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Oil calls Biden’s bluff

  
Analysis, Crude

US EIA forecasts undermine White House talk

 oil
The US made subtle and not-so-subtle threats towards OPEC+ in the aim of boosting production and lowering prices but OPEC+ shrugged them off and now the US must either respond or lose face.
The market was thinking a response could come today with the release of the US EIA’s short-term energy outlook but if anything that report undermined the President’s case. The agency forecast that the crude market will be oversupplied next year.
With that, the market called Biden’s bluff. WTI crude oil is up $2.27 on the day to $84.20. That’s less than a dollar away from the October cycle high of $85.41.
In addition, the fundamentals continue to improve. The CEO of physical oil trader Vitol today said that demand is already back to 2019 levels.

“We are at or about 2019 levels now,” CEO Russell Hardy said.

He believes OPEC has 2-3 million barrels a day of spare production capacity, about what global demand will rise by next year.

EIA cuts forecast for 2022 world oil demand (Another scamsters after Central Bankers )

  
Analysis, Crude

EIA estimates for oil demand

The EIA is out with his forecast for demand and supply.

  • Cut the forecast for 2022 world oil demand growth by 130,000 barrels per day. Now sees 3.35 million barrels per day year on year increase
  • raises forecast for 2021 world oil demand growth by 60,000 barrels per day. Now sees 5.11 million barrels per day year on year increase
  • lease 2022 world oil demand growth unchanged at 3.48 million barrels per day
  • leaves 2021 world oil demand growth unchanged at 5.05 million barrels per day
  • US crude output to rise 770,000 barrels per day to 11.9 million barrels per day in 2022 (versus increase of 710,000 barrels per day expected last month)
  • US liquid fuels consumption to rise 1.49 million barrels per day in 2021 (versus 1.48 million barrels per day increase forecast last month)
  • US liquid fuels consumption to rise 690,000 barrels per day in 2022 to 20.37 million barrels per day (versus 760,000 increase projected last month)
  • projects gasoline prices to rise to $3.00 per gallon in 2021 and $2.91 per gallon in 2022
  • expects gasoline prices higher than forecast last month

Oil gives back most of its gains after OPEC

  
Analysis, Crude

Oil falls $3 from the highs

Oil falls $3 from the highs
From high to low in the past hour or so, oil is down $2.98, from $83.40 to $80.42.
The statement and OPEC comments didn’t include any clear reason for the selling. It may simply be a ‘sell the fact’ trade after a decision that was expected.
More broadly, the stronger US dollar is a headwind for oil and other commodities. However I’d argue that the dollar is strong because of a lower-rate path that’s being priced in. That’s good for both growth and the reflation trade, which should boomerang back into oil.
All that said, oil ran for nine-weeks straight starting in September and the bulls have been taking some off the table. In addition, Mexico is putting on its annual hedge at the moment, according to reports. That put selling could be reverberating through the cruve market.

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Reminder: OPEC+ to meet later today

  
Analysis, Crude

But no change to output policy is expected

OPEC
Despite calls by the US to loosen the taps, OPEC+ is almost certainly not going to budge with their plan to raise output by 400k bpd. The bloc has maintained a consistent message in outlining that pandemic risks are not over yet and they are also arguably not going to overreact to the global energy crisis – at least for the time being.
Oil is down 0.5% to on the day currently to $80.49 after the drop yesterday, with support seen around the $80 mark for now. This comes after a period of back and forth consolidation after testing the recent highs close to $85.

Oil – Talks with Iran on nuclear deal will recommence on November 29

  
Analysis, Crude

A date has been set for negotiations, Iran is aiming for removal of US-imposed sanctions, while the other participants are seeking a deal on Iran’s nuclear program.

Multilateral talks will begin again on November 29 in Vienna.
(ps. This is not breaking news, posting as an ICYMI)
If an agreement can be cemented it paves the way for Iran to return, officially, to world oil markets.
Coming up later today is the OPEC+ meeting, no change in policy from the group is expected, the output increase is expected to be held at +400K bbls/day.
A date has been set for negotiations, Iran is aiming for removal of US-imposed sanctions, while the other participants are seeking a deal on Iran's nuclear program. 

