Aramco listing reshapes Saudi Arabia’s OPEC oil policy… Reuters

by Jim Colburn • Friday, September 29, 2017

Rania El Gamal and Alex Lawler, Reuters discuss the Saudi’s oil policy here

“Late last year, Saudi Arabia tried to get fellow oil producers around the world to agree to reduce production. Before an OPEC meeting in Vienna in November, Saudi officials were armed with an unprecedented bargaining chip: if there was no deal, the kingdom would quit the exporter group altogether.”

“The IPO also raises questions over Saudi Arabia’s future role in OPEC, as the kingdom would become the only member with a national oil firm listed abroad. That in turn raises questions over the future of OPEC itself given the kingdom has been the group’s driving force since its inception almost 60 years ago.”

Do read the whole thing (http://www.reuters.com/article/us-saudi-aramco-insight/aramco-listing-reshapes-saudi-arabias-opec-oil-policy-idUSKCN1C31H0)

 

 

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Selected charts from “This Week in Petroleum”… EIA

by Jim Colburn • Friday, September 29, 2017

Crude oil stocks are around the 5 year average:

Production has snapped back from effects of Harvey (exports soared last week to around 1.5 mbd and Cushing stocks built by about a million, perhaps, in part, due to refinery throughput still significantly below seasonal pre Harvey highs)…

Refinery runs are still recovering… During previous hurricanes runs did not reach pre hurricane levels (in part, due to seasonality of refinery activity)…

Gasoline demand and supply have both been hit hard (Mexico, too) so we’ll keep an eye on this to see if recent builds continue…

Distillate stocks continue to tighten despite refineries coming back… Demand for diesel is strong and reconstruction efforts should require more product than usual…

Here is the site:  https://www.eia.gov/petroleum/weekly/

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Kill the Jones Act Now!… Marginal Revolution

by Jim Colburn • Wednesday, September 27, 2017

Alex Tabarrok makes the case here

“The purpose of the 1920 Jones Act was to protect American shipping interests by giving them a monopoly on US port-to-port traffic. The Act requires that all ships transporting goods between U.S. ports have to be constructed in the United States and owned and crewed by U.S. citizens (or permanent residents).

The Act, however, wasn’t enough to save the US industry. As a result, we have the worst possible situation. Extremely expensive US port-to-port shipping and only a tiny US shipping industry to show for it. By one account, there are less than one hundred Jones-Act-eligible ships.”

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Riding the energy transition… VOX

by Jim Colburn • Tuesday, September 26, 2017

Here is the abstract from Reda Cherif, Fuad Hasanov and Aditya Pande at voxeu.org:

“The motor vehicle was very quick to replace horses in the early 20th century, and the advent of the electric car suggests that another profound shift in transportation and energy could be around the corner. This column projects how different rates of electric car adoption will effect oil demand and consumption over the next three decades. In a fast-adoption scenario, oil prices could converge to the level of current coal prices by the early 2040s. Even under a slow adoption scenario, oil could become obsolete before it is depleted.”

And, here are some interesting charts from the article:

 

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Lybia, Nigeria causing problems for OPEC… WSJ

by Jim Colburn • Friday, September 22, 2017

 From Benoit Faucon, Summer Said and Sarah Kent at the Wall Street Journal:”

“Libya and Nigeria have added 550,000 barrels a day of crude-oil production since October, the month OPEC uses as a benchmark for its cuts, according to figures from the International Energy Agency.

That new output wipes out almost half of the cuts achieved by OPEC’s other members over 1.2 million barrels a day, over 1.2 million barrels a day, even more than they promised last year to slash.”

I’m interested the comment by Ian Taylor:

However, Libya and Nigeria are pumping out so much new oil that, combined with robust output from the U.S., they are keeping the world well supplied with crude and weighing down prices, said Ian Taylor, chief executive of Vitol Group, the world’s largest independent oil trader.

Mr. Taylor said he doesn’t see oil reaching $60 a barrel this year. “I would be very surprised to see it with a six in front of it before the end of the year,”he said. “I don’t think it’s going to happen.”

Currently the WTI crude oil option with the most open interest is the Dec $60 call, with 64,201 open… The Dec 45 put has over 50,000 contracts open… These active strikes seem to have traced out an expected trading range for WTI…

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US vs emerging stock markets… Bloomberg

by Jim Colburn • Thursday, September 21, 2017

Here is the link

“Stock prices in emerging markets have historically reflected that higher growth. The Emerging Markets Index outpaced the S&P 500 by 3.8 percentage points annually from its inception in January 1988 to August 2007. But they, too, have stumbled in recent years. The S&P 500 has beaten the Emerging Markets Index by 4.9 percentage points annually over the last 10 years through August.”

 

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Brent/WTI spread an incentive for US oil exports… WSJ

by Jim Colburn • Thursday, September 21, 2017

Alison Sider and Lynn Cook at the Wall Street Journal discuss the widening Brent/WTI crude oil price spread here

“A difference of at least $4 makes it attractive for a refiner in countries like China or South Korea to buy oil from shale producers in Texas and North Dakota, said R.T. Dukes, an oil expert with consulting firm Wood Mackenzie.

“Get to a $4 spread and you can take it anywhere in the world,” he said.”

The spread moved above $6 and is now at $5.88…  Here is the chart:

Do read the whole thing: https://www.wsj.com/articles/lower-u-s-oil-prices-are-a-shot-in-the-arm-for-crude-exports-1505986208?tesla=y

 

 

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September Oil Market Pod Cast…

by Jim Colburn • Wednesday, September 20, 2017

Recorded Friday, September 15th…

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Buffet wins bet…

by Jim Colburn • Monday, September 18, 2017

Alex Tabarrok at Marginal Revolution quotes the NY Post:

“NYPost: The Oracle of Omaha once again has proven that Wall Street’s pricey investments are often a lousy deal. Warren Buffett made a $1 million bet at end of 2007 with hedge fund manager Ted Seides of Protégé Partners. Buffett wagered that a low-cost S&P 500 index fund would perform better than a group of Protégé’s hedge funds.

Buffett’s index investment bet is so far ahead that Seides concedes the match, although it doesn’t officially end until Dec. 31.

The problem for Seides is his five funds through the middle of this year have been only able to gain 2.2% a year since 2008, compared with more than 7% a year for the S&P 500 — a huge difference. That means Seides’ $1 million hedge fund investments have only earned $220,000 [through 2016] in the same period that Buffett’s low-fee investment gained $854,000.”

(The interesting part is I thought I was the only one left who still reads the NY Post…)

Here is a chart from Carpe Diem which compares hedge fund returns to the S&P:

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Jarrett Renshaw, Reuters, on diesel supplies…

by Jim Colburn • Sunday, September 17, 2017

Jarrett Renshaw, Reuters, discusses diesel supplies here

“Thanks to surprising summer demand, particularly from exports, inventories of diesel, jet fuel and heating oil were heading into the busy winter at their lowest levels in three years….

Harvey’s effects cost refiners even more production of fuel, raising the possibility of shortages and higher prices if the United States suffers another major disruption or an unexpectedly frigid winter….

U.S. distillate stocks are now at three-year lows for this time of year, and 5.2 percent below their historical average…

The inventory also sets the stage for a bullish run in the diesel market. The 3-2-1 crack spread CL321-1=R, a measure of the profit refineries make from converting three barrels of oil into gasoline and diesel, is at $20.63 a barrel, the highest level seasonally since 2012, and more than $6 above the average during that time.”

Here are distillate stocks compared to the 5 year range from the EIA:

 

 

 

 

 

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