Actions speak louder than words. Nope, strike that and reverse it. Rhetoric from Saudi’s oil minister today is emphatically rallying crude prices, as Khalid al-Falih said Saudi would ‘take any action to help the market rebalance’. This is somewhat at odds with yesterday’s OPEC report that showed Saudi production had reached an all-time high. For a second day we find ourselves saying ‘Hum dee dum’. Hark, here are five things to consider in oil markets today.
1) ExxonMobil is trying to figure out how to export Qua Iboe, Nigeria’s largest export stream, by using an alternate pipeline. Qua Iboe is under force majeure, and is expected to be so for the next few months (some rumors are channeling Wyclef Jean, saying ‘Gone ‘Till November‘).
Our ClipperData below show how sabotage and supply issues have collectively hit certain key Nigerian grades, dropping export loadings from above 1 million barrels per day in January by 60 percent last month to just over 400,000 bpd. That said, total loadings have held up rather well, as alternate grades such as Agbami and Akpo have risen to the challenge to offset losses primarily in Qua Iboe and Forcados. Through the first third of August, there have been no loadings whatsoever of Qua Iboe.
2) IEA’s monthly oil market report has completed the triumvirate of monthly oil reports this week, and has fallen in line with the other reports by being tilted net bearish. It has trimmed its demand growth forecast for next year by 100,000 bpd to 1.2 million barrels per day, while keeping this year at +1.4 million bpd.
It reiterated what yesterday’s OPEC report said, highlighting rising Saudi and Iraqi production, but in contrast to OPEC, it saw OECD crude and product inventories rise last month, increasing to a record of 3,093 million barrels.
The agency does, however, expect to see a ‘hefty’ draw to crude in the coming quarter, as global production falls and refiners process a record amount. Nonetheless, the combination of both a crude and product overhang remain – these will take a good deal of time to be worked through, regardless of crude stock draws.
3) The chart below is from the IEA report, showing a swift drop-off in Chinese oil demand over the last three quarters (h/t@chris1reuters). This is affirmed elsewhere, with Chinese oil demand seen little changed compared to year-ago levels. Official data show refinery runs up only 1.9 percent this year, although Platts suggests independent refiners (aka teapots) could be producing an additional 400,000 bpd.
4) While oil companies slash their capital expenditures, investors have been targeting the oil patch in the search for yield. The relative high yield on energy debt has attracted an influx of investment in the last two years; private equity funds focused on energy have managed to raise $113 billion in the last nine quarters, looking to buy up the assets that no-one else wants.
By : oilprice.com