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Oil Price - Sept 12
Posted: Tue Sep 12, 2017 9:19 am
by dan_s
The Come Back Trail by Phil Flynn 9/12/2017
Oil prices and petroleum products are starting to deal with the recovery phase in Florida and Texas and the rest of the Gulf Coast. Gas prices at the pump are showing signs of stabilizing as refiners come back on line and fears of demand destruction as places in Florida and in Texas are cutting into local demand.
Read:
https://www.investing.com/analysis/the- ... -200212776
Re: Oil Price - Sept 12
Posted: Tue Sep 12, 2017 10:52 am
by dan_s
Looking more and more like OPEC will extend their production limits another quarter to 6/30/2018 and put restrictions on Libya and Nigeria. This should be confirmed at OPEC's November meeting.
IEA's monthly "Oil Market Report" s/b be published in a few days. You can read the summary at
https://www.iea.org/oilmarketreport/omrpublic/
I am expecting the EIA weekly report to show a build in U.S. crude oil inventory for the week ending September 8, just because of lower demand from the refineries still recovering from Hurricane Harvey. Offsetting that will be lower inventories of refined products. Other OECD inventories are also falling, which should be mentioned in the IEA monthly report. Florida gasoline stations are out of fuel and they will be importing gasoline and diesel from Europe for awhile. South America also depends heavily on imports of refined products from the U.S.
Crude oil supply/demand is tightening and the trend should continue through year-end. Demand always softens a bit in Q1.
Re: Oil Price - Sept 12
Posted: Tue Sep 12, 2017 1:50 pm
by dan_s
Tuesday September 12, 2017
Oil prices held steady in early trading on Tuesday after the release of OPEC’s latest report, which struck a confident tone about the pace of rebalancing underway in the oil market.
OPEC sees strong oil demand. In its latest monthly report, OPEC revised up its forecast for global oil demand growth, predicting consumption will expand by 1.42 mb/d this year, an upward revision of 50,000 bpd from a month earlier. Meanwhile, OPEC’s collective oil production dipped in August for the first time in four months. Output fell by 79,000 bpd in August from a month earlier, mostly the result of sizable outages in Libya, but also because compliance with the group’s cuts improved among other OPEC members. OPEC’s estimate for oil inventories in OECD countries also declined for the third consecutive month, putting total storage at 195 million barrels above the five-year average. “It is clear the rebalancing process is under way,” OPEC’s Secretary-General Mohammad Barkindo said in a speech on Monday. OPEC also dismissed worries about demand falling short in the U.S. because of the two major hurricanes. The cartel said the storms will have a “negligible” impact on U.S. demand.
Goldman Sachs: Hurricanes Harvey and Irma cut oil demand by 600,000 bpd. Goldman Sachs says that Hurricane Harvey will reduce demand by 600,000 bpd in September while Irma could reduce demand by 300,000 bpd. After factoring in oil production outages in Texas from Harvey, which cut output by 300,000 bpd, Goldman says that on balance the two hurricanes will cut oil demand by 600,000 bpd in September. Other analysts agree. Thomas Pugh, a commodity economist at Capital Economics, estimates that the two hurricanes will lead to a steeper drop in demand than Hurricane Katrina in 2005, which saw a dip in U.S. oil demand by 2 percent in the three months following the storm. Ultimately, that could lead to an increase in crude oil inventories by about 40 million barrels in the next month, Goldman says. “That’s obviously not particularly useful for the global rebalancing effort,” he said, according to the WSJ. Meanwhile, the bank says that the refineries in Texas and Louisiana are still operating at reduced rates, keeping 2.24 mb/d of refining capacity offline.
North Sea oil storage falling. According to Reuters, the volume of crude oil stored offshore in the North Sea has declined over the past month, a sign that the market is rebalancing. The reduction of floating storage is consistent with the Brent futures market shifting into backwardation, a situation in which front-month oil contracts trade at a premium to futures dated further out. Backwardation makes storage uneconomical and tends to show up when there is some bullish momentum for crude. “The whole market is tightening up,” a North Sea trade source told Reuters. “Crude inventories have been drawn down, and there is no direct economic incentive for floating storage.”
Clashes in Iraq's south threaten oil fields. Reuters reports that clashes among tribes in Iraq’s south have increased recently, a cause for concern because there is a vacuum in the region while much of the country’s security forces are in the north fighting ISIS. The violence is a worry because of its proximity to Iraq’s major oil fields – the vast majority of Iraq’s oil production comes from the south. The government has been trying to attract more investment from international oil and gas companies, a campaign that will be significantly handicapped by instability and violence.