Crude oil: Waiting for Doha

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SBOne hundred and ten years after the birth of Samuel Beckett, and waiting for a production cut from key oil producers feels like waiting for Godot (or…waiting for GoDoha, amirite?). After Saudi oil minister Ali al Naimi has been quoted today saying ‘forget about this topic‘ in relation to a production cut, here are nine things to consider in energy markets today:

1) Let’s jump straight into an economic data recap. China kicked things off overnight, and yielded the first positive print for exports year-on-year since last June. Consensus of +2.5% was blown out of the water by a print of +11.5% YoY for March. Not only is this encouraging because it points to stronger global demand, but imports dropped by less than expected too, indicating better domestic demand than expected. Tomorrow night we have an epic set of data releases from China: Q1 GDP, industrial production, and retail sales. It’s going to be more fun than a barrel of monkeys.

2) As a quick aside, while on the topic of Chinese data,  Chinese SUV sales continue to go through the roof, up 46% in March versus a year ago. A cut in sales taxes for small-engine cars has meant that Chinese car sales have grown 6.8% in the first quarter. Chinese gasoline demand was up 7% last year, and although this pace will be tough to replicate this year, the world’s second-largest oil consumer is giving it its best shot.

3) Alright, as an aside to the above aside, a final tidbit to share re Chinese data has been crude imports, which have climbed to a record in the first quarter, up 13% year-on-year, according to official data. What makes this even more remarkable is the fact that Chinese imports were so weak in January; our ClipperData show that waterborne imports were down nearly 20% YoY for the first month of the year.

A strong rebound in February and March due to strong teapot refinery demand has rocketed imports higher. While this trend is likely to stall as stockpiles brim out, this is yet to happen: our ClipperData show that crude imports so far in April are even stronger.

4) Getting back on track, other economic data of note has come from the Eurozone, where industrial production had a big miss in February, now up just 0.8% YoY. As for the US, producer prices surprised to the downside, dropping 0.1% last month, indicating a distinct absence of inflationary pressures. Retail sales were also weaker than expected, driven by a drop in sales at retail stores, restaurants, and of automobiles.

5) OPEC’s monthly oil market report has been released, showing the cartel has revised oil demand slightly lower this year by 50,000 barrels per day to 1.2 mn bpd, driven by economic concerns about Latin America.

In terms of output, non-OPEC supply is expected to drop by 730,000 bpd this year, a smidge bigger of a drop than what was forecast last month. As for OPEC output, it edged higher in March, led by increasing flows from Iran (+139 kbd) and Iraq (+43 kbd), while supply losses were seen from UAE (-100 kbd), Libya (-41 kbd) and Nigeria (-39 kbd). Saudi ticks along at 10.1 mn bpd.

6) A bright spot in the OPEC report for the bulls is Indian oil demand, which showed a 12% YoY increase in February, a 480,000 bpd jump YoY. Unlike China, where gasoline demand is leading the charge, India is seeing broad-based improvement across products, from gasoline to LPG, from diesel to fuel oil. Total oil demand is now seen at 4.59mn bpd, establishing India firmly as the third-largest consumer of oil in the world.

Indian oil demand growth OPEC

7) The OPEC report has been hot on the heels of the EIA’s monthly short term energy outlook, which was released yesterday. The key takeaways from the EIA release have been that domestic production has been tweaked lower for this year and next, now expected to average 8.6 mn bpd this year, and 8.0 mn bpd in 2017 – both chopped by 100 kbd. Non-OPEC supply is expected to drop 0.4 mn bpd this year (in large part due to falling US production), and 0.5 mn bpd next year (ditto).

The demand side of things mirrors the OPEC report, with an expected increase of +1.2 mn bpd this year.

8) Oh, and EIA expects retail gasoline prices to average $2.04/gal through the summer driving season (April-September), with annual expenditures reaching a 12-year low this year. Woot woot!

gasoline prices

9) Finally, we get the weekly inventory report this morning from the EIA, following a surprisingly large build to crude stocks from the API report yesterday – despite the closure of the Keystone pipeline last week. Our ClipperData indicate that a rise in imports to the Gulf Coast helped to offset the supply loss caused by Keystone, with volumes discharged at LOOP over 40% higher than those seen in recent history.