OPEC / NOPEC exports indicate non-compliance

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Has no-one really done a ‘getting riggy with it’ pun yet? Ok then, here it goes. We’ve made it to Friday, which means we get a couple of data points to hold our attention at the tail-end of the trading week. First we get the Baker Hughes report, which will once again likely be getting riggy with it (Ta-dah!), as prices in fifty-dollardom continue to incentivize drilling activity. After that we get CFTC data, which will likely show an ongoing overcrowded tilt towards the bulls. But for now, hark, here are five things to consider in oil markets today:

1) The more we look at OPEC loadings, the more that Jack Nicholson movies come to mind. After we mused that last month’s loadings were ‘As Good As It Gets‘, our focus this month has switched to ‘Something’s Gotta Give‘, given the current status of net long financial positioning (at a record), US oil inventories (at a record) and Singapore’s floating storage in recent weeks (at a record).

As for OPEC loadings, it invokes ‘The Departed‘, as that best describes both vessels and OPEC’s discipline. As our ClipperData illustrate below, total OPEC export loadings so far this month are now higher than October’s reference level, after being 1 million barrels per day below it last month.

Granted, some of this rebound can be attributed to rising exports from exempted cartel members (think: Libya, Nigeria), but this doesn’t fully explain the rebound.  Venezuelan and Qatari loadings this month are well above both October and December’s levels, while Angolan loadings have rebounded also.

As we have said from the onset of this production cut deal, Saudi, Kuwait and UAE should lead by example – and they appear to be doing so, although full compliance isn’t reflected in lower Saudi loadings. On the aggregate, this leaves us a little higher in terms of OPEC loadings than where we were in October. Hum dee dum. (At least we can count on non-OPEC producers to do their part. Ahem).   

OPEC loadings Feb 2017.jpg

2) Oh wait, my bad. Hark, a WSJ headline reads this week: ‘Non-OPEC members falling short of promised production cuts‘. We can see in our ClipperData that although Russian export loadings have dropped materially, this is seasonal in nature (think: harsh winters).  

Kazakh crude loadings this month are rebounding, well above 1mn bpd – which shouldn’t come as a surprise given that the Kashagan field has ramped up to 160,000 bpd. Loadings of Azeri grades are also strong, at an 11-month high so far this month.

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3) Mexican export loadings are dropping, down by about half of their production cut commitment of 100,000 bpd. Meanwhile, Omani loadings are reflecting waaaay more than full compliance with their commitment to cut 45,000 bpd. On the aggregate, waterborne loadings from NOPEC are down by 200,000 bpd from October’s levels.

NOPEC loadings Feb 2017.jpg

4) Argentina’s state-run oil company, YPF, has confirmed it has reached a deal with Shell to develop oil and gas assets in its Vaca Muerta (translation: dead cow) shale field. There is an awful lot of hype about Vaca Muerta, with YPF looking to invest $2.3 billion into the field on its own this year.

The field is roughly the size of Belgium at 30,000 square kilometers, and is considered to hold some of the largest shale reserves in the world. Shell has agreed to invest $300 million.  

5) Finally, now for something completely different. As the chart below illustrates, offshore wind is getting cheaper, and especially versus onshore costs. While the current administration appear to have a negative view of wind power,  turbines added on the Atlantic coast would not only create jobs, but also help in the effort of getting the U.S. to the goal of being energy independent. 

The Obama administration outlined a plan last year to add 86,000 megawatts of wind power by 2050 – the equivalent of 86 nuclear reactors. With Rick Perry as Energy Secretary, wind power may find an ally; as Texas Governor, the state saw record expansion of wind power. Texas continues to lead the nation in its number one producer. 

onshore offshore wind.jpg