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Oil acting decisively indecisive into the weekend

May 20, 2016 10:31:59 AM EST

jOne hundred and forty-three years after Levi Strauss began marketing blue jeans with copper rivets, and the oil market is trying to make strides higher once again. But keeps changing its mind. Here are five things to consider on this final trading day of the week:

1) While Nigeria's Qua Iboe crude grade remains under force majeure, Exxon has confirmed its production is still ongoing at its oil terminal. We discussed earlier in the week how we've been seeing Nigerian loadings holding up, despite estimates that production has dropped precipitously due to outages and sabotage.

While we are seeing volumes of Escravos and Forcados grade loadings falling off, Qua Iboe loadings are holding up - affirming Exxon's rhetoric. Our ClipperData show crude loadings of Qua Iboe since the beginning of last year have averaged 317,000 bpd, close to this level so far this month:

ClipperData Qua Iboe loadings

2) There's not too much on the economic data front today; Brazilian inflation remains sky-high, rising to +9.62% mid-month (shy of Feb's 12-year high of 10.84%), while the Eurozone's current account rose to EUR27.3bln in March (a good thing). The main data release of note from the US has been existing home sales, which have come in better than expected at +1.7% MoM.

3) According to one of the lead operators in Iraq, production has probably peaked, and is set to come in shy of the country's target over the coming years. According to Bloomberg, Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April. A target of 5mn bpd is very much dependent upon oil prices, according to its deputy oil minister; cuts in capex by the government this year may see output come up short.

As our ClipperData illustrates, Iraqi waterborne exports have been running at a frenetic pace over the last year as production has increased. Exports have averaged 3.1mn bpd over the last year, some 28% higher than the 12 months prior.  iraqi crude oil loadings

4) From foreign shores back to the U.S., and the below map from the EIA highlights how great the impact of US shale has been. Natural gas-fired generation is set to surpass coal generation in the U.S. on an annual basis this year; it increased 19% in 2015, spurred on by low natural gas prices amid an abundance of supply.

Moving forward, much of the capacity additions to natural gas-fired generation will be in the proximity of the Utica, Marcellus. Haynesville and Eagle Ford shale plays:

natgas capacity

5) The theme of rising natural gas supply is not just a domestic issue. About half of long-term European natural gas contracts are linked to oil prices, historically tracking them fairly closely, But a combination of weak demand in Europe due to a mild winter, in combination with an oversupplied global LNG market, has caused pricing to detach. Brent crude prices have rallied 32% this year...front-month U.K. gas has dropped by 12%.

uk ng

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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