Global Oil Market - Sept 9

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News that impacts the global oil market from John White at Roth Capital

On September 8 Reuters reported Saudi Arabia's king appointed his son, Prince Abdulaziz bin Salman, as energy minister on Sunday, replacing Khalid al-Falih and for the first time handing the portfolio in the world's top oil exporter to a member of the royal family. Prince Abdulaziz, a longstanding member of the Saudi delegation to OPEC with decades of experience in the oil sector, is not expected to change the kingdom's oil and OPEC policies, Saudi officials and analysts say. He helped negotiate the current agreement between OPEC and non-OPEC countries, a group known as OPEC+, to cut global crude supply to support prices and balance the market. "Saudi oil policy will be enhanced by the appointment of Prince Abdulaziz, through strengthening cooperation among OPEC and with non-OPEC," a Saudi official told Reuters.

On September 6 Reuters reported China's central bank said on Friday it was cutting the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan ($126.35 billion) in liquidity to shore up the flagging economy.

On September 5 Reuters reported weaker demand from abroad drove a bigger than expected drop in German industrial orders in July, suggesting that struggling manufacturers could tip Europe's biggest economy into a recession in the third quarter. Germany's export reliant economy is suffering from slower global growth and business uncertainty caused by U.S. President Donald Trump's “America First" trade policies and Britain's planned, but delayed, exit from the European Union. Contracts for "Made in Germany" goods fell 2.7% from the previous month in July, data showed on Thursday, driven by a big drop in bookings from non-euro zone countries, the economy ministry said. That undershot a Reuters consensus forecast for a 1.5% drop.

On September 5 Bloomberg reported Shale pioneer Mark Papa sees U.S. oil production growth well below current forecasts as companies spend less capital on drilling and exhaust prime shale areas. Output will grow by about 700,000 b/d next year, compared with a “consensus expectation” of 1.2 million b/d Papa said Wednesday at an industry conference. The EIA sees U.S. production 1 million b/d in 2020 at 13.3 million b/d. “We’re seeing a lot of difficulties in growing U.S. oil production,” Papa said. Lower oil prices and investor demands for financial discipline are causing companies to reduce drilling but the bigger issue, according to Papa, is that many are running out of sweet spots in the Permian and Eagle Ford areas, forcing them into less efficient zones. “You need to pay attention to this,” Papa said. “In a timeframe of six months to three years it’s going to have a profound effect on oil prices.”

On September 4 Reuters reported the U.S. blacklisted an "oil for terror" network of firms, ships and individuals allegedly directed by Iran's Islamic Revolutionary Guard Corps (IRGC) for supplying Syria with oil worth hundreds of millions of dollars in breach of U.S. sanctions. Washington also issued a new international shipping advisory about IRGC's use of "deceptive practices" to violate U.S. sanctions on Iranian oil sales and warned that those doing business with blacklisted entities "are now exposed to U.S. sanctions," said State Department official Brian Hook, who oversees Iran policy.

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SINGAPORE (Reuters) - S&P Global Platts (N:SPGI) said on Monday it will launch new price assessments for U.S. crude for Asian buyers from Oct. 1, as the United States exports more oil to the East.

Asian refiners are increasingly turning to sweet, or low-sulfur, light U.S. crude, amid falling production in Asia and as U.S. sanctions curb oil supply from Iran and Venezuela.

The two price quotes are for West Texas Intermediate (WTI) Midland for U.S. crude sold to Singapore and South Korea's Yeosu on a delivered-ex-shipment basis, Platts said in a statement.

At both locations, Platts will assess cargoes for delivery three months from the date of publication, it said.

The move follows the first-ever offer of a WTI Midland crude cargo by oil major Royal Dutch Shell (L:RDSa) for delivery in October on Platts' widely used trading platform for Asian buyers in late August.

"The market has already shown appetite to demonstrate the value of WTI though the recent publication of the first firm and transparent offer in the Platts Asia Market On Close price assessment process, priced at a premium to Platts Dubai," said Vera Blei, head of oil market pricing at S&P Global Platts.

Asia already accounted for 45% of total U.S. crude exports at 2.7 million barrels per day (bpd) in the first five months of 2019, she added.

South Korea, which previously tended to import condensate, or an ultra-light form of crude oil, from Iran, halted importing Iranian crude from May and saw imports from the United States almost triple in July from the year before.

In July, the United States was South Korea's second-biggest crude oil supplier, overtaking Kuwait.

U.S. crude delivered to Singapore in the first eight months this year totaled 73,300 bpd, up from 70,620 bpd during the corresponding period a year before, Refinitiv shipping data showed.