One hundred and thirty-four years after H.W. Seely patented he first electric iron, and the crude complex is unable to get rid of the wrinkles from supply concerns. As broader markets try to recover from Friday’s ugly jobs report, the oil market is introspective, focusing on its own fundamentals once more. Hark, here are five things to consider in oil markets today:
1) After Friday’s fun and games, we take a bit of a breather on the economic data front. The EIA’s drilling productivity report is not on deck until next Monday, and we instead get EIA’s Short Term Energy Outlook tomorrow. We have to wait until next Monday and Tuesday for OPEC and IEA’s monthly reports, respectively.
2) Markets are left to focus back on supply concerns, and specifically Nigeria. Despite Exxon announcing over the weekend it has lifted force majeure on Qua Iboe, the country’s largest export stream, supply fears continue to swirl amid further threats of sabotage from the Niger Delta Avengers.
The IEA estimates that production in the West African nation has dropped to average 1.6mn bpd in May – pushing it into second place behind Angola in terms of leading African oil producers. A WSJ piece today describes the Niger Delta, where most of the attacks are taking place, as a ‘Portugal-sized swamp where almost all of the country’s oil lies’.
Nonetheless, our ClipperData show loadings have held up well in May, coming in at 1.6mn bpd as storage has presumably been tapped. While the return of Qua Iboe flows will lend support to loadings, Brass River, Bonny Light and Forcados grades remain under force majeure.
3) After we discussed on Friday how our ClipperData showed that Iranian crude loadings have risen to 2.5mn bpd in May, this is now being affirmed by sources elsewhere. The majority of these flows continue to head to Asia, and the key destinations of China, India, Japan and South Korea.
Saudi Arabia, concerned about the rising threat of Iranian flows, has cut its prices into northwest Europe and the Mediterranean, preparing to compete with returning Iranian barrels.
4) The below graphic is from the EIA, showing changing trends in North American rail shipments of liquid fuels. The key takeaway is that although shipments of ethanol and biodiesel have remained relatively flat, total rail movements have averaged 1.1mn bpd in Q1, nearly 20% lower than the three-year average. The drop has been wholly caused by reduced crude shipments, as crude-by-rail is just not economic at the current price point.
5) Finally, this morning’s post on RBN Energy is by the mighty Abudi Zein, covering emerging trends in U.S. crude exports. You can check it out here.