Crude buoyed by fumes of hope

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With a weaker dollar in cahoots with ongoing hope spurred on by OPEC murmurs and rumors, crude is ripping higher into the weekend. Hark, here are five things to consider in oil markets today.    

1) Petrobras has finally managed to muster a profit after three consecutive quarterly losses. Brazil’s state-run oil company managed to make a $118 million profit last quarter, as oil output and exports boosted profits.

Our ClipperData show that total Brazil oil exports through the first half of the year have actually dropped, but exports to its key markets – China, Uruguay, India, U.S. and Spain – have risen over 4 percent year-to-date, and are over 600,000 bpd for June:

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Petrobras has seen debt surge in recent years to close to $140 billion. The company is now on a mission to reduce this, with a $15 billion divestment program in place – already agreeing to sell $4.6 billion of assets in Argentina, Chile and Brazil.

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2) We have had a whole slew of weaker data out of China overnight. Industrial production dropped to +6.0 percent YoY, below last month’s 6.2 percent and below consensus of 6.1 percent. Retail sales also missed expectations of +10.5 percent, coming in at +10.2 pecent YoY.

Meanwhile, Chinese fixed asset investment dropped to its lowest level in over 16 years at +8.1 percent. This is down from 9 percent last month, and down for a fourth consecutive month – indicating the waning effects of a credit boom in the first quarter.

This data comes follows ongoing poor trade data earlier in the week as both imports and exports fell more than expected, indicative of both weak domestic and global demand. Imports declined the most since February, and have now declined for 21 consecutive months. Exports have fallen for 12 of the last 13 months. As we know all too well, all paths lead back to energy, hence lower total imports were aided by falling oil imports (hark, lowest since January), while strong petroleum (and steel) exports helped total exports from being even worse. 

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3) Continuing the theme of weak data from China, National Bureau of Statistics data out overnight has shown domestic crude output has fallen to the lowest level since October 2011, down 8.1 percent year-on-year. Production has dropped for a fifth straight month to 3.95 million barrels per day, driven by falling investment by China’s key producers; capex has been cut by 10 percent this year by the likes of PetroChina and Sinopec. It also shows refinery throughput has dropped 300,000 bpd month-on-month. Coal output has fared even worse than oil:
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4) Oman is not a member of OPEC, but produces