Oil Inventories Plunging EIA Reports

Summary of Weekly Petroleum Data for the week ending July 26, 2019
U.S. commercial crude oil inventories (excluding those i n the Strategic Petroleum Reserve) decreased by 8.5 million barrels from the previous week. At 436.5 million barrels, U.S. crude oil inventories are at the five year average for this time of year. Total U.S. crude oil refinery inputs averaged 17.0 million barrels per day during the week
ending July 26, 2019, which was 43,000 barrels per day less than the previous week’s average. Refineries operated at 93.0% of their operable capacity last week. Gasoline production increased last week, averaging 10.4 million barrels per day. Distillate fuel production decreased last week, averaging 5.2 million barrels per day. U.S. crude oil imports averaged 6.7 million barrels per day last week, down by 365,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.0 million barrels per day, 13.1% less than the same four -week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1,117,000 barrels per day, and distillate fuel imports averaged 103,000 barrels per day. motor gasoline inventories decreased by 1.8 million barrels last week and are about 2% above the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories
decreased by 0.9 million barrels last week and are about 3% below the five year average for this time of year. Propane/propylene inventories increased by 1.4 million barrels last week and are about 6% above the five year average for this time of year.
Total commercial petroleum inventories decreased
last week by 10.1 million barrels last week.
Total products supplied over the last four
-week period averaged 21.1 mi llion barrels per
day, up by 1.2% from the same period last year. Over the past four weeks, motor gasoline
product supplied averaged 9.6 million barrels per day, down by 1.3% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the past four weeks, down by 2.9% from the same period last year. Jet fuel product supplied was up 3.3% compared
with the same four -week period last year.

North Korea fires short-range ballistic missiles – South Korean military

SEOUL, July 31 (Reuters) – North Korea fired two short-range ballistic missiles early on Wednesday, the South Korean military said, only days after it launched two other missiles intended to pressure South Korea and the United States to stop upcoming military drills. The latest launches were from the Hodo peninsula on North Korea’s east coast, the same area from where last week’s were conducted, South Korea’s Joint Chiefs of Staff (JCS) said in a statement. It said it was monitoring in case of additional launches. The JCS in Seoul said later the North had fired ballistic missiles that flew about 250 km (155 miles). South Korean news agency Yonhap said they appeared to be a different type to previous launches. Colonel Lee Peters, a spokesman for U.S. military forces in South Korea, said: “We are aware of reports of a missile launch from North Korea and we will continue to monitor the situation.” He did not comment when asked whether the joint South Korea-U.S. drills, scheduled to begin next month, would continue. Japan’s defence ministry said no missiles had reached Japanese territory or its exclusive economic zone, and the launches did not threaten Japan’s immediate security. North Korea test-fired two new short-range ballistic missiles on July 25, its first missile tests since leader Kim Jong Un and U.S. President Donald Trump met on June 30 and agreed to revive stalled denuclearisation talks. The White House, the Pentagon and the U.S. State Department did not respond immediately to requests for comment.

Trump and U.S. Secretary of State Mike Pompeo both played down last week’s launches and Pompeo has continued to express hope for a diplomatic way forward with North Korea.

Since Trump and Kim’s June 30 meeting in the Demilitarized Zone (DMZ) between the two Koreas, Pyongyang has accused Washington of breaking a promise by planning to hold joint military exercises with South Korea next month and warned that these could derail any talks. North Korea has also warned of a possible end to its freeze on nuclear and long-range missile tests that has been in place since 2017, which Trump has repeatedly upheld as evidence of the success of his engagement with Kim. Trump reiterated to reporters at the White House earlier on Tuesday that he had a good relationship with Kim, but added: “We’ll see what happens. I can’t tell you what’s going to happen.” Pompeo said on Monday he hoped working-level talks to revive denuclearisation talks could occur “very soon.” Harry Kazianis, of Washington’s Center for the National Interest think tank, said the latest launches were a clear attempt by North Korea to put pressure on Washington. “For now, it seems any working-level talks between America and North Korea are on hold until the fall, as the Kim regime won’t immediately spring back to diplomacy after this round of tests,” he said. Other analysts have said North Korea will have been emboldened to press more aggressively for U.S. concessions by Trump’s apparent eagerness to hold up his engagement with Pyongyang as a foreign policy success ahead of his 2020 reelection bid.

