SINGAPORE/LONDON (Reuters) - Support for oil prices came from China's release of strong import quotas for 2018, which could lead to another record for purchases by the world's biggest importer. China's oil thirst has also led to a 3 percent monthly drawdown in its crude inventories in November, to a seven-year low of 26.15 million tonnes, Xinhua data showed on Thursday.
Oil markets have also been tightened by a year of OPEC and Russia-led production cuts that started last January and are scheduled to continue throughout 2018.
A Reuters monthly poll showed on Thursday that analysts expect Brent crude to stay close to $60 in 2018.
Pipeline outages in Libya and the North Sea have also supported prices.
"Given the much stronger price response to supply disruptions in the wake of OPEC supply cuts, the market is poised to make further gains," said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda.
Libyan oil supplies were disrupted by an attack on a pipeline this week and flows towards the port of Es Sider were reduced by about 70,000 bpd on Thursday.
In the North Sea, the 450,000 bpd capacity Forties pipeline system was shut this month after a crack was found.
Both pipelines are expected to return to normal operations over the new year or in early January. Forties removed a restriction on shipping on Thursday but force majeure remains in place for supplies.
Global Oil Market News - Dec 28
Global Oil Market News - Dec 28
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Global Oil Market News - Dec 28
Phil Flynn at 8:22 AM ET: 2018 - It’s Leap Year!
Welcome to leap year 2018! Ok, I know what you are thinking, you have not heard that it's leap year. Well, 2018 is not a traditional leap year but it will be a leap year for oil. Oil struggled this year as the market failed to be convinced that the combination of OPEC and Non-OPEC production cuts and strong global demand could reduce global supply. They falsely believed that shale oil production could offset record compliance to cuts. Instead of a global oil glut in 2018 we are going to be seeing the effects of the biggest supply drain in history. Yet, the real story in 2018 will be near record global oil demand growth. We are seeing more evidence of that overnight.
China reported that their oil inventories fell 3% by 26.15 million tons last month, putting China oil supplies at their lowest level in 7 years. China also raised their import quota for next year, signaling to the market that China oil imports next year should set another record. Yet, it not just China that should see record imports. India and the European Union should see record imports as well.
Last Month, India's fuel demand rose 6.2 percent compared with the same month last year. Consumption of fuel, a proxy for oil demand, totaled 17.41 million tons, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. Gasoline demand was 4.8 percent higher from a year earlier at 2.12 million tons.
We also saw another big drop in U.S. crude oil stocks according to the American Petroleum Institute (API). The API reported another massive 6 million barrels drop in crude supply, lead by a 1.3 million barrel drop in Cushing Oklahoma. That was the sixth drop in a row. What tempered some of the bullish impact from that drop was a reported 3.1 million barrel increase in gasoline supply and a 2.8 million barrel increase in distillate supply. Still, the record pace of supply drain is not just a U.S. situation. It is a global situation making for the tightest oil market we have seen in almost 10 years. Get ready for oil to leap in 2018. This will be a main topic when I speak at the Orlando Money Show in February. We will go over this outlook and the shale outlook. The misperception on oil and the bad data will come back to haunt us in the new year. While we were so focused on the glut we forgot to look for new sources of oil and that has led to less oil being discovered than at anytime in history.
In Orlando, we will also cover the underinvestment threat in oil. We are already seeing the early impact from the investment pullback and we will continue to see it as the pullback in investment has cost us over 10 million barrels a day of future oil production. That is like one of the world's major producers going out of business. No, I am not talking about Venezuela, that is another story.
Geo-political risk factors are on the rise and that could see an even tighter market situation in the New Year. Today we will get two for one. We will be getting both the Energy Information Administration (EIA) supply report on petroleum and natural gas. Both reports should be bullish.
Welcome to leap year 2018! Ok, I know what you are thinking, you have not heard that it's leap year. Well, 2018 is not a traditional leap year but it will be a leap year for oil. Oil struggled this year as the market failed to be convinced that the combination of OPEC and Non-OPEC production cuts and strong global demand could reduce global supply. They falsely believed that shale oil production could offset record compliance to cuts. Instead of a global oil glut in 2018 we are going to be seeing the effects of the biggest supply drain in history. Yet, the real story in 2018 will be near record global oil demand growth. We are seeing more evidence of that overnight.
