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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 Up On Weaker Dollar, Declining Production

Oil Prices Up On Weaker Dollar, Declining Production

One hundred and nineteen years to the day after the first Boston marathon, and oil markets are running higher once more. Looking beyond Doha disappointments, the market is finding solace in current supply outages, while hoping to see market balancing picking up pace going forward. Hark, here are five things to consider in oil markets today:

1) Currency moves are being thoroughly supportive for the crude complex today, with the yen moving to a near-18 month high versus the U.S. dollar. Commodity currencies such as the Aussie and Kiwi dollars have soared to 10-month highs, as risk appetite chomps at the bit and global equity markets push to new highs for the year.

The Canadian dollar has also rebounded to a nine-month high, as the attractiveness of the U.S. dollar wanes amid the lesser need for a safe haven. Given the flip-flop, see-saw inverse relationship betwixt crude and the dollar, the dollar heads lower….and crude looks up. Related: Horizontal Land Rig Count Summary 15th April 2016

2) All is fairly sparse on the economic data front again today. The key release of note overnight has been from Europe, relating to ZEW sentiment data. While current conditions for Germany were below consensus, the six-month economic outlook for both Germany and the Eurozone were better than expectations; Germany reached a four-month high, the Eurozone saw the best showing in three.

In the U.S., we have had building permits and housing starts, both of which were below expectations.

3) As the dust settles post-Doha, a piece from Reuters suggests we should look to Latin America to rebalance the market via falling output. Digging into our ClipperData, production losses are already manifesting themselves in lower exports for Venezuela, Mexico and Colombia.

Venezuelan production was seen down 11.9 percent in Q1 versus year-ago levels, according to OPEC data. Our ClipperData show exports dropped….by 11.8 percent. On the aggregate, the three Latin American nations saw Q1 crude exports down 13 percent versus year-ago levels. Production losses are underway, and should continue given aging oil fields and the ongoing lack of investment (Venezuela, Mexico) and lower drilling activity (Colombia). Related: Where Is The LNG Glut Going?

4) Rumors continue to spread about current Iranian crude exports, and future expectations for production. Today’s rumor has come from deputy minister Rokneddin Javadi, who has said Iran’s production will reach pre-sanction levels by late June – a level close to 4 million barrels per day. According to Javadi, production is already up to 3.5 million bpd; last week’s OPEC report pegged March production at 3.29 million bpd.

5) While I was affirming the aforementioned Iranian production number from the OPEC report, I was distracted by the below chart. Related: Saudi Arabia Kills Doha Deal, Talks Fall Apart

We discussed last week how the OPEC report showed Indian oil demand growth looking robust, while we continue to see in our ClipperData that Chinese waterborne crude imports are blowing the doors off last year’s numbers, currently up 4 percent year-to-date (and up a scorching 14 percent so far in April versus year-ago levels).

The Middle East is also continuing to be a sponge to soak up oversupply in the market. The region saw oil demand growth of 200,000 bpd last year, in large part driven by Saudi Arabia. This year, further demand growth of 150,000 bpd is expected.

(Click to enlarge)

By Matt Smith

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  • avenger 426 on April 19 2016 said:
    As the price inches up, shale production will also rise. The oil market is over supplied and oil usage will continue to slow. Cars are more fuel efficient and by law, will continue to get even better. Electric cars are on the way, there is no stopping them from continuing. Solar power and storage continues to be refined and prices are dropping dramatically. Big oils greed has been a driver for innovation. Companies and the public are tired of being held hostage by big oils greed. While oil certainly isn't going away, you can be,sure that big oil realizes the need to diversify and move away from oil as their only industry.
    The fundementals of oil are that high oil is a product that is bad for the economy, bad for the environment and bad for the consumer. There will never be a scenario where high oil and energy is good for an economy or a driver of a recovery. If oil rises, the economy will simply decline more than it already has. High oil is only good for greed and economic destruction. Basic economics don't change because of big oil greed. Basic facts.
  • rebel of reason on April 22 2016 said:
    Avenger, while your comments sound reasonable to many, and is our current executive administration's stance. Natural gas, and crude oil prices being within a reasonable profit range would far out way the value of the consumer saving a couple dollars on a fill up. I know that most people have negative feelings toward oil and gas companies because of the runaway prices in 07. Unreasonably high oil prices I agree are bad also. The prices of 07 oil where the catalyst for people making many decisions, that have seriously hindered our economy. Most people don't realize that depressed oil prices are the reason our economy has not been able to mount a recovery. Oil and gas make up a huge portion of our economy and without a minimal rebound to profitability. Our country will not be able to maintain a significant economic recovery.

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