Weekly Crude oil inventories 3.291M vs 2.225M estimate

  
Analysis, Crude

Private data showed a 3.59M build for crude

The EIA is now with their weekly inventory data.  This comes after the private data showed crude oil inventories showed a higher build of 3.59M while gasoline inventories showed a draw of -0.55M (vs -1.33M est).

  • Crude oil inventories 3.291M versus estimates of 2.225M
  • Gasoline inventories 0.104M vs estimates of -1.33M.
  • Distillates inventories 2.16M vs estimates of -1.443M
  • Cushing inventories -0.916 M versus previous of -3.899M
  • inventories in US strategic petroleum reserve off 1.6 million barrels to 612.54M
  • refining utilization 1.200% versus expected 0.6%. Previous 0.4%
  • crude oil production 11.5M versus 11.3M previously.  +1.77%
The private data released near the close of trading yesterday showed:
  • Crude oil +3.59M
  • Gasoline -0.55M.
  • Distillates, +0.57M.
  • Cushing,  -0.88M

$120 oil may be only seven months away

  
Analysis, Crude

Bank of American and Goldman Sachs with some bullish comments

Bank of American and Goldman Sachs with some bullish comments
The OPEC+ decision is on Thursday and another 400k/bpd is expected to be added as OPEC sticks to the script. There’s some tail risk they could add more as the US and others lean on them.
WTI is up 51-cents to $84.08 and rose as high as $84.88.
One note that’s getting some attention today is from Bank of America, where analysts say $120 oil could arrive by June.
They cite a potential for surging gasoline demand along with jet fuel.
Goldman Sachs also highlights an increasingly bullish backdrop.
“We estimate that oil demand is nearing 100 million b/d, its pre-COVID level, with winter seasonality and the recovery in international jet demand set to bring demand to record highs by early next year,” they wrote today.
The biggest tell might be the increasing backwardation in the crude market. That’s a sign that oil is being rapidly pulled from inventories.
On another commodity front, European wheat is challenging the 2008 all-time high.

Oil creeps higher to start the new week

  
Analysis, Crude

WTI trades back up to above $84 on the day

There has been some exhaustion to the upside momentum but buyers are not exactly letting up either, keeping a defense at the recent lows around $80.79 last week before seizing back near-term control now on a push above its key hourly moving averages:

WTI
The $85 mark still poses a modest resistance point on the daily chart but the fundamentals continue to look solid for oil as we look towards next year.
A Bloomberg report highlighted that China’s stockpiles are down to their lowest since February 2020 and that creates more headaches for local authorities who are already needing to deal with the power crunch amid shortages of coal and natural gas.
As such, that could see state enterprises come in to replenish inventories even as prices are at elevated levels i.e. underscoring added demand for crude stocks.
OPEC+ will also be meeting later this week so there’s that to factor into consideration but I doubt the bloc will do much to shake up the status quo for the time being.

OPEC+ meet this week. 400K barrel increase likely to remain, but some prospect of more.

  
Analysis, Crude

An energy analyst at KPMG says OPEC+ is most likely to stick with the earlier agreed top plan of a 400,000 barrel per day increase.

But the group may ponder increasing the amount “marginally, or more substantially,”
  • by 600,000 barrels to 1 million barrels per day
This is from a piece at DJ/Market Watch but there isn’t much from the analyst to support thoughts on increasing the output.
Countering the argument OPEC+ may consider boosting output above 400k barrels are reports over the weekend (vai Bloomberg) that the OPEC+ Joint Technical Committee (JTC) significantly downgraded expectations of a market deficit at their meeting last week:
  • now expects the oil market to show a deficit of just 300,000 barrels per day in Q4, down from initial expectations of a 1.1m bpd deficit
  • The role of the JTC is to monitor the market, the JTC meets ahead of every ministerial meeting of OPEC+. The JTC met last Thursday.
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The Organization of the Petroleum Exporting Countries and allies, OPEC+, hold their monthly ministerial meeting on Thursday.
An energy analyst at KPMG says OPEC+ is most likely to stick with the earlier agreed top plan of a 400,000 barrel per day increase.
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