increasing asset purchases. Its negative deposit rate was kept at -0.1 percent, while many expected a shift into further negative territory. (What a strange world we live in).

2) We’ve had a ton of economic data out overnight; as well as the Japanese rate decision, we’ve seen Japanese unemployment edge lower to 3.2 percent last month, while preliminary industrial production ticked 3.6 percent higher on the prior month – better than expected. Japanese retail sales shrank, but by less than expected.

3) Onto Europe, and German unemployment held at its record low of 6.2 percent, monthly Spanish and German inflation plundered on in deflationary terrain, while a host of Eurozone sentiment numbers (consumer confidence, industrial sentiment, business climate) were in line, except for services sentiment – which came in above consensus. Related: Has the Oil Price Rally Gone Too Far?

4) As for the U.S., weekly jobless claims continues its hot streak, coming in better than expected at 257.000. This means that the 4-week moving average has now dropped to its lowest level since 1973.

(Click to enlarge)

Nonetheless, as the Federal Reserve highlighted yesterday, the U.S. economy is patchy, hence Q1 GDP came in below consensus today at +0.5 percent, the slowest pace in two years.

Initial jobless claims 4-week moving average

5) Yesterday we looked at Saudi Arabia’s global crude oil exports amid talk of an Asian ‘oil market turf war‘. We also mentioned how Saudi exports to the U.S. last month hit an 11-month high. Related: Can Oil Continue To Rally Like This?

Granted, imports into the Port Arthur refinery rose to a 3-month high after last month’s announcement of the break-up of Motiva Enterprises – the joint venture betwixt Saudi Aramco and Shell – but regardless, imports to U.S. Gulf Coast refineries have shown broad-based strength.

As refineries ramp up again after the spring maintenance period, it is natural that we see a seasonal high in imports as demand increases. Our ClipperData show that Saudi imports haven’t been at this level since April 2015, while their highest level since our records began (in 2009) was in April 2014.

(Click to enlarge)

6) Wood MacKenzie produces some great research, and some great charts to boot. In this latest piece, they highlight that the oil and gas industry is set to invest ~$40 billion from this year to 2018. This is less than half the investment seen betwixt the period 2012 – 2014 (think: $100/bbl oil); they also project that investment will not recover to normal levels until after the end of the decade: Related: Why The Saudi Aramco IPO Will Not Be Enough

(Click to enlarge)

Another amazing stat is that liquids discovered between 2008 and 2011 fell annually from 19 billion barrels to 8 billion barrels for the period 2012 to 2015. Last year, only 2.9 billion barrels of liquids were discovered.

7) Finally, the EIA estimates that OECD commercial crude oil and liquid fuels inventories reached 3.05 billion barrels at the end of 2015. This is the equivalent of ~66 days of consumption:

(Click to enlarge)

By Matt Smith

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