• 3 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 8 minutes Why Is America (Texas) Burning Millions of Dollars Per Day Of Natural Gas?
  • 11 minutes Is $60/Bbl WTI still considered a break even for Shale Oil
  • 15 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 53 mins The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 24 hours Hormuz and surrounding waters: Energy Threats to the World: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack
  • 1 day As Iran Nuclear Deal Flounders, France Turns To Saudi For Oil
  • 4 hours Middle East on brink: Oil tankers attacked off Oman
  • 23 hours The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 9 hours Russia removes special military forces from Venezuela . . . . Maduro gone by September ? . . . Oil starts to flow ? Think so . .
  • 1 day Never Knew Gasoline Prices were this important!
  • 14 hours Plants are Dying
  • 7 hours The Latest: Iranian FM Says US Cannot Expect To ‘Stay Safe’
  • 21 hours We Are Better Than This
  • 9 hours Emmissions up, renewables nowhere
  • 2 days Britain makes it almost 12 days with NO COAL
  • 2 days Middle East Attack Jolts Oil-Import Dependent Asia
Alt Text

Oil Just Had Its Worst Run Since 2008

Oil prices have entered bear…

Alt Text

OPEC’s Struggle To Avoid $40 Oil

Saudi Arabia cannot afford to…

Alt Text

Expect More Bearish News For Oil

A very bearish inventory report…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Trending Discussions

Oil Prices Head Lower In Spite Of Bullish OPEC Data

Oil is charging lower to start the new week, as the monthly OPEC oil market report has done little to assuage oversupply concerns - despite the cartel's proclamations of production cut compliance and upward revisions to oil demand growth. Hark, here are five things to consider in oil markets today:

1) Even though Russia is apparently cutting production, it is still set to boost exports of Urals, its medium sour grade. Russia's Energy Minister Alexander Novak has been keen to point out that although Russia is cutting production, it is not cutting exports. The Russian Energy Ministry has further endorsed this notion, confirming exports via Transneft's pipeline system in January were up 114,000 bpd from December's level.

As our ClipperData illustrate below, export loadings of Urals averaged 2.6 million barrels per day in 2016, up 16 percent versus the year prior. Loadings last month also held above 2.6 million bpd. The vast majority of Urals go into Europe, and into Northwest Europe at that. The Netherlands is the leading destination, accounting for nearly a quarter of all Urals exports, followed by Italy, Finland and Lithuania.

(Click to enlarge)

2) Following in the footsteps of last week's IEA monthly report, OPEC has also revised up oil demand growth expectations for this year, lifting them by 35,000 bpd to +1.19 million bpd, while also boosting last year's number by 70,000 bpd to +1.32 million bpd.

The cartel has also revised up non-OPEC supply growth this year by 120,000 bpd to 240,000 bpd, driven by higher expectations from U.S. production. It has also mirrored the IEA in seeing OECD inventories drop below 3,000 million bbls (albeit to 2,999 million bbls). Related: U.S. Oil Rig Count Up On Rising Oil Prices

The charts below illustrate OPEC's expectation for oil demand growth to be just shy of last year's pace, and how vehicle sales in major markets last year drove (no pun intended) gasoline and diesel to be the largest contributors to growth. Transportation fuels are once again expected to lead demand growth this year.

(Click to enlarge)

3) 'As Good As It Gets' is one of Jack Nicholson's best movies (up there with 'The Shining' and 'One Flew Over The Cuckoo's Nest'). It is also an apt way to describe OPEC's current compliance with a coordinated production cut.

According to secondary sources, OPEC producers cut output by 890,000 bpd last month, with Saudi cutting by a fully-compliant 496,000 bpd. Its Core OPEC comrades, UAE and Kuwait, also made significant cuts, dropping production by 159,000 bpd and 141,000 bpd, respectively. OPEC has been considerably more disciplined in making production cuts than expected; the challenge now for the cartel is to maintain it going forward. Related: LNG Giant Looking To Get In On U.S. Shale

The chart below highlights how some cartel members are still not in compliance, be it by direct communications or secondary sources. Saudi is in full compliance according to both measures, while UAE, Venezuela and Iraq are distinctly not:

(Click to enlarge)

4) To help them move closer to compliance, Iraqi loadings are set to be cut to 3.01mn bpd next month, according to Reuters. Loadings of Basrah Light are to drop to 2.207 million bpd, while Basrah heavy is projected to fall slightly to 806,000 bpd.

Our ClipperData indicate that loadings continue to hover in the 3.2 - 3.3 million bpd range. Basrah Light loadings last month averaged 2.407mn bpd, while Basrah Heavy averaged 833,000 bpd - a one-year low.

It makes logical sense that loadings of Basrah Heavy are being cut in favor of Basrah Light; Iraq will be trying to maximize its exports of its higher-quality crude, as it commands a higher price for it.

5) U.S. output of urea, a nitrogen-based fertilizer, rose 10 percent last year, boosted by lower input costs of its key ingredient - natural gas. Urea imports to the U.S. last year dropped by 34 percent, while domestic capacity increased by 24 percent, as new plants came online in the U.S. to take advantage of lower energy costs. Natural gas accounts for 60 - 80 percent of urea production costs.

At least five more plants or expansions are set to come online this year, with urea production capacity expected to rise by 50 percent by 2020 from 2015 levels. Although China remains the largest fertilizer exporter in the world, its share of global production has fallen to 39 percent from 43 percent in 2015; costs are considerably higher in China, given the higher cost of coal as an input fuel.

By Matt Smith

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment





Oilprice - The No. 1 Source for Oil & Energy News