 

The Permian Boom Is On Its Last Leg

Oil

There’s no question that over the past decade, the U.S. shale oil boom has had a tremendous impact on global oil markets. The surge of U.S. oil production broke OPEC’s hold on oil prices — at least temporarily. The Permian Basin is responsible for the greatest oil production gains in the U.S. in recent years. Over the past eight years, there has been phenomenal production growth in the Permian. Between August 2011 and today, Permian Basin oil production quadrupled, with oil production there topping 4 million barrels per day (BPD) earlier this year:

But recently a number of reports have highlighted a slowdown in U.S. shale oil growth. In its most recent Drilling Productivity Report, each of the six regions tracked by the Energy Information Administration (EIA) — Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara, and Permian — still showed a year-over-year increased in oil production.  However, if we look at the year-over-year gains over the past few years, there has been a noticeable slowdown in oil production growth. This slowdown is particularly pronounced in the Permian Basin. The most recent estimates in the Permian are that year-over-year production is growing today at just over half the level of a year ago. Production growth there has been in rapid decline since peaking a year ago.

Permian Basin year-over-year oil production growth.

Should this trend continue, then OPEC’s strategy of maintaining production cuts should ultimately bear fruit. As U.S. shale oil production slows and inevitably declines, OPEC stands ready to regain market share. The wildcard in this scenario is global demand growth, which the International Energy Agency (IEA) recently revised downward for 2019 to 1.1 million BPD. A year ago the IEA had forecast 2019 demand growth at 1.5 million BPD, and subsequently cut that to 1.2 million BPD on slower growth from China. OPEC is certainly watching the global demand numbers and U.S. production numbers closely. At some point both will fall, and whichever one falls first will likely dictate oil prices for the foreseeable future.

The EIA projects that U.S. shale oil will continue to grow for most of the next decade. Should it falter sooner — while global demand continues to grow at >1 million BPD — then we shall see a return to higher oil prices.

UAE was Japan’s top crude supplier for second month in June

Tokyo — The UAE was the largest crude supplier to Japan for the second consecutive month in June as the Asian importer continued to look for suppliers in the Middle East, Americas and other regions to replace Iranian oil. The US sanctions waiver expiry on May 2 for Iranian oil imports forced Japan to seek a wide variety of alternative supplies including from Ecuador, creating a need to procure more light sour grades to blend with heavy grades from the South American producer. Japan’s crude oil imports from the UAE soared 75.6% year on year to 963,392 b/d in June, driven by increased imports of its light, sour Murban crude, preliminary data released Tuesday by the Ministry of Economy, Trade and Industry showed. The UAE’s Upper Zakum crude as well as the US’ Mars crude were among Japanese importers’ preferred grades to replace Iranian barrels, according to sources with the importers. Murban crude meanwhile can be used as a blendstock with heavier crudes, such as those from Ecuador, before being fed into a crude distillation unit, industry sources said. Japan typically bought mostly Iranian Heavy crude from Iran prior to the end of the US sanctions waiver. Japan’s largest refiner JXTG Nippon Oil & Energy was a regular term lifter of Iran’s South Pars condensate before the US sanctions waivers expired, according to market sources. From the Middle East, Japan’s crude imports from Qatar, the third largest supplier to Japan in June, also surged 78.6% year on year to 241,570 b/d in the month, driven by increased imports of grades including Qatar Marine, which is among grades cited by Japanese refiners to replace Iranian barrels. Middle Eastern suppliers’ share of Japan’s crude imports dipped to 87% in June from 88% a year earlier as a result of increased imports from the US, Ecuador and Kazakhstan, according to METI data. Japan’s crude imports from the US averaged 80,799 b/d (which is virtually nothing) in June, more than five times higher than 14,597 b/d in the year earlier, though it was less than the all-time high of 199,138 b/d in December 2018.

