Oil is on the defensive again, retracing from resistance in recent days amid bearish U.S.-centric data of rampant production increases. Despite the Good Friday holiday, we get the EIA inventory report at the usual time tomorrow, but for now, hark, here are six things to consider in oil markets today:
1) As oil prices based on the Dubai-Oman benchmark remain more expensive than U.S.-based WTI, Latin American crude continues to be pulled towards Asia. This is displacing other flows, translating into lower U.S. imports. We are over halfway through the month, and imports from Central and South America are at the slowest monthly pace on our records.
Our ClipperData show that imports this month continue to drop from Brazil and Colombia, while Ecuadorian grades, Napo and Oriente, are completely absent. Only Venezuelan grades are showing strength versus the month prior:
2) The latest monthly IEA report has been interpreted as somewhat downbeat, despite the prognostication that ‘the market is already very close to balance’. This is because demand growth has been adjusted lower by 200,000 bpd in Q1, and by 100,000 bpd for 2017 on the whole, to +1.3mn bpd.
While Asian fuel demand has been the backbone of oil demand growth for many a year, signs of stuttering from various parts of the region – including South Korea, Japan and India – means demand growth may not be as robust as we have come to expect.
The second piece of the puzzle is inventories. The agency reported that OECD oil and product stocks fell by a mere 8.1 million barrels in February after January’s rise. This leaves them at 3.055 billion (beeelion) barrels, some 330 million barrels above the 5-year average (aka, the normalized level that is the goal of the OPEC production cuts).
Including the IEA’s estimate for March, it projects that inventories still climbed on the aggregate through the first quarter of the year, up by 38.5 million barrels:
3) Yesterday’s feature on NPR’s Texas Standard addressed the issue of fracking sand, and how it is in a bull market. The interview can be found here, while here are some of the sand stats quoted:
4) While so much focus remains on the oil boom in the Permian basin, it is important to note that according to the latest EIA drilling productivity report, natural gas production in the basin is set to reach a new milestone, clambering over 8 Bcf/d. This has prompted Blackstone Group LP to takeover EagleClaw Midstream Ventures for $2 billion.
6) Finally, this piece out on RBN Energy references ClipperData, and how we are counting cargoes and using port agents to identify the quantity, type and quality of crude that is being imported into the U.S. on an almost real-time basis.