Home » Posts tagged 'oil inventories'

Tag Archives: oil inventories

Video: https://www.bnnbloomberg.ca/video/falling-oil-inventories-is-what-matters-not-geopolitics-eric-nuttall~2382581?fbclid=IwAR35n9dgxwTWlZkX2bEYyy72SOGJR0eQM3MkFzRENmj9S8oDz0xkI9XfP8o

Oil prices are retreating as tensions between Russia and Ukraine ease and investors grow more concerned about an Iran nuclear deal, so what does it all mean for the oil market long-term? Eric Nuttall, partner and senior portfolio manager of Ninepoint Partners, joins BNN Bloomberg for his outlook.

Global Oil Inventories Are Exceptionally Tight: Kemp

February 16, 2022

Global Oil Inventories Are Exceptionally Tight: Kemp

Global petroleum inventories are the tightest for years in a sign the market is overheating, as the global economy recovers rapidly from the coronavirus pandemic and major oil producers refuse to increase output faster.

Commercial inventories held in the countries of the Organisation for Economic Co-operation and Development (OECD) totalled 2.68 billion barrels at the end of December 2021, down from 3.21 billion in July 2020.

Since peaking after the first wave of coronavirus infections in 2020, inventories have fallen at the fastest rate for decades, and ended last year at the lowest seasonal level since 2013.

OECD commercial inventories ended December roughly 8% below the previous five-year seasonal average, with or without the pandemic year, based on data from the U.S. Energy Information Administration (EIA). There is no precedent for such rapid depletion of stocks in recent decades and the EIA estimates stocks have fallen further in January and February (“Short-term energy outlook”, EIA, Feb. 8).

The result has been a surge in both nearby oil futures prices and calendar spreads, reflecting concerns about the availability of sufficient oil. Front-month Brent futures prices have climbed roughly 25% in the last two months, as the latest wave of coronavirus infections has ebbed and had limited impact on global economic growth or oil consumption.

Brent’s six-month calendar spread, which is closely correlated with stock levels, has surged into a backwardation of more than $8 per barrel this week, within the 99th percentile for all trading days since 1990.

The current combination of rapidly escalating front-month futures prices and backwardation is the most bullish since at least 1993.

Overheating

Low and falling inventories are a sign of excess demand and inadequate supply, putting continuous upward pressure on prices.

…click on the above link to read the rest of the article…

Oil Spreads Trading at Historically Unrealizable Levels

July 12, 2021

Oil Spreads Trading at Historically Unrealizable Levels

Outright oil prices have continued to rally this year as economies recover from impaired pandemic levels, however calendar spreads have been unable to realize their bullish intent. In fact, calendar spread structures have continued to disappoint into expiration.

In some respects this is less about a failure of the front-month contract heading into expiration and more about a handing-off of strength to the next contract, which narrows the front spread into expiration.

The close-knit nature of 1-month spreads relative to moves in flat price may not reveal a useful pattern. Towards that end, when we lengthen our spread analysis to incorporate more time into the picture (6 or 12 month spreads vs 1 month spreads), the pattern becomes more visible. The pattern being that bullish sentiment is portrayed through calendar spreads until expiration. In both cases (the Dec/Dec 12 month spread and the Dec/June/Dec front vs back condor spread) are prone to follow market sentiment and rally along with flat price only to fail as expiration approaches.

At the moment, both of these spreads are approaching levels that have been UNREALIZABLE in the past.

What does this mean going forward?? Are we likely to see spreads break historical records to the upside before pulling back into expiration, or will we finally realize historical highs in backwardation? To unpack this we start with inventories. First we break the year down in to the first half versus the second half and then compare the changes in these 2 periods over time and also against their 5-year average (ex 2020), highlighted in yellow below.

…click on the above link to read the rest of the article…

Saudis Reportedly Target US Inventories By Slashing Oil Exports

December 13, 2018

Saudis Reportedly Target US Inventories By Slashing Oil Exports

WTI prices briefly popped above $52 before fading quickly after Bloomberg reported that after flooding the US market in recent months, Saudi Arabia plans to slash exports starting in January in an effort to dampen visible build-ups in crude inventories.

Bloomberg reports that, according to people briefed on the plans of state oil company Saudi Aramco, American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production.

