Market Currents: Saudi crude exports show April pullback

Crude is rebounding into the weekend after yesterday’s solid dose of the WBWs (whoop-bang-wallops, lest we forget). Although prices are now mired below their 200-day averages, after dropping ~15 percent from mid-last month, some bargain-hunting has entered into the fray at the end of the week. Hark, here are five things to consider in oil markets today:

1) It is great to see this article about how elevated volumes of waterborne crude flows are causing Malaysia’s oil shipping lines to become clogged – it vindicates us at the good ship Clipper for consistently highlighting how Asian floating storage has not been tanking, while others have said to the contrary.

We can see from our ClipperData that floating storage off Singapore and in the Straits of Malacca is still holding up around 50 million barrels, as global waterborne loadings continue to tick higher:

singapore floating storage 050517.jpg

2) Strong waterborne flows are further affirmed in the chart below, which shows that OPEC deliveries have climbed higher for five consecutive months, clambering over the 28 million barrel per day mark in April. If you’re wondering why the oil market is losing faith in OPEC balancing the market, you only need to look here:

OPEC deliveries May 2017.jpg

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3 ) In last night’s appearance on CNBC Asia we discussed how OPEC production cuts haven’t been working so far, because whatever apparent cuts are being made are not showing up in lower exports. We also mentioned how Saudi Arabian export loadings have dropped considerably last month, now down well over 600,000 bpd versus October’s reference level.

Even though flows have been choppy in recent months, the kingdom is currently exceeding its compliance-agreed cut of 486,000 bpd, leading by example as the May 25 OPEC meeting approaches.

Saudi loadings April 2017.jpg

4) The below chart popped up on my Twitter feed earlier, and is a useful reminder that despite all the focus on the supply-side of the picture, oil demand growth is set to continue rising at a pace over 1 million barrel per day over the next five years – likely surpassing 100 million barrels per day by the end of the decade.

The IEA projects that 70 percent of the growth over the coming years will come from Asia, while the detrimental impact on demand from electric vehicles is still a ways off into the future.

oil demand growth IEA.jpg

5) Finally, the chart below shows how Chinese independent refiners have strongly boosted refinery run rates in 2015 and 2016, driven by them being unshackled and allowed to import crude directly, rather than buy it from state-run companies.

But as the government tries to crack down on pollution, these private refiners are having to dial back on their refinery run rates, as the government attempts to quell their activity by denying them product export licenses. Although they can sell their products into the domestic market, a product glut has formed, and refining margins are getting pressured lower.

independents boost runs.jpg

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