Weekly US petroleum inventory data
- Prior was -4512K
- Gasoline -3322K vs -1000K expected
- Distillates +152K vs -1200K expected
- Refinery utilization -0.1% vs +0.3% expected
- Production unchanged at 10.7 mbpd
API data late yesterday:
- Crude -4264K
- Gasoline +4991K
- Distillates -964K
Crude rose about 20 cents on the headlines to $42.79 per barrel. The headline isn’t as bullish as anticipated but the gasoline drawdown was larger.
The OPEC JMMC meeting is also taking place right now with Russia’s Novak stressing the need for full compliance.
The meeting is scheduled for 1400 GMT
But just take note that with all things OPEC+ related, there’s a likelihood it could be delayed for a few minutes or hours and what not. So, it will happen when it happens.
That said, the meeting today is likely just to reaffirm the bloc’s commitment to production cuts and to assess the compliance over the past two months.
The July compliance is slated to be at around 95% to 97% – down from 107% in June – but it shouldn’t be much of a problem all things considered, especially since oil prices are holding at more favourable levels (at least from the bloc’s perception).
Bloomberg with the headline, citing OPEC on the matter
Just a heads up to the meeting later this week, in case we hear of how the compliance issue is going or any possible plans for future production cuts and what not.
The latest reports are suggesting that OPEC+ sees ~95% compliance to its production cuts in July and I reckon that is somewhat of a satisfactory figure, so there shouldn’t be too much complaints despite that being down from ~107% in June.
The latest forecasts in OPEC’s monthly report
OPEC now sees 2020 world oil demand down by 9.06 mbpd compared to a drop of 8.95 mbpd in the previous monthly report.
They say the second-half outlook points to the need for continued efforts to support a rebalancing in the market through OPEC+ adjustments.
With that, they cut their forecast for OPEC crude by 400K bpd this year and 500K bpd in 2021. Part of that is due to higher non-OPEC supply.
Crude is unmoved by the news and up 59-cents to $42.20/barrel on the day.
The main worry for oil is that OPEC starts to ramp up production again. Non-OPEC producers are filling in gaps from the huge cuts and that’s not going to fly forever.
This doesn’t come as a shock but it’s going to be a very delicate balance in the oil market in the months ahead. OPEC+ wants to claim the market shares as demand comes back online but private producers are going to open the taps as well. We could very easily end up in a price war.
Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week’s meeting.
- Key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies will hold a virtual meeting on Wednesday 15 July
There is no further detail on this, link here
The increased optimism comes as hopes are up that demand is beginning to recover and will continue to do so. Its not going to be smooth sailing though.
GS say the OPEC+ G20 production cut is too little too late, and the bank sees downside risk to its $20/barrel price forecast
- “Today’s agreement leaves the voluntary cuts as still too little and too late to avoid breaching storage capacity, ensuring that low oil prices force all producers to contribute to the market rebalancing”
- no voluntary cuts could be large enough to offset the 19m b/d average April-May demand loss due to the coronavirus
- OPEC+ voluntary cut is an only actual 4.3m b/d reduction in production from 1Q 2020 levels
Oil traded higher initially upon market reopen for the week, gave it all back and turned negative and is now not much changed from late last week levels.
Algeria currently holds OPEC’s rotating presidency, urged convening a panel to consider assesses market conditions and falling prices.
Bloomberg cite an unnamed official as saying the request did not get enough backing to go ahead.
- Key player Saudi Arabia said to be opposed.
Algeria asked OPEC’s secretariat to convene a teleconference meeting of the Economic Commission Board.