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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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August Is Unlikely To See A Recovery In Oil Prices

As we charge into the second half of August, the crude complex is continuing to charge lower. Things are pretty quiet on the economic data front, while what we have seen has only served to further spook economic fears. New York-area manufacturing conditions tumbled to their worst level since April 2009, raising further doubts about an interest rate rise in the US next month.

Meanwhile, overnight we had weak Japanese GDP data. Japan’s economy shrank by -1.6 percent YoY in Q2, as weak consumer spending and the impact of the slowdown in China take their toll. Japanese exports fell a whopping 16.5 percent (on an annualized basis) in Q2. On a year-over-year basis, the Japanese economy has contracted five times in the last nine quarters:

Japan economic growth (YoY) Related: Unorthodox Plays For The Savvy Energy Investor

Gasoline prices continue to have a hiccup in their seasonal downward trend due to the ongoing outage at the Whiting refinery. According to gasbuddy, the national average has ticked higher to $2.66, while Chicago prices are close to $3.50, up ~$0.70 in less than a week. Latest estimates are that the Whiting refinery outage may last a month.

Meanwhile, retail diesel prices reach their lowest level in almost 6 years, at $2.617, according to FRED, as record refinery runs mean strong supply, while demand is down 5.4 percent  for distillates versus last year on the four-week moving average.

(Click to enlarge)

There’s a good article discussing Friday’s decision by the US to approve oil export swaps between the US and Mexico, as the US edges closer to lifting the US oil export ban. The article highlights that this decision occurs at a time when the arbitrage window is closing, as US production shows weakness. This is further affirmed by the trend we have been seeing in condensate exports – something the article specifically references, pointing to #ClipperData to boot. Related: This Week In Energy: The Growing Threat From China

After averaging a record of 181,000 barrels per day of exports in June, July’s condensate volumes have indeed dropped off precipitously, down to 54,000 bpd, the lowest level since December. Then here we are, over halfway through August, and we haven’t seen any condensates loaded for exporting:

Condensate exports (source: ClipperData)

(Click to enlarge)

By Matt Smith

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