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A Global Glut is Ending

Crude oil rises after report shows drop in stockpiles

By Aaron Sheldrick | TOKYO

TOKYO Oil futures climbed nearly 1 percent on Thursday after data showed a surprise decline in U.S. crude stocks as imports fell, supporting the view that a global glut is ending.

The U.S. West Texas Intermediate crude April contract CLc1 had risen 50 cents, or 0.9 percent, to $54.09 a barrel by 0229 GMT.

Brent crude LCOc1 was up 51 cents, or 0.9 percent, at $56.35, although both benchmarks were still well within recent tight ranges.

Crude inventories fell by 884,000 barrels in the week to Feb. 17 to 512.7 million, compared with analyst expectations for an increase of 3.5 million barrels, data from industry group the American Petroleum Institute showed on Wednesday. [API/S]

That added to optimism earlier in the week when the Organization of the Petroleum Exporting Countries said a deal with other producers including Russia to curb output was showing a high level of compliance.

However, for prices to break out of their trading ranges, the market needs to see signs that OPEC inventories are falling, said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.

“It’s a battle between how quick OPEC can cut without shale catching up,” Nunan said, referring to U.S. drilling in shale formations that has shown an upsurge after prices rose this year. [RIG/U]

“What OPEC really has to do is get the inventories down,” he said.

Eleven non-OPEC oil producers that joined the OPEC deal have delivered at least 60 percent of promised curbs so far, OPEC sources said on Wednesday, higher than initially estimated.

In the United States, crude stocks at the Cushing, Oklahoma, delivery hub were down by 1.7 million barrels, while U.S. crude imports fell last week by 1.5 million barrels per day (bpd) to 7.398 million bpd, according to the API.

Official data from the U.S. Department of Energy’s Energy Information Administration (EIA) is scheduled to be released at 11 a.m. EST (1600 GMT) on Thursday, a day later than normal because of a holiday Monday. [EIA/S]

“All attention now shifts to the EIA crude inventory figures due out this evening in the U.S., with the market looking for an increase of 3.4 million barrels,” said Jeffrey Halley, senior market analyst at OANDA in Singapore.

“A big miss either way will set the short term direction for crude.”

(Editing by Richard Pullin and Joseph Radford)

Bullish Citi analysts call for crude oil to hit $70 by year end but elsewhere skepticism grows

CNBC

Citi analysts predict crude oil will hit $70 by the end of 2017   

Crude oil prices could shoot up to $70 a barrel by the end of 2017 as supply and demand levels continue to rebalance in coming months, according to analysts at Citi.

Nearer-term, the research team has raised price estimates modestly by $5 to an average $55 per barrel for the first quarter and by $2 to an average $56 per barrel for the second quarter.

Yet investors will likely have to wait a few more months for a more sustained rise, says Citi in the note published Tuesday, as Brent traded up marginally to around $56 in early European trade.

“Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges,” write the analysts.

Citi’s research team is looking to the second quarter for positive effects from both the reported 93 percent compliance level of OPEC participants in last November’s production cut agreement as well as substantial refinery maintenance in Asia scheduled for the spring.

However, a close eye must be kept on delivery timetables, David Ernsberger, Global Head of Energy at S&P Global Platts, told CNBC’s Squawk Box on Tuesday.

“There is the shadow looming of new supply coming to market not just from Iran but also from the U.S. and what we’re looking at heading into the second quarter is when will that oil come to market and will it begin to take the edge off prices a little bit,” he noted.

Looking beyond 2017, Citi’s optimism also fades on expectations that increasing numbers of shale producers will be enticed back into the market by more favorable pricing.

However, the impact of shale is hard to accurately predict given the lack of uniformity in the product says S&P Global Platt’s Ernsberger.

“One cargo of shale oil is not like another and you don’t really know what is going to happen when you put it through your refinery until it lands at your port and that’s a little more uncertainty that even the oil refinery industry – which is used to uncertainty – is really willing to embrace right now,” Ernsberger explained.

“So there’s a stability of new supply issue that really needs to get worked out in the next few years,” he added, saying this was the “big story” regarding shale right now.

