Trundling crude

Aug 18, 2017 11:47:12 AM EST

WTI is trundling lower into the weekend, still looking listless after hitting its head on resistance around the $50 mark. As the weekend beckons, hark, here are some things to consider in oil markets today:

As Middle East deliveries tank to the U.S. so far this month (no pootling going on there), stronger flows from elsewhere are helping to buoy total waterborne imports. Angola has reined in its export loadings to China last month (the destination for some ~60 percent of its barrels so far this year, given its debt-for-oil obligations), with the U.S. being the leading beneficiary of this latest change in flows.

Arrivals of Angolan crude to the U.S. so far this month are at the highest monthly pace since 2013, after running at a measly 8,000 bpd in March. Eleven different Angolan grades have arrived so far this year, with heavy sweet Clov being the most favored. The Atlantic Coast is the leading recipient of Angolan crude, although we have seen a delivery of heavy sweet Dalia to the U.S. Gulf Coast this month as heavier grades become harder to come by:

Angolan crude to the US ClipperData Aug 2017.jpgTotal Angolan export loadings dropped in July, but are rebounding thus far in August. It looks like flows are set to stay elevated, with September's loading program at 1.6 million barrels per day, before rising to 1.7mn bpd in October's loading program - a 13-month high (and above their OPEC production cut deal level of 1.67mn bpd).

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As the U.S. continues to pull in close to 5 million barrels per day of waterborne crude, exports of products continue to rise. Combined exports of gasoline and middle distillates have been holding above the 2.5 million barrel-per-day mark in recent months, driven by international demand for diesel. 

Mexico is the leading destination for U.S. middle distillates (as well as gasoline), and U.S. loadings to the country have risen nearly 50 percent through the first half of 2017 versus year-ago levels. Brazil's increase has been even more impressive; barrels flowing to the largest economy in South America have basically doubled. As the two countries continue to struggle with refinery issues, they now account for thirty percent of U.S. exports:

Brazil Mexico US imports middle distillates ClipperData Aug 2017.jpgThe U.S. is managing to export close to a million barrels of gasoline a day even as domestic demand continues to tick higher because refineries are running at a record pace (as discussed on CNBC Asia this week). This record pace is exhibited below in the chart of gasoline production from the EIA. Some 44 percent of the input to refineries is turned into gasoline. This is why we see Gulf Coast gasoline inventories 7 percent above year-ago levels.

gasoline production.jpg

Finally, looping back to where we started, and OPEC flows. It is interesting to note that total OPEC exports into Asia are firmly rising through the first seven months of the year compared to year-ago levels. But total offtake into Asia is running even stronger.

Accordingly, OPEC's share of deliveries has dipped to as low as 60 percent in recent months, after being as high as 70 percent in September of last year. This drop coincided with Saudi exports into Asia dropping to a ten-month low. The production cut deal means OPEC members are missing out on meeting higher supply - ultimately losing market share: 

OPEC exports into Asia ClipperData.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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