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Rebels on the move. The Energy Report 10/09/2020
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Oil prices start in a risk-free mode as oil inventories rise, but gasoline supplies plummet. However, early reports that Yemen’s Houthis have launched a drone and missile attack on the Saudi Arabian capital may provide some support. It is too early to tell if there was any significant damage from the attack, as the repeated attacks on Riyadh have not been much.
The American Petroleum Institute (API) reported that US crude supplies rebounded by 2.608 million barrels as imports rebounded after Hurricane Laura. Still, the built-in crude does not suggest that the general trend of tightening the US oil supply is over. As I’ve said before, hurricanes can cause wide fluctuations in the data, and you need to take that into account when trying to discern a trend.
Gasoline supplies plunged by 6.892 million barrels due to the closure of refineries, and demand was reportedly quite good. Still, concerns about overall demand persist, and a standard seasonal dip is exacerbating those fears we have at this time of year. S&P Global Platts reported that, “gasoline imports from Europe [to the U.S.] they have fallen dramatically, by 43.2%, in 2020, according to Kpler. The data company estimated volumes at 45.05 Mb, compared to 79.37 Mb for the same eight months in 2019 ”.
However, reports that large traders are reserving tankers to store oil and products and broader concerns about the Saudi oil price cut keep the story of weak demand alive. Such is the curse of the September midseason. The FT reports that Saudi Arabia is not in favor of a more massive production cut in the future.
After the mid-season, however, a cut may not be necessary as the OPEC cheaters are finally lining up. Compliance among the 19 countries participating in OPEC’s oil production cut further rose to 103% in August, according to Energy Intelligence assessments. They say, “However, the seven percentage point increase in compliance versus July is misleading as an indicator of global oil supply. This is because specific production cuts were reduced by 1.9 million barrels per day in early August to 7.7 million b / d, in line with the agreement announced by the OPEC-plus alliance in April ( IOD April 14, 2020).
The combined production of the alliance increased by 1.3 million b / d in August. Still, with oil prices drifting in recent days, some are now wondering if OPEC-plus may have underestimated the lasting impact of the Covid-19 pandemic on global oil demand. Recent cuts in official sales prices from Saudi Arabia and the United Arab Emirates indicate that key producers are aware that some action is needed to reduce the gap between supply and demand.
The supply of distillates also increased by 2,293 million barrels. Demand should pick up as the harvest gets underway and more flights begin to occur, but weak diesel demand remains the biggest problem for the complex and refineries.
As for the general trend in oil, it is sometimes driven by fear of the facts. The Wall Street Journal reports that, “An options-based indicator of how far traders anticipate oil prices to oscillate over the next 30 days, known as implied volatility, has risen to its highest level since the end of June. It reached an annualized level of 51% on Tuesday, according to option pricing tool QuikStrike, before falling on Wednesday. That’s still well below the 345% peak in April, when lockdowns and safe-in-place restrictions caused turmoil in energy markets, and the main US oil benchmark fell below. of $ 0 per barrel for the first time. But it is 21 percentage points higher than the average level of implied volatility in the last three months of 2019, the last full quarter before the pandemic. “
However, for US crude, the news is positive. Reuters reports that, “Early indications of US crude oil exports to China show interest spike this month, putting September on track to be one of the strongest months on record for Chinese oil purchases. U.S. Interim U.S. crude cargo outflows to China currently stand at 840,000 barrels per day for the month, the second-highest volume on record, according to data intelligence firm Kpler, as cheap oil prices and the Washington trade deal -Beijing encourages purchases.
However, demand in India is still struggling. SBC Global plats reports that some refineries in Asia-Pacific, including India, Indonesia, Thailand, are reducing performance from reimposed closures or poor economics, but others are gradually increasing executions.
The natural gas market appears more reliable as some climate-related demand should provide support. Janice Dean of Fox News reports that dry conditions and warm temperatures will be the current situation throughout the West, although the winds will calm a bit. Smoke from the fires is spreading across the central United States. Today marks peak Atlantic hurricane season with no imminent threats to the US.
Thank you,
Phil Flynn
Today you should invest in yourself. Start by tuning in to Fox Business Network because they are interested in you.
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Recent articles by this author
- Rebels on the move. The Energy Report 10/09/2020 – Thursday, September 10, 2020
- Back at it. The Energy Report 09/09/2020 – Wednesday 09 September 2020
- Sayonara summer. The Energy Report 08/09/2020 – Tuesday, September 8, 2020
- Can oil save the world? The Energy Report 04/09/2020 – Friday, September 04, 2020
- Laura’s last attack. The Energy Report 03/09/2020 – Thursday, September 03, 2020
About the Author
Mr. Flynn is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-date information on investment and risk management in the global oil, gasoline and energy markets.
Phil Flynn’s accurate and timely forecasts have become highly sought after by industry and the media around the world. His impressive career dates back nearly three decades, gaining attention with his calls to market as a writer for “The Energy Report.”
He is a daily contributor to the Fox Business Network, where he provides daily market analysis and updates. Phil’s daily comments also appear in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.
Phil is a lifelong Illinois resident. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange, which eventually led him and his team to The PRICE Futures Group.
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