Oil subdued ahead of inventories

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Crude is drifting lower, looking rather trepidative ahead of another weekly inventory report, while dollar strength is also helping to put the kibosh on a rally. Hark, here are five things to consider in crude markets today:

1) According to Reuters, strong demand from India for heavy crude has helped lift Iraqi exports above Saudi volumes for the first time on a quarterly basis. We can see this below in our ClipperData, as Iraqi flows account for over 20 percent of total Indian crude imports for a second consecutive quarter, while Saudi flows have dropped below this threshold.

As India looks to keep up its pace of building 40 kilometers of road per day this year, its appetite for bitumen is spurring on its pursuit of heavier Iraqi oil.

Saudi and Iraqi flows to India ClipperData

2) While on the topic of India, the chart below highlights how India’s demand continues to rise, boosting its need to import from the likes of the aforementioned Iraq and Saudi Arabia. It is also looking to build its own strategic petroleum reserve (SPR), currently adding 39.1 million barrels of capacity at three locations: Visakhaptnam, Mangalore and Padur.

It is looking to add a further 91 million barrels of SPR capacity in a second phase by 2020. As the gap between India’s demand and supply is set to continue to widen, its need for energy security via an SPR is growing as well:

India consumption and production

3) U.S. exports of LPG (Liquefied Petroleum Gas) have ramped up strongly in recent years, and specifically from the Gulf Coast. As a bi-product of the shale boom, the U.S. has shifted from being an LPG importer to being the world’s largest exporter (sending out