Countries Jun 2019 (b/d) Share (%) Jun 2018 (b/d) % chg on year May 2019 (b/d) % chg on month
UAE 963,392 34.7 548,581 75.6 1,026,413 -6.1
Saudi Arabia 929,234 33.5 916,593 1.4 985,948 -5.8
Qatar 241,570 8.7 135,290 78.6 252,324 -4.3
Kuwait 215,771 7.8 175,579 22.9 249,353 -13.5
Russia 86,931 3.1 111,374 -21.9 140,724 -38.2
US 80,799 2.9 14,597 453.5 65,896 22.6
Kazakhstan 69,951 2.5 35,199 98.7 52,375 33.6
Oman 67,994 2.4 50,849 33.7 81,350 -16.4
Ecuador 48,627 1.8 33,940 43.3 48,819 -0.4
Vietnam 24,477 0.9 0 0
Other 49,166 1.8 373,507 -86.8 140,191 -64.9
Total 2,777,911 100.0 2,395,509 16.0 3,043,392 -8.7
Countries Jan-Jun 2019 Jan-Jun 2018 % chg on year
Saudi Arabia 1,129,219 1,184,221 -4.6
UAE 841,548 736,798 14.2
Qatar 258,462 239,644 7.9
Kuwait 253,323 234,565 8.0
Russia 137,699 139,901 -1.6
Iran 94,496 162,222 -41.7
US 77,525 9,827 688.9
Oman 59,576 47,426 25.6
Bahrain 46,791 34,029 37.5
Ecuador 38,996 28,663 36.0
Other 132,402 224,495 -41.0
Total 3,070,038 3,041,792 0.9

 


China’s Crude Imports From Saudi Arabia Smash Record In June

China imported 39.58 million mt of crude in June, or 9.631 million bpd, up 15.2% year on year, Hengli refinery

China’s crude imports from Saudi Arabia surged to 7.72 million mt, or about 1.89 million barrels per day (bpd) in June, shattering the record of 7.33 million mt hit in March, according to Chinese customs data. Arrivals from Saudi Arabia jumped around 64% last month from 4.7 million mt (1.19 million bpd) in May, data from the General Administration of Customs (GAC) showed. Such a surge was partly attributable to the startups of two private refiners – Hengli Petrochemical and Zhejiang Petrochemical – which significantly boosted crude processing capacity in the country, market sources said. Both of them have crude supply agreements with Saudi Aramco, according to the sources.

By contrast, China’s Iranian crude imports sank near 60% from the same period of last year to 855,638 mt or 209,060 bpd in June as US sanctions bit.

China imported 39.58 million mt of crude in June, or 9.631 million bpd, up 15.2% year on year, but down 1.64% from May, according to GAC.

Chinese refineries’ crude throughput rose by 7.7% to around 13.07 million bpd in June, smashing the record of 12.68 million bpd in April, according to data released by the National Bureau of Statistics. Nick Bit: Another Hedge Fund lie. So much for the bullshit that demand for oil from China is dropping

Oil bulls look to Fed rate cut to overcome demand worries

Weaker dollar, lower bond yields could come to the rescue of oil bulls, analysts say

Getty Images Will Jerome Powell ride to oil bulls’ rescue

When it comes to the oil prices, market bulls are hoping Jerome Powell and his band of Federal Reserve policy makers can do what falling U.S. crude inventories and rising geopolitical tensions haven’t managed by giving crude a lasting kick higher. Indeed, despite six straight weeks of falling U.S. crude inventories and the rising danger of military conflict between the U.S. and Iran near the Strait of Hormuz, the world’s most sensitive oil choke point, West Texas Intermediate crude CLU19, +1.41%, the U.S. benchmark, is off 2.1% in July, while Brent crude BRNU19, +1.26%, the global benchmark, is down around 1%. So far this year, WTI is up 26%, while Brent has gained around 19%, bouncing back from a fourth-quarter 2018 selloff. But both have lost ground over the past 12 months by around 18% and 15%, respectively. Ritterbusch said a Fed cut — and the central bank’s communication efforts regarding the outlook for additional easing — could help turn the tide. But while a rate cut might help soothe demand-related worries about the U.S. and global economy, easier Fed policy is more likely to provide a boost for oil via a weaker U.S. dollar. The dollar often carries an inverse correlation with commodities. A weaker dollar, for instance, makes goods priced in dollars less expensive to users of other currencies while a stronger dollar has the opposite effect. The lack of a rally has left some market bulls nervous. The Organization of the Petroleum Exporting Countries and the International Energy Agency, which represents oil-consuming economies, have both lowered their forecasts for demand growth. The International Monetary Fund earlier this month cut its outlook for global economic growth and European Central Bank President Mario Draghi last week lamented a “worse and worse” outlook for the eurozone’s manufacturing sector. Ryan Fitzmaurice, energy strategist at Rabobank, also sees scope for a Fed rate cut to give crude a boost, but he’s skeptical that demand worries have been the main reason for crude’s lackluster response to seemingly bullish supply-related developments. Instead, he argued that momentum- and trend-oriented trading strategies are sending signals to short oil, which has contributed to the very low exposure to long oil positions by large money managers, as reflected in commitments-of-traders data, relative to history (see chart below). Large speculators are very long bonds, the U.S. dollar, and equities, while being mostly short the dollar. There’s room for a “buy the rumor, sell the fact” type reaction to the Fed decision on Wednesday, that could see some near-term unwinding of those positions to the benefit of oil, Fitzmaurice said, in an interview.