China reported that their oil inventories fell 3% by 26.15 million tons last month, putting China oil supplies at their lowest level in 7 years. China also raised their import quota for next year, signaling to the market that China oil imports next year should set another record. Yet, it not just China that should see record imports. India and the European Union should see record imports as well.
Last Month, India's fuel demand rose 6.2 percent compared with the same month last year. Consumption of fuel, a proxy for oil demand, totaled 17.41 million tons, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. Gasoline demand was 4.8 percent higher from a year earlier at 2.12 million tons.
We also saw another big drop in U.S. crude oil stocks according to the American Petroleum Institute (API). The API reported another massive 6 million barrels drop in crude supply, lead by a 1.3 million barrel drop in Cushing Oklahoma. That was the sixth drop in a row. What tempered some of the bullish impact from that drop was a reported 3.1 million barrel increase in gasoline supply and a 2.8 million barrel increase in distillate supply. Still, the record pace of supply drain is not just a U.S. situation. It is a global situation making for the tightest oil market we have seen in almost 10 years. Get ready for oil to leap in 2018. This will be a main topic when I speak at the Orlando Money Show in February. We will go over this outlook and the shale outlook. The misperception on oil and the bad data will come back to haunt us in the new year. While we were so focused on the glut we forgot to look for new sources of oil and that has led to less oil being discovered than at anytime in history.
In Orlando, we will also cover the underinvestment threat in oil. We are already seeing the early impact from the investment pullback and we will continue to see it as the pullback in investment has cost us over 10 million barrels a day of future oil production. That is like one of the world's major producers going out of business. No, I am not talking about Venezuela, that is another story.
Geo-political risk factors are on the rise and that could see an even tighter market situation in the New Year. Today we will get two for one. We will be getting both the Energy Information Administration (EIA) supply report on petroleum and natural gas. Both reports should be bullish.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Global Oil Market News - Dec 28
Bloomberg: Five oil signals to watch as 2018 pits OPEC v. shale
Oil traders are going to have their work cut out for them in 2018. OPEC and its allies are heading into the second year of supply cuts to wipe out the global oil glut, while rising U.S. output is threatening those efforts. Geopolitical tensions also add a wild card to the market mix. As oil watchers seek to plot a course through the year ahead, they'll be paying close attention to signals ranging from timespreads to options contracts. Here are five key barometers to watch as 2018 unfolds.
1. The Shale Signal.
WTI's discount to Brent closed at its widest level in more than two years on Tuesday as an explosion at an oil pipeline in Libya boosted the global benchmark. That came after Hurricane Harvey kept supplies locked in the U.S. earlier in the year, providing the first trigger for a wider spread and bumper U.S. exports. With shale growth driving forecasts of record U.S. supply in 2018, that could lead to a further expansion in the discount, which neared $7 a barrel on Thursday. "If we get more shale and Canadian crude in the first half, and OPEC cuts hold, then it should widen," said Richard Fullarton, founder of London-based commodity hedge fund Matilda Capital Management Ltd.
2. OPEC's Bellwether
Brent crude surged into a bullish, backwardated structure this year as OPEC-led output cuts tightened global supplies. December 2018 futures climbed to their highest premium ever versus the same month for 2019 this week, and the spread may expand further as OPEC's cuts drive the oil market toward balance next year, according to Abhishek Deshpande, head of oil research at JPMorgan Chase & Co. "We are more comfortable with a balanced market to take a view of going long that spread," said Deshpande.
3. Lottery Tickets
With geopolitical risks flaring in a host of major oil producers, funds have been busy snapping up bullish oil options contracts that would profit from a sharp spike in crude prices. The December 2018 $100 call remains the most-held Brent options contract, while $80 calls equating to more than 30 million barrels for the latter part of next year traded in recent weeks. Venezuela, Iran and Saudi Arabia top the list of countries that could see oil-related disruptions in 2018, RBC Capital Markets LLC analysts including Helima Croft wrote earlier this month.
