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WTI crude prices are on the rise, but only at the expense of Brent’s premium. The spread between the two crude grades shrank below $8 this week, its lowest since January 2011.
But what’s really striking is the rise in US crude output, which has risen 57,000 barrels a day to 7.37m — its highest level since February 1992.
If one chart speaks a thousand words in this regard, it’s the following one from the American Enterprise Institute’s Carpe Diem’s blog, charting data from the US Department of Energy:
When it comes to commodities everyone understandably likes to focus on supply and demand. However, there is another important driver for commodity prices that’s sometimes overlooked.
The real interest rate. Read more
A small selection from our inbox the last few weeks.
First, this from Barclays on Friday, about copper: Read more
Okay. This is weird.
Perhaps the analysts in Citi’s commodities team headed by Seth Kleinman (which includes the inimitable Ed Morse) didn’t get the memo? You know, the one about needing to talk up the old carbon complex as much as possible?
After all, how else do you account for the disruptive tone of the following summary points: Read more
Nymex WTI futures trade experienced somewhat of a wobble on Wednesday.
As Stephen Schork highlights in his chart of the day: Read more
Philip K. Verleger, veteran independent energy consultant, has been doing some sleuthing concerning some of the more opaque areas of the oil market.
What he’s unearthed is interesting, to say the least. Read more
How much of the oil and gas sector’s asset valuations could be at risk from climate mitigation policy?
The International Energy Agency’s latest annual World Energy Outlook, released in November, followed the popular practice in long-term forecasts of using several scenarios. One involves global policymakers moving to limit atmospheric CO2 concentration to 450 parts per million, in order to limit to 50 per cent the probability of average temperatures rising 2 degrees or more.
The problem for fossil fuel companies is that could limit their ability to utilise all their reserves. Read more
Remember the whipsawing days of 2008? The days when commodity prices couldn’t get crazier?
Some excellent market commentary from Olivier Jakob at Petromatrix on Friday morning regarding the current state of oil market (dis)equilibrium and the potentially precarious position of Saudi Arabia. Read more
Veteran economist and oil analyst Phil Verleger in his latest note has roundly criticised everyone who forecast in recent years that oil prices would keep rising forever; which he says includes just about everyone who has an opinion about oil prices.
He highlights the work of Morris Adelman, an MIT economist who’s little known these days — unjustly, according to Verleger: Read more
When the International Energy Agency’s big annual report came out last week there was a big top line story picked up nearly everywhere: that US oil production will overtake Saudi Arabia by about 2020.
This is due to projected rises in oil being wrung from the sort of shale formations that have been the source of vast new supplies of natural gas in the past few years. Read more
Because the deal has been exclusively revealed repeatedly and over a number of weeks, few seemed too excited by news on Monday that BP and its oligarch ‘partners,’ Alfa, Access/Renova, have finally agreed the terms on which they will sell TNK-BP to Rosneft.
Goldman’s analysts, long-time oil bulls, are now expecting a “flatter oil price environment” in the next few years. In other words, they think prices in 2013 and 2014 will be “marginally” lower than current spot levels, and drift down to $85 by 2016.
Capital Economics ponders whether falling commodities prices will harm the emerging economies that rely most on selling them, and comes up with an answer: not much. At least, for most of them… Read more
From the IEA’s latest oil market monthly report:
The paradox is that US product stocks have been falling faster than normal and European refiners have been running flat out despite tepid product demand in both markets. Hurricane disruptions and a string of refinery glitches (especially on the West Coast) are only part of the US story. In both regions, the bottom line is that exports have become a key driver of refining activity and profits, not just the outlet for surplus product that they used to be. To wit, in Europe even gasoline cracks have staged a dramatic recovery, despite vanishing demand at home. Read more
Over the current decade, Iraq accounts for around 45% of the anticipated growth in global output. Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and by the 2030s Iraq is the second-largest global oil exporter, overtaking Russia.
From BNP Paribas’s Harry Tchilinguirian and Gareth Lewis-Davies on Friday.
The latest crude and product stock position in the United States: Read more
It could be that a major commodity story is about to go mainstream.
We are, of course, talking about the issue of financialised commodity inventory and the impact it has had on the supply and demand picture, by taking inventory off-market and off-balance sheet. Read more
People are still scratching their heads over what possibly sparked crude oil’s sell-off in the middle the US trading day on Monday.
Explanations in contention include: fat fingers, SPR talk and general illiquidity due to the Jewish New Year. Read more
The IEA’ September Oil Market report paints an interesting picture of developments in the global refining industry. In short, having restructured intensively over the past few years — by closing off a lot of unprofitable capacity — the industry is now in a position to respond to the product tightness it itself created (as a result of its restructuring).
Which is important because product tightness persists despite an overhang of crude in many regions. Read more
It’s always useful to look to alternative indicators that have a good track record.
Over the last few years, Philip Verleger, independent oil analyst and author of “Notes at the Margin”, has tended to look to the share price of the BP Royalty Trust — backed by output from BP’s Prudhoe Bay in Alaska — to gauge crude oil price expectations. Read more
Robert Campbell at Reuters makes some great points on Wednesday about the diminishing influence of SPR-release talk.
Like us, he compares the SPR, and its releases, to central-bank type operations for the oil market — but notes that what might be deemed the SPR transmission mechanism is now being clogged up: Read more