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Crude unable to steady the ship

Jun 27, 2016 10:49:05 AM EST

As the U.S. dollar flexes its muscles once again and broader markets adopt a decidedly risk-off stance, oil prices are charging lower amid unknowns surrounding last week's Brexit decision. Hark, here are five things to consider in oil and energy today.

1) Nigeria's Minister for Petroleum Resources has said output is up to 1.8 - 1.9 million barrels per day, and could return to 2.2mn bpd amid ongoing negotiations with militants. We can see from our ClipperData in June that export volumes are stronger than last month - despite some stymied loadings of the problem grades Brass River and Bonny Light. Strength in loadings of Qua Iboe are helping to offset this - at their firmest pace since January.

ClipperData Nigeria crude oil loadings June 2016

2) The new and extended Panama Canal was inaugurated yesterday - a project which took nine years and $5.4 billion dollars to complete. The waterway has been doubled so that it can accept larger ships - such as VLGCs (Very Large Gas Carriers) carrying U.S. LNG exports, but still is unable to accept VLCCs (Very Large Crude Carriers). The expansion is expected to boost shipments to U.S. East Coast ports, at the expense of West Coast ports.

3) As we limber up for an impending holiday weekend, a record number of travelers are set to be on the move amid the lowest gasoline prices in more than a decade. Almost forty-three million people are set to travel this weekend, with 85 percent of them set to travel by car. (0.01 percent by tricycle).

The retail gasoline price is currently $2.30/gallon, down nearly 20 percent compared to this time last year. This is in contrast to 2008, when the retail price was over $4/gallon. Accordingly, gasoline demand is at a record high - as people drive more miles, while increasingly purchasing gas guzzlers.

three day weekend

4) A combination of rising longs and reduced short positions by hedge funds meant net longs increased last week in the latest CFTC data to June 21; speculators were subsequently wrong-footed by the Brexit vote, being positioned for both a 'Remain' vote and an oil rally.

CFTC data 062716

5) Finally, the NDRC is forecasting that Chinese coal output capacity will fall by 280 million tons this year - the equivalent of 7.5 percent of the coal produced by China last year.  This comes amid the release of a study from the IEA today that air pollution leads to 6.5 million deaths per year.

China consumes close to fifty percent of the world's coal; an ongoing focus on retiring coal-fired power plants and stricter standards for motor vehicles would help it to make significant strides in reducing pollution.

 

About the Author

Matt Smith

deciphers and distills what is most relevant across the energy complex into cohesive and pithy knowledge you can use. The belly laugh is a bonus.

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