Oil jumped Wednesday after an unexpected draw in U.S. crude stocks was reported by API late Tuesday and an oil service worker strike in Norway .
> American Petroleum Institute data showed a draw of 7.5 million barrels in U.S. crude to 507.2 million.
> If EIA confirms the big draw, it will be the third week in a row that U.S. crude inventories have fallen.
> Expectations were for an increase of 3.4 million barrels.
Oil Price - Sept 21
Oil Price - Sept 21
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Sept 21
A note from Phil Flynn this morning: "The informal OPEC meeting at the International Energy Forum conference in Algiers on Sept. 28 is now suddenly a formal OPEC affair. That means the likelihood of a major policy announcement at this meeting has gone up dramatically. With all of the major policy players from Russia, Saudi Arabia and Iran suggesting that a deal is going to get done, it means that a deal is going to get done."
My SWAG is that an agreement between Russia and OPEC will have little impact on the physical market, but it will have a big impact on the speculative traders that control oil prices. Traders have been using every oil price advance to lay on more shorts, cover on the dips and lay on more shorts with the next advance. When their strategy changes to going long on the dips, then oil will advance to the $60-$70 range (which is where the supply/demand fundamentals are pointing).
My SWAG is that an agreement between Russia and OPEC will have little impact on the physical market, but it will have a big impact on the speculative traders that control oil prices. Traders have been using every oil price advance to lay on more shorts, cover on the dips and lay on more shorts with the next advance. When their strategy changes to going long on the dips, then oil will advance to the $60-$70 range (which is where the supply/demand fundamentals are pointing).
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Sept 21
The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 6.2 million barrels in the week ended September 16. Market analysts' expected a crude-stock increase of 3.35 million barrels. Gasoline stocks fell by 3.2 mn barrels after an increase of 567,000 barrels the previous week. Gasoline inventories were forecast to fall by 567,000 barrels.
Last edited by dan_s on Wed Sep 21, 2016 10:59 am, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Sept 21
More from Phil Flynn, a respected Wall Street energy sector analyst:
> Russia’s oil envoy suggested that a one-year deal to test the waters on a production freeze was on tap. Bloomberg News reported that Russia was in favor of a pact that would help oil price stabilization and a potential 1-year agreement “meets this criteria,”
> Interfax reports, citing Vladimir Voronkov, Russia’s envoy for international organizations based in Vienna.
> OPEC Secretary-General Mohammed Barkindo also said that Iranian officials have told him they are committed to negotiating. We know that Saudi Arabia is backing a deal because they were the ones that restarted talks after they screwed up the Doha accord in April. I was in the minority when I said a deal would get done this time and it looks like we will be right.
> Oil also got a boost from a report that India imported a record amount of oil. India imported 4.4 million barrels of oil a day in August and it looks like that number will rise. As I have said before, India is the new China when it comes to oil demand growth. Now it seems that India will import more oil as it, like China before it, wants to build a strategic oil reserve.
> Reuters is reporting that India is set to buy 6 million barrels of Iranian crude for its strategic oil reserves as negotiations with the United Arab Emirates' national oil company for supplies are stuck over commercial terms, industry sources said. Reuters says that India, seeking to hedge against energy security risks as it imports about 80 percent of its oil needs, is building emergency storage in vast underground caverns to hold a total of 36.87 million barrels of crude, enough to cover almost two weeks of demand.
> Russia’s oil envoy suggested that a one-year deal to test the waters on a production freeze was on tap. Bloomberg News reported that Russia was in favor of a pact that would help oil price stabilization and a potential 1-year agreement “meets this criteria,”
> Interfax reports, citing Vladimir Voronkov, Russia’s envoy for international organizations based in Vienna.
> OPEC Secretary-General Mohammed Barkindo also said that Iranian officials have told him they are committed to negotiating. We know that Saudi Arabia is backing a deal because they were the ones that restarted talks after they screwed up the Doha accord in April. I was in the minority when I said a deal would get done this time and it looks like we will be right.
> Oil also got a boost from a report that India imported a record amount of oil. India imported 4.4 million barrels of oil a day in August and it looks like that number will rise. As I have said before, India is the new China when it comes to oil demand growth. Now it seems that India will import more oil as it, like China before it, wants to build a strategic oil reserve.
> Reuters is reporting that India is set to buy 6 million barrels of Iranian crude for its strategic oil reserves as negotiations with the United Arab Emirates' national oil company for supplies are stuck over commercial terms, industry sources said. Reuters says that India, seeking to hedge against energy security risks as it imports about 80 percent of its oil needs, is building emergency storage in vast underground caverns to hold a total of 36.87 million barrels of crude, enough to cover almost two weeks of demand.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Sept 21
Raymond James: "The fact remains, with oil below $50/bbl, the global oil supply/demand situation is improving sharply and 2017 should be over 2 million bpd tighter than 2015 despite massive headwinds from recovering OPEC oil supplies."
"The big picture: Global oil inventories still set to draw by ~800,000 bpd in 2H16 and another 600,000 bpd in 2017. Looking past the near term, largely market psychology issues that have pressured oil prices in recent months, the global oil market’s fundamentals are still very much on a bullish upward trajectory. Relative to our model from the beginning of 2016, the outlook for non-OPEC supply is materially lower and global demand is higher. We will get into details on all of these variables later in the report, but for now, let’s focus on the bottom line – “what is likely to happen with global oil inventories over the next few years?” We project that global oil inventories will decline by about 300,000 bpd in 2016 (almost all of which will be seen in 2H16), 600,000 bpd in 2017 and nearly 200,000 bpd in 2018. While these inventory 2017/2018 draws are not as high as we thought a few months ago, they are still large enough to support our above-consensus oil price forecast."
RJ's forecast is that we see $60/Bbl WTI by year-end.
"The big picture: Global oil inventories still set to draw by ~800,000 bpd in 2H16 and another 600,000 bpd in 2017. Looking past the near term, largely market psychology issues that have pressured oil prices in recent months, the global oil market’s fundamentals are still very much on a bullish upward trajectory. Relative to our model from the beginning of 2016, the outlook for non-OPEC supply is materially lower and global demand is higher. We will get into details on all of these variables later in the report, but for now, let’s focus on the bottom line – “what is likely to happen with global oil inventories over the next few years?” We project that global oil inventories will decline by about 300,000 bpd in 2016 (almost all of which will be seen in 2H16), 600,000 bpd in 2017 and nearly 200,000 bpd in 2018. While these inventory 2017/2018 draws are not as high as we thought a few months ago, they are still large enough to support our above-consensus oil price forecast."
RJ's forecast is that we see $60/Bbl WTI by year-end.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Sept 21
This is why RJ is so bullish on oil prices in Q4: "Given the seasonality differences between the global oil model and U.S. inventory changes, we are looking for U.S. crude inventories to net out roughly flat in 3Q of 2016 but fall by a massive 0.5 to 1.5 million bpd (or 45 to 135 million bbls) in 4Q of 2016. That means the U.S. oil inventory declines as a catalyst for higher oil prices is more likely to occur in the fourth quarter of 2016 than the third quarter."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group