Oil oversupply fears return

Oil oversupply fears return image

Oil oversupply fears return

01/10/2017 | Author: Matt Smith

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Crude prices are once again on the defensive today as oversupply fears swirl. As the market waits with bated breath for the manifestation – or lack thereof – of OPEC / NOPEC cuts, hark, here are five things to consider in oil markets.  

1) Last week we discussed how Middle East producers send the majority of their crude exports to Asia, and Iraq is no different. Amid stories that Iraq is still sending full allocations to some refiners in Asia and Europe, we can see from our ClipperData that a half of all Basrah loadings last month went into Asia.

India surpassed China last year as the leading destination for Basrah crude. The U.S. is the third leading recipient, while South Korea is fourth. Exports to India, China and South Korea last year accounted for 56 percent of all Basrah exports last year.

Basrah crude into Asia ClipperData dec 2016.jpg

2) In terms of OPEC crude to the U.S., Iraq is the third largest supplier, behind Saudi Arabia and Venezuela. Last year, the U.S. received just under 400,000 bpd from Basrah, with Basrah Light accounting for just over 60 percent of these flows, and Basrah Heavy accounting for the rest.   

Iraq crude to US Dec 2016.jpg

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3) An article in the Wall Street Journal today draws on our ClipperData, highlighting how Iranian crude floating storage has dropped in recent days down to 17 million barrels, after being almost double this volume in September.

The chart below shows crude floating storage for the Middle East as a whole, and how long it has been waiting there. The key takeaway is that Iranian barrels account for the lion’s share of the volume.   

middle east floating storage Jan 2017.jpg

 

4) We have visited a similar chart to the one below before, but it has appeared in an article today, and serves as a useful reminder that the impact of low oil prices will chomp away at new oil production in the coming years.

There is a silver lining, however. Even though only 3.7 billion barrels of conventional crude were discovered last year, the lowest amount since 1952, discoveries in 2017 are forecast to be higher, driven by higher prices encouraging more exploration.  

oil discoveries 1952.jpg

5) Finally, the mighty Abudi Zein (ClipperData’s CEO) and myself will be presenting our 2017 outlook in Houston and New York this week. Although we are sold out for Houston, we have a couple of places left for New York on Thursday (12th) for analysts or traders. Sign up here to attend! 


About The Author

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Matt is a Director of Commodity Research at ClipperData. Matt specializes in extracting key themes from technical and fundamental analysis of the global energy market, and communicating these through daily and weekly deliverables. He also provides oil and natural gas analysis and commentary to national and international media outlets that include CNBC, Fox Business, Russia 24, the Wall Street Journal, MarketWatch, AFP, Bloomberg, Reuters, and the Oil Daily. Prior to joining ClipperData, he worked for eight years at Schneider Electric / Summit Energy as a Global Commodity Analyst, where he also founded and authored the blog, Energy Burrito. He started his career at the Royal Bank of Canada in the UK, spending eight years with the bank. During that time, he managed $55 million in assets as a portfolio manager and financial analyst.