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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 Prices Rise Ahead Of Rig Count Data

After oil prices spiked higher overnight amid a U.S. airstrike on Syria, an underwhelming monthly employment report this morning has helped to unravel most of these gains. As the market awaits CFTC and rig count data this afternoon, hark, here are five things to consider in oil and energy markets today:

1) Yesterday we discussed how West African crude arrivals to China reached a record in March. As the narrowing of the Brent-Dubai/Oman premium is pulling more Atlantic Basin barrels to Asia, we have also seen a corresponding drop in Angolan imports into the U.S. in the last few months. (Ain't markets brilliant?!).

Our ClipperData shows that as heavier grades are desired by Asian buyers amid the OPEC / NOPEC production cut deal, light Nigerian crude grades continue to arrive on U.S. shores - and especially Qua Iboe, Akpo,and Agbami. Angolan medium grades, however, are in higher demand. Hence, arrivals of medium grades such as Plutonio and Hungo and heavy sweet Dalia have dried up in recent months.

(Click to enlarge)

2) As global waterborne loadings of crude continue to exhibit strength, and as arrivals into the key demand hub of Asia continue to look robust, it is hard to comprehend how some market participants are seeing oil on the water tanking. Even though Asia is in the midst of refinery maintenance this month, our projections show arrivals holding up.

Our ClipperData shows that Latin American and West African imports into Asia last month breached 4.6 million barrels per day for the first time on our records. While light grade imports are up about 3 percent so far this year versus 2016, heavy grades are up 8 percent, and medium grade imports are up... 20 percent.

(Click to enlarge) Related: Tanker Traffic Points At Much Tighter Oil Markets

3) Chart of the day comes from Rystad Energy, who highlight how new horizontal drilling permits in the Permian basin are up 280 percent in March from the low early last year. The Baker Hughes oil rig count for Permian pales in comparison to this: it is only up 140 percent from its low last April.

(Click to enlarge)

4) The chart below is also pretty nifty. It shows how almost 40 percent of electricity generation on March 11 in the territory of CAISO (California Independent System Operator) was met by utility-scale solar generation. As solar generation in California continues to grow, its generation at peak times is causing negative wholesale electricity prices.

(Click to enlarge)  Related: Oil Erases Gains After Inventory Head-Fake

5) Newly-completed or expanded natural gas-fired plants are finally coming on line in the coming years in the mid-Atlantic and Midwest as Marcellus shale gas is finally tapped for the PJM electricity market (which covers 14 states).

There is expected to be almost 33 gigawatts of power generation added to the grid through 2019, as new natural gas-fired capacity is joined by wind farms and solar installations. The timing is rather unfortunate, however, as it comes just as the grid operator slashes its demand outlook, as energy efficiency measures kick in across the region.

(Click to enlarge) 

By Matt Smith

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