Energy Prospectus

When the market opened on Sept 19
WTI is up 79c to $58.90/Bbl, and Brent is up $1.31 to $64.91/Bbl

Oil prices are higher this morning as traders doubt the speed at which Saudi Arabia can recover from the weekend’s attacks on its oil facilities that reduced production (Bloomberg)
There were reports from Dow Jones that the Saudis asked Iraq’s national oil company for as much as 20 MMBbls of crude to supply its domestic refiners
The request for oil from Iraq could mean the Saudis recovery could take longer than what was announced in their press release on Wednesday

President Trump announced new sanctions on Iran Wednesday as the US administration blames Iran for the attacks on Saudi oil installations (The Hill)
Senator Lindsay Graham has been advocating for the US to strike Iranian oil infrastructure in response to the Saudi attacks
The Senator said on Wednesday that imposing new sanctions would not be a sufficient response

AEGIS Energy notes adding new sanctions has been the default action for penalizing Tehran
A Crude oil inventory build disappointed bulls on Wednesday, but price action was rather muted following the government data release
US crude stocks rose by 1.1 MMBbl to 417 MMBbl last week amid a steep drop in refinery runs, according to the EIA
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Oil price rebounds as doubts emerge over Saudi Arabia’s ability to bounce back from attacks
Published: Sept 19, 2019 9:01 a.m. ET

Oil futures bounced back Thursday, finding support after reports Saudi Arabia contacted foreign producers looking for crude as it attempts to fill holes in its supply chain following last weekend’s attacks on the country’s production facilities.

West Texas Intermediate crude for November delivery CLX19, +0.93% on the New York Mercantile Exchange rose $1.42, or 2.4%, to $59.46 a barrel, while November Brent crude BRNX19, +1.43%, the global benchmark, was up $1.81, or 2.8%, at $65.41 a barrel.

Oil futures were boosted after The Wall Street Journal reported that Saudi Arabia was looking to buy oil and additional oil products from Iraq and possibly other neighbors, including a request for as much as 20 million barrels of oil from Iraq, as it scrambles to maintain its reputation as a reliable supplier after missiles knocked out around half of the country’s crude production over the weekend.

Crude rallied on Monday in the wake of the attacks, but lost ground the next two sessions. On Tuesday, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said the country had already restored around half of its lost production. Saudi Arabia said it would restore lost production by the end of the month.

Traders, however, are skeptical of the rosy outlook offered by Saudi officials, said Phil Flynn, senior market analyst at Price Futures Group, in a note.

“The Saudis are telling us one thing but industry experts are telling us another on this. It’s not like you can just replace refinery parts overnight,” he said.

The Energy Report: Back Off
By Phil Flynn (Sep 19, 2019 08:30AM ET)

Crude Oil prices backed off after it appeared that President Trump backed off from war. As the blame for the weekend attacks on the Abqaiq oil-processing plant and the Khurais oil field is being pointed towards Iran, the market is sensing that the response may be more muted than it feared. President Trump tweeted, "I have just instructed the Secretary of the Treasury to substantially increase sanctions on the country of Iran!". Instead of bombs we get sanctions and a push to build a coalition in the UN.

Oil also sold off on Saudi Arabia's rosy outlook for the full return to normal operations. Yet traders are very skeptical of their rose colored glasses they have on. The Wall Street Journal reports that the Saudis are making inquiries to import Iraqi crude and suggests they are really relying on oil in storage and not returned production to meet customer demand. The Saudis are telling us one thing but industry experts are telling us another on this. It’s not like you can just replace refinery parts overnight. They can’t just go to “Refiners are Us” or “Refinery Depot” and do a little shopping!

We also had the Energy Information Administration (EIA) status report that was bearish but not as bearish as the American Petroleum Institute (API) version. The EIA reported a surprise 1.1-million-barrel increase in crude supply but product builds that were much smaller than the API. The EIA reported total motor gasoline inventories increased by 0.8 million barrels. Distillate fuel inventories increased by 0.4 million barrels last week.

We saw a drop in refining activity as we may be seeing maintenance as well as operations. The EIA said, "U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending September 13, 2019, which was 788,000 barrels per day less than the previous week’s average. Refineries operated at 91.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day. U.S. crude oil imports averaged 7.1 million barrels per day last week, up by 326,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.7 million barrels per day, 13.7% less than the same four-week period”.