Global Oil Market - June 19

[dan_s]

Comments below from John White at Roth Capital:

On 6/14/2017, the IEA released its Monthly Oil Market report. Regarding crude oil demand, the IEA said recent weaknesses in demand growth are likely to prove transitory, particularly in post currency-reform India. Although global growth was only 900,000 b/d in 1Q 2017, it sees demand growth accelerating in 2H 2017 and for the year as a whole the IEA outlook remains unchanged at 1.3 million b/d. In 2018, the IEA sees growth increasing modestly to 1.4 million b/d as demand reaches a record 99.3 million b/d.

With regard to global oil supply, the IEA estimates production rose by 585,000 b/d in May to 96.69 million b/d as both OPEC and non-OPEC countries increased production. Output stood 1.25 million b/d above a year ago, the highest annual increase since February 2016. Gains were dominated by non-OPEC, particularly the U.S. OPEC crude output rose by 290,000 b/d in May to 32.08 million b/d, the highest level so far this year, after comebacks in Libya and Nigeria, which are exempt from the OPEC supply cuts. Output from OPEC members bound by the production deal edged lower, which kept year-to-date compliance strong at 96%.

OECD commercial inventories rose in April by 18.6 million barrels due to higher refinery output and imports. Inventories now stand 292 million barrels above the five-year average and are higher than when OPEC decided to cut output in late 2016. For May, preliminary data suggests inventories
falling in Japan, Europe, Singapore and in vessels offshore, but rising in the U.S. and China.

On 6/16/2017, Reuters reported that eight prominent hedge funds have reduced the size of their positions in ten of the top shale firms by over $400 million, concerned producers are pumping oil so fast they will undo the nascent recovery in the industry after OPEC and some non-OPEC producers agreed to cut supply in November.

The funds, with assets of $286 billion and substantial energy holdings, cut exposure to firms that are either pure-play Permian companies or that derive significant revenues from the region, according to an analysis of their investments based on Reuters data. Hedge funds pulled back in the first quarter, according to the most recently available regulatory filings, and the stocks have continued to struggle as oil prices have come under renewed pressure.

The value of these funds' positions in the 10 Permian companies declined by 14 percent, to $2.66 billion in the first quarter, the most recent data available, from $3.08 billion in the fourth quarter of 2016.
-----------------------
John has BUY ratings on the following: CPE, EPM, ESTE, FANG, GDP, HK, LONE, PQ, REI, RSPP, SRCI

John covers many of the same companies that I do, so his reports are extremely helpful to me.