Oil traders were not that impressed…

And while the plan to slash Saudi exports to America may ultimately convince a skeptical oil market about the kingdom’s resolution to bring supply and demand incline, it may anger President Trump, who has used social media to ask the Saudis and OPEC to keep the taps open.

✔

Hopefully OPEC will be keeping oil flows as is, not restricted. The World does nott want to see, or need, higher oil prices!

WTI Slumps To $61 Handle After US Crude Production Soars To New Record High

November 7, 2018

WTI Slumps To $61 Handle After US Crude Production Soars To New Record High

Despite sliding after last night’s API-reported big Crude and Cushing build, WTI has rebounded overnight amid a post-midterms tumbling dollar, but a larger crude build than expected from DOE, combined with a smaller gasoline draw, could lead to WTI “set to test $60 easily,” Tariq Zahir, a commodity fund manager at Tyche Capital Advisors, says

Additionally, Oil rose on the back of headlines that OPEC and its allies were said to plan talks on fresh production cuts next year, responding to recent increases in crude inventories amid surging U.S. supply.

“The Saudis want to stop the price decay,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

“There are many moving variables until the OPEC meeting in December, like Iran and U.S. production growth. But as the Saudis say they aim for market stability, if the data suggests an oversupplied market next year the probability of a cut is high.”

However, as Bloomberg notes, if OPEC, led by Saudi Arabia, does ultimately decide fresh cutbacks are necessary, it will confront a number of challenges. It will need to once again secure the support of rival-turned-partner Russia, which has less need for high oil prices. There’s also the risk of antagonizing the kingdom’s key geopolitical ally, President Trump.

API

Crude +7.831mm (+2mm exp)
Cushing +3.073mm (+2.1mm exp)
Gasoline -1.195mm
Distillates -3.638mm

DOE

Crude +5.78mm (+2mm exp)
Cushing +2.419mm (+2.1mm exp)
Gasoline +1.85mm (-1.7mm exp)
Distillates -3.465mm

Crude and Cushing inventories rose for the seventh straight week (considerably more than expected) and a surprise gasoline build, sent WTI prices back below pre-API levels from last night and back to a $61 handle…

And as inventories rose, production surged a huge 400k b/d to a new record high…

…click on the above link to read the rest of the article…

Oil Prices Fall As EIA Confirms Inventory Build

March 28, 2018

Oil Prices Fall As EIA Confirms Inventory Build

After a surprise 5.32-million-barrel inventory build reported by the American Petroleum Institute (API) weighed on oil prices yesterday, the Energy Information Administration (EIA) is reportinga build of 1.6 million barrels for the week ending March 23.

The markets, which have not had a chance to react to the EIA report as of the time of writing, could ease their downward trend given the nearly 4-million difference in build in the official figures.

However, they could also take this as confirmation of a reversal of expectations. Heading into Tuesday’s API data, expectations were for a draw of around 430 million barrels.

The authority said refineries processed 16.8 million bpd of crude in the reporting period, unchanged from a week earlier. Gasoline production averaged 10.3 million bpd, compared with 9.9 million bpd a week earlier, and distillate output averaged 4.8 million bpd last week, versus 4.5 million bpd a week earlier.

Gasoline inventories, the EIA said, fell by 3.5 million barrels in the week to March 23. In the week before that, gasoline inventories marked a decline of 1.7 million barrels. Distillate inventories last week shed 2.1 million barrels, compared with a decline of 2 million barrels in the prior week.

…click on the above link to read the rest of the article…

OPEC Scrambles To Justify Output Cuts

March 27, 2018

OPEC Scrambles To Justify Output Cuts

Oil inventories are approaching the five-year average level in OECD countries, the all-important threshold for “re-balancing” the oil market.

A year and a half on from OPEC’s original deal to limit output, the surplus oil stashed in storage tanks around the world are nearly back to average levels. However, by all indications, OPEC is not ready to ease up on the production caps, with top officials signaling a desire to keep the cuts in place into 2019.

But that might require changing of the definition of a “balanced” oil market. OPEC has consistently held up OECD inventories as the metric upon which it was basing its calculations. The goal was to drain inventories back down to the five-year average. With OECD inventories about 44 million barrels above that threshold in February – down from a roughly 300-million-barrel surplus at the start of 2017 – the goal will likely be achieved at some point this year, perhaps in the second or third quarter.