US shale oil to rise massively in months: Commerzbank

US shale oil to rise massively in months: Commerzbank   

Another prominent concern in the market is the distribution of derivative positioning with record net long positions and a current long to short positioning ratio of around 10:1, with this being a key reason why oil will soon drop to below $50 per barrel, Eugen Weinberg, Head of Commodity Research at Commerzbank, told CNBC’s Street Signs on Tuesday.

Weinberg also argued that the focus on OPEC compliance levels were like a distracting “magician’s show” while the real action is taking place in the U.S., which he claims is on the way to regaining its crown as the world’s largest oil producer.

“OPEC must at some point recognize and understand that they are no more the marginal producers and marginal production will be coming from shale oil so prices will come under massive pressure during this year once investors recognize oil supplies are not going to disappear,” he opined.

“The world is awash with oil at the moment and there continues to be endless supply so therefore I don’t see a real reason for prices to rise above $60 or $70…so I’m really seeing probably the risks of the prices falling below $50 for a considerable period of time and probably even touching the levels of $40 to $45 this year,” he concluded.

Oil in a dangerous zone

CNCB

Why oil could now be in a ‘danger zone’

Crude oil has slumped over 2 percent this year and could see more pain ahead if OPEC does not stick to production cuts it agreed upon in December.

“I think oil is in a very dangerous zone now precisely because demand is not there,” Boris Schlossberg, BK Asset Management’s managing director of foreign exchange strategy, said Wednesday on CNBC’s “Power Lunch.”
A build in crude oil inventory Wednesday as reported by the Energy Information Administration in fact sent oil higher, settling up 17 cents to $52.34.

“The irony of this whole thing is that OPEC cuts are holding, but the demand is not there. And the longer oil wallows at this $52 level, the more likely it’s actually going to go to the downside. And if it trips to $50 a barrel stops, I think it could really tumble very quickly. So I think we’re in a perilous territory,” Schlossberg said, adding that he wouldn’t be long crude oil at this juncture.

OPEC agreed in December for the first time since 2008 to cut output by 1.2 million barrels per day.

Indeed, oil has traded in a range of roughly $50 to $55 per barrel, said David Seaburg, head of sales trading at Cowen & Company. But he has a more bullish forecast.

“I think from a trading perspective here for the near term, it looks like it’s a level you probably want to step in and take a look from the long side,” Seaburg said Wednesday on CNBC’s “Power Lunch.”

Seaburg said he’d need to see more government data in coming weeks to see if the OPEC agreement is holding, but he cited hedge funds’ extreme positioning in crude oil as a positive for crude.

He said the fact that crude oil held up in Wednesday trading despite the build in inventory was a bullish near-term signal in the face of crowded long positions in the space. He said that meant investors are comfortable with where oil will be in the next three to six months. “They’re comfortable with that, therefore you probably get a trade here I think for the near-term to the upside,” he said.

The XLE, a popular energy exchange-traded fund that tends to rise and fall with the price of crude oil, is down more than 4 percent this year. ConocoPhillips, one constituent in the XLE, is set to break out of a range in which it has traded since December, said Andrew Keene of AlphaShark.com.

After seeing some unusual options activity from an institutional buyer of the April 52.5 calls (which would imply a rally of nearly 6 percent by April expiration) Keene said he would buy the COP April 52.5/55 call spread for 60 cents, or $60 per options spread.

Oil prices extended losses on Tuesday

Oil prices slide after API reports 14.2 million barrel US crude stockpile increase; gasoline stocks also rise

Crude plunges off strong dollar 

Oil prices extended losses on Tuesday after an industry group reported a far larger rise in weekly U.S. crude stockpiles than anticipated.

U.S. crude oil in storage rose by 14.2 million barrels last week, according to the American Petroleum Institute. That was more than five times analysts’ forecasts for a 2.5-million barrel increase.

Gasoline stocks rose by 2.9 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.1-million barrel gain.

U.S. crude was trading at $51.72 after ending Tuesday’s trade down 84 cents, or 1.6 percent, at $52.17.

Benchmark Brent crude was down $1.03, or 1.9 percent, to $54.69 a barrel by 4:50 p.m. (2150 GMT).

