HFIR: Bullish surpise ahead from cont. reduced SA exports?
Posted: Tue Mar 12, 2019 1:34 am
HFIR has an article on SA (and to subscribers) in which they discuss in some depth their belief that Saudi will continue their reduced level of exports to US to target a US storage level of somewhere in the 350-380 mm bbls range. They believe the market does not see this "bullish surprise" coming.
Snippets:
If all of this plays out according to what we see right now, there's a reasonable chance that U.S. crude storage fall ~30 mbbls within the next 8 weeks. This will come as a sticker shock to many because U.S. shale production has ramped up past 12 mb/d, but yet, U.S. crude storage continues to fall. One of the key reasons for this misunderstanding is the differentiated view we hold that Saudi was, in fact, the only reason U.S. crude storage built excessively from April to December of 2018.
So if you buy into this thesis of ours, then you know the reverse will also be true. By keeping exports to the U.S. "below" 700k b/d, Saudi will effectively drain the excessive storage out of the U.S.
And we've already seen this in the data. As the trend continues, we believe in order for Saudi to achieve the elevated oil price scenario it needs (~$80/bbl Brent), U.S. crude storage needs to stabilize around ~350 to 380 mbbls.
We can achieve this target by September if the Saudis remain disciplined with exports to the U.S.
Overall - The data we track continues to point us in the right direction. Because of our differentiated view on what caused the U.S. crude storage build-up in the second half of 2018, we also know that the reversal of that will also be true (much lower U.S. crude storage).
We believe the market is not even properly assessing any possibility to this, so the bullish surprise will be exactly that - a surprise.
Snippets:
If all of this plays out according to what we see right now, there's a reasonable chance that U.S. crude storage fall ~30 mbbls within the next 8 weeks. This will come as a sticker shock to many because U.S. shale production has ramped up past 12 mb/d, but yet, U.S. crude storage continues to fall. One of the key reasons for this misunderstanding is the differentiated view we hold that Saudi was, in fact, the only reason U.S. crude storage built excessively from April to December of 2018.
So if you buy into this thesis of ours, then you know the reverse will also be true. By keeping exports to the U.S. "below" 700k b/d, Saudi will effectively drain the excessive storage out of the U.S.
And we've already seen this in the data. As the trend continues, we believe in order for Saudi to achieve the elevated oil price scenario it needs (~$80/bbl Brent), U.S. crude storage needs to stabilize around ~350 to 380 mbbls.
We can achieve this target by September if the Saudis remain disciplined with exports to the U.S.
Overall - The data we track continues to point us in the right direction. Because of our differentiated view on what caused the U.S. crude storage build-up in the second half of 2018, we also know that the reversal of that will also be true (much lower U.S. crude storage).
We believe the market is not even properly assessing any possibility to this, so the bullish surprise will be exactly that - a surprise.