Happy Nonfarm Friday Eve! Prices are pushing on for yet one more day, under the gravitational pull of another informal producer meeting - this time in Istanbul next week for certain OPEC members and Russia. As prices are lifted by the wings of hope once more, hark, here are five things to consider in oil / energy markets today:
1) Yesterday we took a look at how Saudi Arabia oil exports to the U.S. have just clambered above 1 million barrels per day in September - for the first time since April. Saudi just tweaked most of its OSPs lower for November, somewhat a counterintuitive move given the kingdom is apparently on the brink of a production cut.
Should Saudi participate in a production cut, it will likely rope in its closest comrades in the crude cartel, Kuwait and UAE. While the U.S. market is not that large for UAE, it has still sent a cargo in each of the last four months.
Our ClipperData show that Kuwait, however, is a consistent supplier to both the West and Gulf coasts, with imports averaging 235,000 bpd for this year through September, to twelve different destination points - the majority of which are Valero refineries. The import split between the two areas is 60 / 40, favoring the Gulf coast.
2) Yesterday's draw to weekly crude inventories means that total U.S. inventories have dropped below 500 million barrels for the first time since January; stocks have now dropped over 25 million barrels in the last five weeks.
U.S. crude oil days of supply is measured by inventories divided by refinery inputs (4-wk MA). The chart below shows that US crude oil days of supply are coming back in line with last year's levels, as inventories fall and refinery runs hold up much better than last year.
3) Checking back in on the U.S. LNG export market, our ClipperData show that Cheniere's Sabine Pass terminal has now exported 33 cargoes to thirteen different countries (with three tankers still on the water). The dip seen in September relates to 2 weeks of maintenance at the export terminal; volumes should show a return to form this month.
4) This piece on Bloomberg addresses the increasing efficiencies of U.S. shale, highlighting how production cost decreases have been unable to keep pace with the decline in oil prices.
While Pioneer Resources has dramatically improved its efficiencies in some areas - such as 25 wells in the Wolfcamp shale (in the Permian basin) yielding 95 percent more oil in the first 30 days than older methods used in mid-2014 - it has drilled more than 200 wells in the region last year which have achieved lesser results. No two wells are alike.
Another consideration is that E&P companies are not purely producing crude. In fact, the industry mix between producing oil and gas is roughly half and half. Hence, even though producers' efficiencies have not been able to fully offset falling prices, those producers that are tilted more toward crude production have fared much better in terms of profitability per barrel:
5) Finally, some 80 percent of electric vehicles are concentrated in four countries: China, U.S., Netherlands and Norway. After global electric car sales climbed to 1.26 million units sold last year, the U.S. has just achieved a milestone in September: 500,000 electric vehicles have now been sold in this country alone.