Concerns that U.S. gasoline consumption is stalling weighed on futures. U.S. gasoline prices fell 2.3 percent.

Commodities tomorrow:

Commodities tomorrow: Strong support for oil at $53   

Futures were pressured on Tuesday by sluggish demand and evidence of a burgeoning revival in U.S. shale production that could complicate efforts by OPEC and other producers to reduce a supply glut.

Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade, according to official inventory data.

“It’s a supply-driven setback … We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February,” said Tony Headrick, energy markets analyst at CHS Hedging. “A strong build in inventory reports could weigh on gasoline in a seasonal timeframe where gasoline demand is weak.”

Inventory estimates from trade group the American Petroleum Institute are due on Tuesday afternoon. U.S. government data is reported Wednesday.

Gasoline futures fell below the 200 day moving average on a continuous chart, Headrick noted.

The U.S. dollar rose 0.4 percent against a basket of currencies, making dollar-denominated commodities like crude oil more expensive to holders of other currencies.

Prices have been supported for two months as the Organization of the Petroleum Exporting Countries and other exporters have tried to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017. OPEC and Russia have together cut at least 1.1 million bpd so far.

Another bullish sign emerged on Tuesday as crude oil exports from southern Iraq fell in January to 3.275 million barrels per day (bpd) from 3.51 million bpd in December, according to two oil executives.

Iraq, OPEC’s second largest producer, has been a concern among analysts because it has a harder time managing output than some other cartel members. Its leaders also raised issues with the coordinated production cuts from their inception.

‘Encouraging’ signs that OPEC production has been cut back: IEA

‘Encouraging’ signs OPEC production has been cut back: IEA   

But market players are concerned that rising U.S. production and signs of slowing demand growth could offset these efforts.

“The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.

Societe Generale oil analyst Michael Wittner said U.S. shale oil output was recovering faster than expected.

“Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply,” Wittner said.

“U.S. shale is coming back, and it’s coming back strong.”

U.S. oil production is expected to rise 100,000 barrels per day to 8.98 million barrels in 2017, 0.3 percent less than previously forecast, according to a monthly U.S. government report released on Tuesday.

Chinese oil demand grew in 2016 at the slowest pace in at least three years, Reuters calculations showed, the latest sign of slower demand from the world’s largest energy consumer.

Correction: This story has been corrected to reflect the total stockpile build reported by API was 14.2 million barrels.

— CNBC’s Tom DiChristopher contributed to this report.

New report shows rising oil and gas industry confidence

 

New report shows rising oil and gas industry confidence

02/01/2017

Offshore staff

HOUSTON – Despite the drawn-out recovery, confidence in oil and gas industry prosperity has risen over the past year among its US-based senior professionals according to new research conducted by DNV GL. Some 45% of the US respondents said they feel confident in the industry’s prospects for the year ahead, compared with only 27% at the start of 2016.

“Short-term agility, long-term resilience” is DNV GL’s seventh annual benchmark study on the outlook for the oil and gas industry. According to the international classification society, the report provides a snapshot of industry confidence, priorities, and concerns for the year ahead. The study draws on a survey of 723 senior sector players globally.

Throughout the US market, respondents reported that investments are spread across the value chain, with 42% saying they are likely to invest in upstream, 45% in midstream, and 27% in downstream for 2017. Notably, 73% believe gas will become an increasingly important component of the global energy mix over the next 10 years.

Peter Bjerager, executive vice president, director of division Americas in DNV GL Oil & Gas, commented: “We see the US oil and gas sector pushing opportunities and investments across the value chain. This shows the market’s ability to adapt and build a more robust portfolio as they position operations for the future. Our research echoes this and predicts a more positive outlook for the US market in the year ahead.”

Over the past couple of years, there has been a strong focus on the price of oil in relation to recovery. The study shows that 45% of US respondents expect the average WTI/Brent oil price to be in the range of $60-70/barrel, and 14% expect the price to be above $70/barrel, aligned with global expectations.

A more stable oil price would improve conditions for investing in oil and gas. “We are pleased to see that respondents globally consider the United States and Brazil to be the top country to invest in for 2017,” Bjerager said.