Meanwhile, crude still has a number of underlying positives in its favor, he said, including supply outages, Iran and Venezuela facing crippling sanctions and rising geopolitical risk.

“I think this week, with Wednesday’s decision, oil is going to be taking its cues from how the dollar reacts and how bonds react, but I think medium- to long-term you could see oil stand on its own two feet relative to the dynamics that are specific to the industry,” he said.

World’s Seventh Largest Oil Company Halts Shipments Through Hormuz Strait Amid Iran Tensions

A boat of the Iranian Revolutionary Guard sails next to Stena Impero, a British-flagged vessel owned by Stena Bulk, at Bandar Abbas port, July 21, 2019.
© REUTERS / Iran, ISNA/WANA A boat of the Iranian Revolutionary Guard sails next to Stena Impero, a British-flagged vessel owned by Stena Bulk, at Bandar Abbas port, July 21, 2019.

In recent weeks, the US and the UK have announced separate plans to put together military coalitions to patrol the Persian Gulf and the Strait of Hormuz and ‘protect commercial vessels’ operating in the area against an alleged Iranian threat. British multinational oil and gas conglomerate BP has not sent tankers through the Strait of Hormuz since July 10, and has no plans to resume such transit anytime soon, chief financial officer Brian Gilvary revealed Tuesday, Reuters reports. “We will continue to make shipments through there but you won’t see any BP-flagged tankers going through in the short term,” Gilvary said, clarifying that the company plans to use chartered tankers to ship crude out of the oil-rich region instead. On July 10, the company reported that three boats belonging to the Islamic Revolutionary Guard Corps allegedly attempted to block a BP tanker traversing the Strait of Hormuz while being shadowed by the HMS Montrose frigate. A British Ministry of Defence spokesperson said the incident forced the Montrose to confront the Iranian vessels. No casualties were reported in the alleged incident. Tensions between Iran and the UK spiked to their highest levels in years this month after Royal Marine commandos boarded and seized the Grace 1, a Panamanian-flagged oil tanker loaded with Iranian oil off the coast of Gibraltar on July 4. London alleged that the ship was headed for an oil processing terminal in Syria, in violation of European Union sanctions against the war-torn country. Iran denied the claims.Last week, in response to the incident involving the Stena Impero, UK Foreign Secretary Jeremy Hunt announced plans to put together a European-led coalition separate from a similar US partnership to patrol the waters of the Persian Gulf and the Strait of Hormuz in a bid to “protect” commercial vessels against possible Iranian interference. Germany, France, Denmark and Italy have reportedly expressed interest in London’s idea, with Iran condemning the plans and vowing to “protect” its “1,500 of Persian Gulf coastline” and the surrounding waters.  Up to one third of the world’s sea-bound oil supplies pass through the Strait of Hormuz each day, with the vital strategic waterway carrying oil from oil rich nations of Iraq, Saudi Arabia, Kuwait, and the small Gulf States, as well as Iran. BP is one of the largest energy conglomerates in the world, with $282 billion in assets and $9.58 bill in net profits in 2018. According to World Atlas, the company’s $222.8 billion in total revenues made it the seventh-largest oil company in the world

Fmr Intel Director: Trump ‘Consolidating Personal Control,’ Amassing ‘Unprecedented Executive Power’

