Oil Price - April 12

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Oil Price - April 12

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OilPrice.com daily report Friday, April 12, 2019

Despite losses on Thursday, oil is set to close out a sixth consecutive week of price gains. The market has been steadily tightening for quite some time, but the instability in Libya this week was the main contributor. “Demand is mixed” but “the tightness of the market is going to win out,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said in a Bloomberg television interview.

OPEC production falls 534,000 bpd. OPEC production in March fell by 534,000 bpd, led by a massive 324,000-bpd reduction from Saudi Arabia, putting overall output at just below 9.8 million barrels per day (mb/d), well below its 10-mb/d ceiling as part of the OPEC+ deal. Meanwhile, Iraq lowered output by 126,000 bpd, and Venezuela saw a sharp 289,000-bpd decline in output, due in large part to power outages. On the other hand, Libya saw 196,000 bpd come back online, owing to the ramp up of the Sharara oil field. However, fighting in Libya now puts those gains at risk.

IEA: Oil supply and demand fundamentals relatively bullish. The IEA said that supply declines and steady demand have helped tighten up the oil market. However, the agency noted that there are some concerns about demand, and even as the agency maintained its 1.4-mb/d demand growth estimate, it conceded that there are downside risks to that forecast.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - April 12

Post by dan_s »

Phil Flynn's weekly "Energy Report" (before the markets opened on Friday, April 12)
Too Little Too Late

OPEC is sending signals that they may raise production if the stuff hits the fan. Will it be too late? Oil prices sold off a day after the Energy Information Administration (EIA) report as traders seemed to focus on the crude oil build while trying to forget about the plunge in gasoline supply and spike in demand. Yet oil bears were getting a false sense of security with this week’s oil inventory rise, as it is very likely that in the coming weeks oil supply may start to fall dramatically. Thus, OPEC’s suggestion by some unnamed OPEC source that if prices got high enough and supplies tight enough, they might relent and raise output.

Yet despite the oil selloff, there is a growing uneasiness about the supply side of the oil market while the demand side is coming in constantly higher than the bearish evidence. This is especially true of China, where demand has been breaking records despite talk of a slowing economy. Chinese Export data overnight seems to confirm that China’s economy might be stabilizing after weak data around the Chinese New Year holiday.

China’s exports for the month of March blew away expectations; coming in higher than expected while imports into China missed. China’s dollar-denominated exports increased by 14.2 percent for March from a year ago, beating Reuters expectations of a 7.3 percent increase. Imports were down 7.6 percent in March from a year ago, missing expectations of a 1.3 percent decline. Imports should improve next month as China moves to buy more U.S. goods. China as a side note, purchased a record amount of pork from the U.S., trying to replace food lost from the Asian swine flu.

Oil supply risk factors are running the highest they have in many years. Libya is just one of the supply side issues that we must deal with. The FT reports that “ The head of Libya’s national oil company Mustafa Sanalla, chairman of the National Oil Corporation, has warned that the country’s energy industry faces the gravest threat since the 2011 civil war after the latest outbreak of fighting.” “I am afraid the situation could be much worse than 2011 because of the size of forces now involved,” Mr. Sanalla told the Financial Times by telephone from his office in Tripoli.

“Unless the problem is solved very quickly, I am afraid this will affect our operations, and soon we will not be able to produce oil or gas.” He added that the loss of Libyan supplies would force the global oil price to rise.

Reuters reported that the fighting is continuing “Fighting (Friday) between the eastern force of General Khalifa Haftar and troops loyal to the Tripoli government of Prime Minister Fayez al-Serraj has displaced 9,500 people in the capital, the United Nations said.”

Venezuela, according to reports is in absolute chaos. There is no water and no electricity and reports about their oil production are probably overoptimistic. Canada is trying to fill the void, but pipelines are filled to capacity. Iran sanctions are taking their toll on the Iranian economy and President Trump is under pressure to push them over the edge by not granting sanction waivers to the Iranian oil buyers. Iran’s economy contracted by 1.5% last year and is expected to contract by 3.6% this year, according to the International Monetary Fund, compared to 3.8% growth in 2017 before sanctions were re-imposed by the Trump administration after the U.S. withdrew from the Iranian nuclear deal in May 2018 according to reports.
Dan Steffens
Energy Prospectus Group
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