For a variety of reasons, reaching this milestone is not satisfactory for OPEC. For one, the measurement is clouded by the fact that it’s a running calculation, meaning that the past five-years is now made up of more than three years of bloated inventories. In other words, the current five-year average is significantly higher than the five-year average in early 2014 when inventories were not suffering from a supply glut.

The flip side of that argument is that the oil market is way bigger than it was in 2014. Both supply and demand are higher, meaning that the global market probably needs a much higher level of oil sitting in storage. As such, it isn’t necessarily a bad thing that inventories are above the five-year average.

Another reason why OPEC is suddenly not satisfied with OECD inventories as the sole metric around which it bases its decisions is that OECD inventories do not capture the entire global oil market. What is happening in the non-OECD, where at this point, much of global demand growth is occurring? A more comprehensive measurement that included non-OECD inventory data would paint a more accurate picture of the global oil market. However, the problem with this is that non-OECD data is notoriously opaque, which is exactly why OECD inventories is a widely-cited data point.

…click on the above link to read the rest of the article…

OPEC Doubles Down On Draining Oil Inventories

March 20, 2018

OPEC Doubles Down On Draining Oil Inventories

Although the oil market has been improving, OPEC still has work to do to bring global oil inventories back to their five-year average—the metric that OPEC has vowed to achieve with the production cut deal, OPEC Secretary General Mohammad Barkindo said on Monday while on a visit to Azerbaijan.

“The worst is probably over for now. We are beginning to see light at the end of the tunnel but we still have some work to do because we still have inventories that are higher than the 5-year average,” Barkindo said at a press briefing in Azerbaijan’s capital of Baku, as carried by Reuters.

Barkindo’s words signal that OPEC is committed to totally erasing the glut, even if it has mostly achieved this part of its mission.

Last month, the Energy Minister of OPEC’s leading producer Saudi Arabia, Khalid al-Falih, saidthat “If we have to err on over-balancing the market a little bit, so be it.”

In an interview with Azeri television Real TV, Barkindo said on Monday that he hoped that stability would be restored to the global oil market this year.

“We are beginning to see that the stability is gradual but still returning to the market,” said OPEC’s secretary general.

Azerbaijan is part of the non-OPEC countries that have joined the cartel in the pact to support oil prices and draw down excess global oil stockpiles through voluntary production cuts or managed decline.

According to OPEC’s latest Monthly Oil Market Report from last week, preliminary data for January showed that total OECD commercial oil stocks rose by 13.7 million barrels from December, reversing the drop of the last five months. At 2.865 billion barrels, OECD stocks were 206 million barrels lower than in January 2017, but 50 million barrels above the latest five-year average, OPEC said.

…click on the above link to read the rest of the article…

Physical Oil Markets Don’t Lie – Is Another Crash Likely?

February 15, 2018

Physical Oil Markets Don’t Lie – Is Another Crash Likely?

Oil prices are falling and analysts and market players are as eager as ever to explain the decline in accordance with their own bullish or bearish leanings. It’s a natural correction that was only to be expected after the buildup of long bets on crude oil and oil product futures, the bulls insist. It’s the start of a trend, thanks to the major jump in U.S. production, the bears counter. Now, data from physical oil markets has surfaced that supports the bears’ stance.

North Sea Forties, Russian Urals, WTI, and Atlantic diesel have all fallen to their lowest in several months, Reuters reports, citing commodity traders and analysts. These are physical markets — the markets where actual oil is taken from one place and shipped to another to be refined into fuel and other products, as opposed to the speculative futures market. If the physical market points down, chances are the price drop — 15 percent in three weeks — is not just a blip, as OPEC’s Secretary General Mohammed Barkindo said earlier this week.

Interestingly enough, Barkindo also said he had Russian President Vladimir Putin’s word that Russia will not flood the market with oil while the cut deal still holds. The reason this statement is interesting is that it is the latest example of OPEC’s tendency towards upbeat comments that have little substance, unlike the physical oil market data.

RBC Capital Markets’ Michael Tran told Reuters that, “Physical markets do not lie. If regional areas of oversupply cannot find pockets of demand, prices will decline. Atlantic Basin crudes are the barometer for the health of the global oil market since the region is the first to reflect looser fundamentals. Struggling North Sea physical crudes like Brent, Forties, and Ekofisk suggest that barrels are having difficulty finding buyers.”

