Oil rallies as focus swings back to supply outages

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faOne hundred and seventeen years after the birth of Fred Astaire, and the oil market is getting its groove on – facing the music and dancing higher. Hark, here are five things to consider in the oil market today: 

1) We get all three monthly reports from key sources this week; the EIA kicks things off today with the Short Term Energy Outlook, while the IEA’s oil market report follows on Thursday, before we are set to be scared witless by the OPEC monthly report on Friday 13th (bwhahahaha!). The key themes of OPEC production strength, unplanned outages and market rebalancing are set to reverberate from all three.

2) This article today piqued my interest, suggesting that Kuwait is now the third largest supplier of crude to Japan. Pulling out my spade, I started digging into our ClipperData; Saudi Arabia is consistently the leading supplier, accounting for 31% of Japanese imports, while UAE is second with 28%. Qatar has been holding on to third place for much of the last year or so, while Kuwait flows have overtaken Russian imports since late last year.

Nonetheless, despite a push by Kuwait, it is still getting edged out of third place by Qatar, who looks to defend its market share with its biggest customer.

Japan crude imports ClipperData

 

3) Stat of the day: Nigeria’s state-run National Petroleum Corp recorded 3,153 punctured points on its oil pipelines through the last 12 months (through the end of March) due to ‘incessant vandalism’. Fears of increasing violence is on the rise with a new militant group operating in the area. As we have mentioned recently, sabotage to the Forcados export line has materially cut crude loadings from Africa’s largest oil exporter.

4) Onto the economic data front, and we’ve had the latest round of Chinese inflation data, which came in at a minor miss of +2.3% YoY (versus consensus of +2.4%). Once again, the devil is in the details, however, as pork price inflation accelerated to 33.5% YoY (down from 28.4% last month), although offset by a slower increase in vegetable prices. Food prices account for approximately a third of Chinese inflation. Chinese producer prices fell again, but at the slowest rate in 16 months

5) Finally, the duplicitous state of the oil market is typified in two articles today; the first draws attention to an estimate of offline Canadian production of 1.6 million barrels  per day to wildfires. If true, this would wipe out – albeit temporarily – the entire oversupply in the global market. The second article leads with the headline ‘Saudi Aramco CEO sees ‘signficant growth’ in oil output in 2016‘, highlighting that Saudi Aramco is looking to boost capacity at its Shaybah oil field by 33% in the next few weeks to 1 mn bpd.