4. Volatility Vacuum
Despite those risks, volatility has plunged to the lowest in more than three years in recent weeks as a steady grind higher in prices took some of the fizz out of the oil market. With the Organization of Petroleum Exporting Countries clearly signposting its plans for 2018, banks including Societe Generale SA expect to see a continued slide in volatility next year. "OPEC's decision to proactively manage the market is going to keep volatility flat as a pancake," Amrita Sen, chief oil market analyst at Energy Aspects Ltd., wrote earlier this month.
5. How Long?
The market is heading into 2018 near a record number of bullish bets in Brent and WTI combined, exchange data show. Those contracts, which now outstrip bearish ones by seven to one, have led to concerns that crude may soon see a speculator-driven slump. That bullish positioning has been "the largest bearish cross in my scorecards for the last several weeks," said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. What's difficult is that "we don't know the type of players. If they want to have a larger part of their assets in commodities for the next couple of years, then they're not going to sell those positions."
Oil traders are going to have their work cut out for them in 2018. OPEC and its allies are heading into the second year of supply cuts to wipe out the global oil glut, while rising U.S. output is threatening those efforts. Geopolitical tensions also add a wild card to the market mix. As oil watchers seek to plot a course through the year ahead, they'll be paying close attention to signals ranging from timespreads to options contracts. Here are five key barometers to watch as 2018 unfolds.
1. The Shale Signal.
WTI's discount to Brent closed at its widest level in more than two years on Tuesday as an explosion at an oil pipeline in Libya boosted the global benchmark. That came after Hurricane Harvey kept supplies locked in the U.S. earlier in the year, providing the first trigger for a wider spread and bumper U.S. exports. With shale growth driving forecasts of record U.S. supply in 2018, that could lead to a further expansion in the discount, which neared $7 a barrel on Thursday. "If we get more shale and Canadian crude in the first half, and OPEC cuts hold, then it should widen," said Richard Fullarton, founder of London-based commodity hedge fund Matilda Capital Management Ltd.
2. OPEC's Bellwether
Brent crude surged into a bullish, backwardated structure this year as OPEC-led output cuts tightened global supplies. December 2018 futures climbed to their highest premium ever versus the same month for 2019 this week, and the spread may expand further as OPEC's cuts drive the oil market toward balance next year, according to Abhishek Deshpande, head of oil research at JPMorgan Chase & Co. "We are more comfortable with a balanced market to take a view of going long that spread," said Deshpande.
3. Lottery Tickets
With geopolitical risks flaring in a host of major oil producers, funds have been busy snapping up bullish oil options contracts that would profit from a sharp spike in crude prices. The December 2018 $100 call remains the most-held Brent options contract, while $80 calls equating to more than 30 million barrels for the latter part of next year traded in recent weeks. Venezuela, Iran and Saudi Arabia top the list of countries that could see oil-related disruptions in 2018, RBC Capital Markets LLC analysts including Helima Croft wrote earlier this month.
4. Volatility Vacuum
Despite those risks, volatility has plunged to the lowest in more than three years in recent weeks as a steady grind higher in prices took some of the fizz out of the oil market. With the Organization of Petroleum Exporting Countries clearly signposting its plans for 2018, banks including Societe Generale SA expect to see a continued slide in volatility next year. "OPEC's decision to proactively manage the market is going to keep volatility flat as a pancake," Amrita Sen, chief oil market analyst at Energy Aspects Ltd., wrote earlier this month.
5. How Long?
The market is heading into 2018 near a record number of bullish bets in Brent and WTI combined, exchange data show. Those contracts, which now outstrip bearish ones by seven to one, have led to concerns that crude may soon see a speculator-driven slump. That bullish positioning has been "the largest bearish cross in my scorecards for the last several weeks," said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. What's difficult is that "we don't know the type of players. If they want to have a larger part of their assets in commodities for the next couple of years, then they're not going to sell those positions."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Global Oil Market News - Dec 28
Dip in the U.S. dollar is also putting upward pressure on the price of oil.
See: https://www.marketwatch.com/investing/index/dxy/charts
See: https://www.marketwatch.com/investing/index/dxy/charts
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group