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Saudi still pushing for market share

Oct 5, 2016 12:33:22 PM EST

Oil prices are moving higher once again, boosted by a supportive weekly inventory report (and not OPEC rhetoric....refreshing!). As further distractions await in the coming days via data deluges, hark, here are five things to consider in oil markets today.

1) Today is national do something nice day, and Saudi Arabia has responded accordingly, adjusting most of its official selling prices (OSP) lower for its various grades to various geographies for November (h/t @oilsheppard).

The chart below shows Saudi Aramco's OSPs for Arab Light and Arab Medium to the U.S. - the two predominant grades which account for 90 percent of U.S. imports from Saudi. Their OSPs have both been adjusted to be more competitive for November:    

Saudi_OSP_to_US_Nov_2016.jpg

2) Our ClipperData show below how Saudi exports to the U.S. in September have clambered to a 5-month high, back above the 1 million barrel-per-day mark for the first time since April.

While Arab Heavy is only a marginal volume of Saudi exports to the U.S., Arab Extra Light has been rising in prominence in recent months, to the highest level since mid-2012 - accounting for nearly 9 percent of Saudi imports in September:

Saudi_imports_to_US_ClipperData.jpg3) As for today's weekly inventory report, the counterseasonal draw to oil inventories can be summed up by higher runs, lower imports. Even though runs are coming off, as they seasonally should, they are nearly 500,000 bpd higher than this time last year (hark, below), while waterborne imports continue to remain subdued, coming in below 5mn bpd last week.

refinery_runs_Sep.jpg

A rebound in gasoline throughput and lower runs encouraged just a minor build to gasoline stocks, while a draw to distillates makes sense from a seasonal perspective. A fairly supportive report on the whole. 

4) Caelus Energy has just published a press release, announcing a large-scale discovery of an estimated 6 billion ANS_shipments_Alaska.jpgbarrels in Alaska. Recoverable reserves are estimated at 2.4 billion barrels. In addition to this whopping find, there is adjoining acreage which could boost the estimate to over 10 billion barrels.

The Smith Bay development may add production of 200,000 bpd to the region, which would leave via the Trans-Alaska Pipeline System (TAPS). Our ClipperData show (hark, right) that production is around a modest 500,000 bpd, with the vast majority of this output being shipped out via TAPS.

The chart below illustrates that this find would boost Alaska's proved reserves by 80 percent, given the state's current proved reserves were at 2.86 billion in 2014. 

Alaska_proved_reserves.jpg

5) Finally, we pay a visit to an old friend - the US dollar versus oil. Traditionally, these two adversaries move in opposition to each other, given much of the world purchases US-denominated commodities in non-US currencies. But given the latest price-supportive shenanigans of OPEC, and the returning prospect of an interest hike before the year is out, the two have joined forces in the last week and have pushed on higher together:

 

WTI_versus_US_dollar.jpg

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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