…click on the above link to read the rest of the article…

Why Oil Prices Could Dive

January 25, 2018

Why Oil Prices Could Dive

WTI briefly touched $65 per barrel after the EIA reported a surprise drawdown in inventories — the highest price since late 2014. Although the rally hit some stumbling blocks in recent days, prices remain at multi-year highs. However, absent further bullish news, the downside risk looms large.

One of the most acute threats to prices is the exorbitant positioning by hedge funds and other money managers, who have staked out record net longs in the oil futures market. With everyone piling into one side of the bet, there’s little room left on the upside. This kind of lopsided positioning has consistently ended with a rush for the exits, setting off a sudden — and often sharp — price correction.

Mad Money’s Jim Cramer spoke about the problem on Tuesday on CNBC. “As of last week, large speculators were holding the single largest bullish position in the history of crude oil,” he said. “Being bullish is NOT a good sign … when everyone’s bullish, well, then, you don’t have anyone to convert to be able to start buying … You need to convert bears but there’s no bears.”

Cramer, citing data from Carley Garner, co-founder of DeCarley Trading, said the current makeup in the futures market points to a near-term price correction. “As Garner points out, when one of these massive speculative bets in oil unwinds, you do not want to get caught anywhere near the blast radius,” Cramer said.

Another force working against the current rally is the recent decline of the dollar, which has been weakening for the last several weeks. Since oil is denominated in U.S. dollars, a weaker dollar can put upward pressure on crude prices as crude becomes relatively less expensive to much of the world.

…click on the above link to read the rest of the article…

Oil Prices Testing August Lows As Inventories Swell

November 21, 2015

Oil Prices Testing August Lows As Inventories Swell

There has been little in the way of economic data out overnight, leaving comments from European Central Bank President Mario Draghi to clobber the euro, propel the dollar higher. As the prospect of a US rate hike in December sits around ~70%, the WTI December contract is charging lower ahead of its contract expiry today.

The chart below shows the combined rising production from two leading sources since 2012, the US and Iraq, plotted versus OECD oil inventories. Production from the two has risen nearly 60% over the near-four year time-frame, with them currently pumping the equivalent of 4.88 billion barrels a year. In comparison, OECD inventories have only risen 10%, or 314 million barrels, as stronger demand and weaker supply elsewhere have offset the rampant additions from the two nations.

Looking ahead to next year, we are set to see aggregate production from the two countries drop, as modest rising supply from Iraq will not be enough to offset falling US production.

Below is another nifty graphic from the folks over at Bloomberg, which shows the share of deepwater oil fields for various African governments. Six out of the ten largest global oil discoveries in 2013 were made in Africa, but the drop in oil prices over the last year and a half means two out of three investment projects on the continent are not viable at a price below $50. African production is already 19% below its peak in 2008 at 10.2 million bpd, and is set for a third consecutive drop this year.

…click on the above link to read the rest of the article…

Bearish News For Oil Growing By The Day

July 4, 2015

Bearish News For Oil Growing By The Day

Oil hit its lowest point in two months on July 1, falling on a combination of market turmoil and bearish oil figures.

WTI dipped below $57 and Brent dropped to around $62 per barrel, breaking out of a narrow range within which the two benchmarks have been trading for several months.

The ongoing crisis in Greece is weighing on global markets. The Greek government has called a referendum set for July 5th that will largely test the Greek public’s desire to endure more austerity or else risk a more uncertain path. Greece’s creditors have declined to negotiate an extension of the bailout package until after the referendum, and EU member states led by Germany have suggested the vote would be tantamount to a decision on whether or not Greece would remain in the Eurozone. Meanwhile, Greece’s banks are closed for the week, and tempers will likely flare as the days pass with people unable to withdraw cash.

The crisis is causing broader worries over the stability of global markets. Although Greece is a small country, and makes up only a fraction of the Eurozone’s GDP, the markets are keeping a wary eye on the ongoing predicament, watching for any signs that the euro itself could be affected. All of this is dragging down stock markets and oil prices.

A second major factor that suddenly pushed down oil prices is the latest EIA figures released on July 1, which showed a very surprising uptick in the level of crude oil storage. Oil inventories climbed by 2.4 million barrels, the first increase in two months. Since mid-April, the U.S. has begun drawing down its record high inventory levels, with refineries working their way through the glut and producers leveling off their production.

…click on the above link to read the rest of the article…

Tag Archives: oil inventories

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Latest Posts