Phil Flynn's take on global oil market - Oct 1

[dan_s]

The Energy Report: Give No Quarter
By Phil Flynn (Oct 01, 2019 08:41AM ET)

Oil prices got crushed in an end of quarter, holiday thinned market. Weak global manufacturing numbers, as well as claims by Saudi Aramco that production is restored, found the oil market lacking a bid. A run to the dollar was a safe haven that despite the impeachment push by bitter and off-balanced Democrats, the U.S. economy is still the best in the world.

Crude oil had its worst quarter in a year as growth fears in Europe added to negative sentiment. Eurozone purchasing managers index data fell to 45.6 in September, its lowest level since 2012. Spain, Italy, France and Germany are all showing manufacturing in contraction. Germany is seeing its worst contraction since the 2009 financial crisis. Yet this morning UK Manufacturing beat with their PMI hitting 48.3, better than the 47.0 forecast but still in contraction.

Yet as the new quarter beckons we are seeing more signs of OPEC production restraint as well as signs that U.S. oil output might sputter. Reuters reports that, "Organization of the Petroleum Exporting Countries fell to the lowest in eight years in September at 28.9 million bpd, down 750,000 bpd from August’s revised figure and the lowest monthly total since 2011, a Reuters survey found. Output at the world’s two largest producers, the United States and Russia, also fell in July and September respectively." Reuters reports that, "Russia’s output declined to 11.24 million bpd in Sept. 1-29, down from 11.29 million bpd in the previous month, sources said", although it is still above the quotas set in an output deal between Russia and OPEC.

Even U.S. production fell. Reuters shows that U.S. crude oil output fell 276,000 bpd in July to 11.81 million bpd as federal offshore Gulf of Mexico production slid, according to a U.S. Energy Information Administration monthly report released on Monday. U.S. production peaked at 12.12 million bpd in April.

We may also get a surprise draw in crude supply. While the Reuters survey is showing a likely 1.1 million barrels crude supply increase, our contacts and data are suggesting a larger draw. We will get our first take on inventory tonight with the American Petroleum Institute report. If we are right it should help oil recover.

Natural gas is still under pressure as supply is 16% higher than a year ago and U.S. production continues to break records.

AAA reports that, “Two weeks after attacks on major Saudi Arabian oil facilities, the majority of Americans are starting to see signs of gas prices trending cheaper. While the national average may have only decreased by a penny on the week, 10 states saw pump prices decline by a nickel or more.” “Crude oil prices have dropped close to where they were right before the drone attacks on the Saudi oil facilities,” said Jeanette Casselano, AAA spokesperson. “This is helping to push gas prices cheaper in most of the country. Americans can expect this trend to continue, except for those filling-up on the West Coast, where refinery disruptions are causing spikes at the pump.” On the week, all West Coast region states saw prices increase with California (+28 cents) seeing the largest spike, which drives the state average to $4.02 and is likely to push more expensive this week. Today’s national gas price average of $2.65, which is the same price as last week, is seven cents more expensive than last month but 22-cents cheaper than a year ago.

[k1f]

Phil Flynn has become partisan---& panicky. He slams the opposition and only consults evidence that confirms his Trumpish bias: that
<<despite the impeachment push by bitter and off-balanced Democrats, the U.S. economy is still the best in the world.>>

In the real world he leaves out US ISM data, which shows the US caught in the global downturn. Cf news from Kitco:

<<Tuesday, the ISM said its manufacturing index showed a reading of 47.8% for September, down from August’s reading of 49.1%. The data was much weaker than expected as consensus forecasts were calling for a reading of 50.5%.
According to the report, this is the worst reading for the manufacturing sector since June 2009.>>

[dan_s]

Isn't everyone "partisan". What percentage of the population is totally open-minded and not partisan?

I'm not defending Phil Flynn, who I don't always agree with either.

As I try to point out in the newsletter, the level of noise (a lot of which is total BS) is incredibly high these days. The media is so "partisan" that investors don't know what to believe. Can we believe what government agencies are telling us? All I know is that the EIA has been overstating U.S. oil production month after month and very few people are pointing it out.

[dan_s]

Investing.com -- Oil prices faltered again on Tuesday after a weaker-than-expected survey of U.S. manufacturing put another dent in the bull case, adding to concerns about global demand in the wake of similarly bleak surveys from elsewhere around the world.

The Institute of Supply Management’s purchasing managers index posted its lowest reading in 10 years, falling to 47.8 from 49.1 in September and disappointing consensus forecasts of a rebound above 50.

Earlier in the day, similar surveys from Japan to the euro zone and U.K. had also painted a picture of a global manufacturing sector still suffering from the fallout of the U.S.-China trade conflict, Brexit and other concerns.

By 10:45 AM ET, U.S. WTI crude futures were up 0.5% on the day at $54.34, having given up over half of their earlier gains. Brent, the international benchmark, was at $59.79, up 0.7%. That's now below the $60/barrel mark that most oil and gas majors have used as their benchmark in recent years.

Those gains were a modest upward correction after a brutal slide of over 10% in the last two weeks, driven by surveys by Reuters and Bloomberg which both suggested a modest dip in OPEC exports in September.

However, growing fears of stalling demand have proved more durable than concerns about supply squeezes due to tension between Iran and Saudi Arabia. With the national oil company Saudi Aramco pledging to honor all commitments to clients and claiming a speedy restoration of operations at the key Abqaiq processing facility, the perceived risk of a prolonged squeeze to supply has sharply receded.

Later Tuesday, the American Petroleum Institute is due to release its figures on domestic oil supplies. Official government data are due on Wednesday, and the last two reports have both showed increases in crude inventories. < Just keep in mind that we are in the time of year when U.S. crude oil inventories need to grow because refineries are doing maintenance and changes to produce more winter blend gasoline and more home heating oil. As you can see from the charts in my podcast, it is just the normal cycle. - Dan