Donald Trump ICE

National Intelligence Director Dan Coats, viewed by many as one of the last remaining non-acolytes among the administration’s intelligence officers, submitted his resignation Sunday, effective August 15. Conversely, Coats’s chosen replacement, Rep. John Ratcliffe (R-Texas), is a staunch supporter of President Donald Trump, an attribute he displayed in his grilling of former Special Counsel Robert Mueller during last week’s House Judiciary Committee hearing. The latest shakeup at the top of the national security hierarchy has raised major concerns for at least one former intel director. Rolf Mowatt-Larssen, who served for more than three years as the Director of Intelligence and Counterintelligence at the U.S. Department of Energy and more than two decades as a CIA officer, warned Sunday that the absence of non-partisan actors at the head of America’s security agencies does not portend well for the future of law enforcement. “Trump is consolidating his personal control over the intelligence community. Between loyalists Barr and Radcliffe, and pliant CIA and FBI directors, Trump is close to neutralizing intelligence and law enforcement as spoilers in his bid to amass unprecedented executive power,” Mowatt-Larssen said. Mowatt-Larssen, a 26-year intelligence veteran, also weighed-in on Ratcliffe’s inexperience and seeming unwavering allegiance to Trump, which he believes presents real problems in his future role of providing oversight to all of America’s 17 intelligence agencies. “Ratcliffe is unprepared and unqualified to be DNI. He lacks the experience to manage an $80 billion dollar enterprise consisting of 17 intelligence agencies.  Moreover, Trump selected him only for his loyalty. That conflicts with the DNI’s duty to speak truth to power,” Mowatt-Larssen continued. Ratcliffe, a Republican and former prosecutor from Texas currently serving his third term in the House, has wholeheartedly defended Trump in the face of the Russia investigation. He has no prior experience in national intelligence. According to the New York Times, Coats had long been expected to depart of his own accord due to his tumultuous relationship with Trump, but remained in his position to avoid appearing forced out. Trump reportedly asked Coats to remain longer in February, but in a meeting last week with Trump and Vice President Mike Pence, Coats said he would no longer continue in the position. Nick Bit: This will end in disaster. Trump is a colossal fuck up. You can kiss America goodbye. Sooner or later all great empires collapse from within. In Americas case its sooner!

Oil advances most in almost three weeks as U.S. rate cut awaited

NEW YORK (Bloomberg) – Oil rose the most in almost three weeks on speculation that demand will get a bump from a potential U.S. Federal Reserve rate cut aimed at spreading economic benefits more broadly. Futures in New York rose 1.2%, extending last week’s 1% advance. Later this week, the Fed is expected to lower borrowing costs for the first time in more than a decade. Meanwhile, Chinese and U.S. negotiators are set to meet in a bid to resolve a trade war between the world’s top economies. On Wednesday, government data is predicted to show that American crude stockpiles declined for a seventh straight week. “Markets are holding their breath until Wednesday,” said Phil Streible, senior market strategist at RJO futures. “It will be like the Superbowl of oil. There’s the EIA stockpile numbers that are coming out and the Fed announcement a couple of hours later. If we see a Fed cut and a draw on crude stockpiles, there could be big movement Wednesday on the price of oil.” Simmering political tensions in the Middle East, which have raised geopolitical risk across the major oil-producing region, are also continuing to support prices. The U.K. has sent one of its Type 45 warships to the Strait of Hormuz, after Iran seized a British tanker, as the U.S. and others seek to build a coalition to protect vessels traversing the crude chokepoint. Despite the gains, oil is heading for its second monthly loss this year as the long-term outlook for the global economy remains shaky. Hedge funds added to bets on a slump in New York futures at the fastest pace in almost a year, with disappointing manufacturing data out of America and Germany last week bolstering fears of declining demand. “Demand is soft right now,” said Streible. “The Chinese need to come in and start buying crude oil and we need to see a pickup in demand in the U.S. for the price to rise more.” West Texas Intermediate for September delivery rose 67 cents to settle at $56.87 a barrel on the New York Mercantile Exchange, the biggest advance since July 10 and its third straight gain. Brent for September settlement climbed 25 cents to $63.71 a barrel on the ICE Futures Europe Exchange. It capped a 1.6% weekly gain on Friday. The global benchmark crude was at a $6.84 premium to WTI.

Oil edges up on prospect of U.S. interest rate cut and War in the Gulf

NEW YORK (Reuters) – Oil prices edged higher on Monday as the prospect of an expected interest rate cut by the U.S. Federal Reserve overshadowed pessimism over U.S.-China trade talks and worries about slower global economic growth. Traders and investors are watching the Fed this week, with U.S. central bankers expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago. U.S. President Donald Trump said a small Fed rate cut “is not enough.” Economic growth in the United States slowed less than expected in the second quarter, strengthening the outlook for oil consumption. Crude prices were also supported by supply risk as tensions remained high around the Strait of Hormuz, through which about a fifth of the world’s oil passes. Tensions have spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the seizure of an Iranian tanker by British forces near Gibraltar. Britain told Iran that if it wants to “come out of the dark” it must follow international rules and release the British-flagged tanker. Following the end of a waiver on U.S. sanctions at the start of May, China’s crude oil imports from Iran sank almost 60% in June from a year earlier, Chinese customs data showed on Saturday.