2.9 vs .9!+ read more
The Wall Street Journal quotes the excellent Amrita Sen:
““Libyan production was rising, they were talking about getting to 1 million barrels a day, I’m not sure they were going to get to that but the fact that they’re down to less than 500,000 barrels, that’s a big change,” said Amrita Sen, chief oil analyst at Energy Aspects.
This has coincided with U.S. data showing that product stocks have shrunk sharply, which is also positive for prices, Ms. Sen added.
Since OPEC instated cuts—which Libya was exempt from—there has been a 94% compliance rate from its members, but doubts on the effectiveness and sustainability of the deal kept prices in a narrow range for much of the year. Non-OPEC compliance has been more questionable.
“There’s skepticism around Russia but I think the main thing has been that the Russian refinery maintenance is undoubtedly a lot higher than people realized and that’s why their exports have been high. I think their May export program will be a lot lower,” Ms. Sen said.””+ read more
Fereidoon Sionshani from energypost.eu has a nice piece on peak oil demand (remember “peak oil supply” about 10 years ago?) here…
He quotes Redburn: “In a report titled When will global oil demand peak? Rob West, an analyst at Redburn, an investment research and advisory service in the City of London points out that: “Global oil demand grew +1.1Mbpd pa in the last decade. Peak demand is seen well beyond 2035 by BP, in 2040 by the IEA, in 2030 by McKinsey and in 2029 by OPEC. But at $55-60 oil, we argue demand can slow to <0.5Mbpd pa from 2020 and peak in 2026.””
“West identifies 5 major trends, all contributing to intensified market competition and – one might add – potentially devastating consequences for the oil majors.
Alternatives to oil, especially in the critical transportation sector, will make oil vulnerable to behavioral and technological disruptions (see table);
Electric vehicles – increasingly charged from renewable sources – will begin to eat into internal combustion engine’s (ICE) dominant market share – a trend that many expect will accelerate once EVs move mainstream and a charging infrastructure is in place;
Oil subsidies, once prevalent in many countries – are expected to dwindle or be phased out entirely as already witnessed in a number of countries.
Cheap solar , wind and gas-fired generation will reduce oil demand in the global electric power sector; and
Travel demand will dwindle due to aging population and the rise of “virtual travel.””
There are some interesting charts, too, do check out the whole article…
But After reading the article, I see no reason to sell gasoline, distillates or crude oil…
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The markets are reacting to good demand numbers and sharp stock draws in distillates and gasoline… Here are the charts from This Week in Petroleum:
Crude stocks are still building but should begin to draw as refiners come back from seasonal maintenance:
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but I’m not sure what… “Bloomberg sees rare drop in terminal users”- Financial News:
“The number of terminals used by traders, fund managers and other finance industry professionals fell by 3,145 to 324,485 in 2016, according to a report by Burton-Taylor International, a consultancy acquired by the interdealer broker TP Icap earlier this year.
The fall in the number of terminals, for which Bloomberg charges $22,000 per year for a subscription, was due to staffing reductions across the industry, according to the report.”
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From Oppenheimer, here is a quilt (I love the quilt!)showing returns from different asset classes over 10 years:
One note… The quilt has an “equity” perspective, or a bias toward buying assets… Growing up in the world of commodities, we learn that selling commodity futures is as easy as buying them…+ read more
“Days supply” is a measure which compares stock levels to current demand… Stock levels divided by daily demand gives us a sense of how tight or plentiful supplies are… Each week the EIA’s “This Week in Petroleum” publishes charts showing this year and last year’s days supply… Relative to last year, only diesel is “tighter” as we leave winter:
Last year’s mild winter (and recent cold weather) is pointed to as the culprit, but days supply has crossed “tighter”… Here is gasoline:
Weak gasoline demand, while disputed by many analysts, pushed current days supply over last year… But the number is close to last year going into its season…
Bottom line is we may see a stealth improvement (assuming one is bullish) in oil inventories showing up first in the days supply measure…
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Used in fracking, here is the Wall Street Journal on the demand for sand:
“The tightening market has already sent prices marching toward $40 a ton or more, by some estimates, up from $15 to $20 a ton in the second half of 2016. Increasing sand orders are also raising demand for railcars and trucks to transport it from mines in states like Wisconsin to shale fields in Texas and Oklahoma.”+ read more
In the race to develop a world benchmark for a commodity increasing in importance globally, ICE is winning… Here is the Wall Street Journal:
“By May, global gas will have a futures contract based on liquefied exports coming out of the U.S., according to Intercontinental Exchange Inc. and S&P Global Platts. The two companies are launching the effort, an ICE traded contract, as liquefied gas supplies are soaring, raising interest from suppliers and traders eager to lock in or bet on prices.”
“LNG has long been sold mainly through yearslong contracts priced off oil, gas that is piped, and price reporting agencies’ data. But so much new supply is coming world-wide from the U.S. to Australia that it is likely more than long-term consumers can take, forcing them to resell it. Spot market activity has already surged and many traders are eager for derivatives to deal gas globally.”
And here are Tim Boersma and Tatiana Mitrova from their piece, A Changing Global Gas Order, published by Columbia/SIPA:
“What we see unfolding is what some have labeled as a reconfiguration of global LNG markets, which today constitutes about one third of global gas trade. Price mechanisms are changing, moving away from oil indexation and toward indexations based on various pricing points in the more liquid parts of the world (such as Henry Hub in the United States, NBP, or TTF in Europe). We believe it is only a matter of time before offtakers realize that spot market prices do not necessarily equate to low prices, as is sometimes erroneously assumed.”
“New contract configurations at a certain stage will also necessitate a new approach to transactions. They will likely be more frequent, less specific (more standardized), and involve more participants. This will not only encourage further hub development but also potentially lead to the “UBERization” of LNG trade with buyers dispatching LNG cargoes from a liquid global market whenever they need one. Overall, we expect the market will become much more efficient and liquid. In addition, the financial risk in these projects will increasingly shift toward the gas producer, and not, as historically has been the case, predominantly rest with the buyer.”
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It’s an arms race, here is the WSJ:
“When many high-speed traders got their start in the 2000s, the leading technology for transmitting data was fiber-optic cable.
But starting in 2010, the speediest firms began to use microwave networks, shaving milliseconds off the time it takes to transmit information on routes such as the Chicago-New York corridor. Upgrading to microwave networks—and later millimeter-wave and laser technology—added to the costs, traders say. All this hurt HFT firms’ bottom lines just as slumping volatility was eroding their top-line revenues.”
And, volatility is historically low:+ read more