Oil can't get off the canvas

Jul 28, 2016 11:30:15 AM EST

Despite a weakening U.S. dollar wafting smelling salts under the nose of the crude market, prices are still unable to pick themselves up off the canvas, heading lower for a sixth consecutive day. Hark, here are five things to consider in the crude market today.

1) There's a couple of tidbits out about Iran today, which has sent me delving into our ClipperData to see the lay of the land. While much is being made of Iran's ramp up into Asia, and specifically India, China is the largest recipient of Iranian crude in the first half of the year - double that of India at ~600,000 barrels per day.

We are, however, seeing a ramp up in recent months into Europe, as Iran adjusts its focus to further claw back market share. While Iranian barrels arriving in Europe at the start of the year were minimal, we have seen this picking up strongly in the last few months. Our ClipperData show increasing exports into the Netherlands, France, Turkey, Spain and Greece, lifting European arrivals to close to 450,000 bpd in June.

Iran exports to Asia, Europe ClipperData

2) The chart below is from the mighty @jkempenergy, plotting weekly and monthly gasoline product supplied (aka demand) on the same chart. This illustrates that either monthly data is set to move considerably higher when the summer months are reported...or weekly data is overestimating demand. (a hint in the form of a movie title: I know what you did last summer).


3) In stark contrast to the colossal impact that Chinese stockpiling has had on the global oil market this year and last, India's strategic reserve-building effort is likely to have the most minimal of influences, given its modesty.

We discussed last week how India is looking to add a further 91 million barrels of SPR capacity in a second phase by 2020 - in addition to 39.1 million barrels of capacity being completed at three locations (Visakhaptnam, Mangalore and Padur) by the end of this year. The completion of this first phase is estimated to only require up to 200,000 bpd through the rest of the year.

4) While crude inventories are over 61 million barrels higher than year-ago levels, and with gasoline stocks up over 25 million barrels, distillate inventories appear the only ones insulated from the current glut. That said, as refiners look to shift away from gasoline and maximize diesel yields, distillates could be the next shoe to drop...

EIA distillate inventories

5) Finally, our ClipperData show we have seen 19 cargo loadings since the start of LNG exports from Cheniere's Sabine Pass export terminal. Through June we have seen 15 loadings reach their destination - mostly to Latin America, but also to the Middle East, Portugal and India.

The first cargo for Spain was loaded this month, and has already arrived at its destination of Reganosa's Mugardos LNG terminal.

US LNG loadings ClipperData

Export capacity is set to ramp up through the duration of the decade. While global export capacity is expected to increase by 45 percent, the share for the U.S. of the global market is estimated to rise to 14 percent.

US LNG share by 2020

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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