Good day! With Nonfarm Friday now behind us, we can look forward to a week of oil-specific monthly releases from IEA (tomorrow), OPEC (Wednesday) and EIA (Thursday).
As the spotlight swings onto another meeting of global producers – this time in Istanbul this week – rhetoric out of Saudi and Russia is once again encouraging an oil rally. Hark, here are five things to consider in oil markets today.
1) Over the last week we’ve touched on both Saudi Arabian and Kuwaiti oil exports to the U.S. Iraq is also a key supplier of crude to the U.S., sending just shy of 400,000 barrels per day so far this year through September.
Our ClipperData shows Iraqi crude heading to the East, West and Gulf Coasts, with just over 60 percent of these barrels being Basrah Light, with the remaining being Basrah Heavy. As the chart below illustrates, Basrah Heavy has been steadily accounting for more of Iraqi exports to the U.S., after the new grade was introduced just over a year ago.
Iranian and Iraqi oil ministers will not be attending the talks in Istanbul this week, while the new(ish) Iraqi oil minister Jabar al-Luaibi has urged foreign producers operating in the country to keep ramping up output into next year. Hum dee dum, that doesn’t sound all that supportive of an output cut.
2) U.S. crude inventories, which showed a fifth consecutive draw in last week’s weekly inventory report, have spent much of this year eating away at the surplus to year-ago levels. Inventories started the year at 482mn bbls, some 99.9mn bbls higher than at the start of 2015.
After holding in a range of around a 50-70mn bbl surplus for the last six months, recent draws have aided the inventory surplus in shrinking to below 40mn bbls for the first time this year:
3) Chinese oil production continues to fall, dropping to a six-year low in August at 3.89 mn bpd. Nonetheless, there is an expectation that production could halt its descent with prices around $50/bbl.
PetroChina and Sinopec have both expected domestic output to drop by