The report also indicated that US respondents will focus on both digitalization and subsea as emerging technologies in 2017.

Despite the optimism for 2017, cost management is still reported as a high priority among 82% of respondents (down 4% from 2016) and comparable with 85% globally. However, hard work paid off in 2016 and 79% of US respondents feel that they successfully achieved cost efficiency targets. Throughout the US, the key cost cutting priorities for 2017 include opex (34%) and organization restructuring (33%); these are aligned with the global picture.

“In the last two years, we saw intense short-term cost-cutting measures throughout the industry,” Bjerager added. “Though US respondents have a stronger belief that the worst of the downturn is over, restructuring and reorganization are still on the table to ensure growth and competitiveness for the long-run.”

Other key findings included:

* US respondents believe stronger oil prices will start to rebound in 2017 (41% versus 34% globally).

* US respondents (43%) see oversupply of oil and gas as a barrier to industry growth compared with 27% of sector professionals globally.

* The grip on cost control has loosened and dropped significantly from 65% in 2016 to 44%.

* The share of respondents expecting an increased focus on efficiency of assets and extending the lifespan of assets has increased significantly since last year. The share expecting increased focus on efficiency of assets in operations has risen from 34% to 41% while for life extension the percentage has grown from 29% to 36%. Both are slightly lower than the global response of 47% and 39% respectively for 2017.

* Expectations for increased overall headcount remain stable at 14%.

* The focus on cost management as a top priority in 2017 has seen a marked drop, from 38% to 23%. This is a larger fall than globally (from 41% to 34%).

* While opex and organizational restructuring are the top key priorities in both the US and globally in 2017, there is less of a focus on collaboration and supply chain savings in the US.

* 59% stated that cost pressures are driving companies to collaborate with industry participants.

* 68% understood that their business will seek to achieve greater standardization of tools and processes during 2017 – two percentage points higher than globally.

02/01/2017

US crude settles at $52.63, down 1%, as more US drilling revives concern about oil glut

CNBC

A worker on a Nabors crude oil drill near New Town, North Dakota.
A worker on a Nabors crude oil drill near New Town, North Dakota.

Oil prices fell on Monday as news of another increase in U.S. drilling activity spread concern over rising output just as many of the world’s oil producers are trying to comply with a deal to pump less in an attempt to prop up prices.

The number of active U.S. oil rigs rose to the highest since November 2015 last week, according to Baker Hughes data, showing drillers are taking advantage of oil prices above $50 a barrel.

U.S. crude futures settled down 54 cents, or 1 percent, at $52.63. Global benchmark Brent crude oil prices were down 32 cents at $55.20 a barrel at 2:33 p.m. ET (1933 GMT).

Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg, said “three factors that have been weighing on prices: the stronger U.S. dollar, the steady increase in U.S. rig counts and the (latest OPEC compliance data).”

When it comes to oil, don't forget about demand: Expert

When it comes to oil, don’t forget about demand: Expert   

The Organization of the Petroleum Exporting Countries and other producers including Russia agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang.

First indications of compliance to that deal show members have cut production by 900,000 barrels per day (bpd) in January, according to Petro-Logistics, a company that tracks OPEC supply.

That suggests only 75 percent of the targeted cuts would be met, said Tony Headrick, energy analyst at CHS in Minnesota.

“There’s an apprehension about how big that cutback is going to be versus the strength in U.S. crude production,” Headrick said. “That gap is a little narrower than folks had anticipated more recently.”

Tamas Varga, analyst at PVM Oil Associates in London, said the news was “not very encouraging” because it implied that only 75 percent of the OPEC production cut target was being met.

What's next for big oil?

What’s next for big oil?   

Oil prices have remained above $50 a barrel since producers agreed the deal in December, incentivising drillers in low-cost U.S. shale producing regions to ramp up activity.

“In our view the strong rise in U.S. shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

He estimated the U.S. rig count will continue rising at a rate of seven rigs per week over the first half of the year.

Analysts at J.P. Morgan said they saw a rise in oil prices beyond $60 a barrel in 2018 as unlikely.

“For prices to be supported above $60/bbl in 2018 would likely require continued OPEC output reductions that continue to tighten the market beyond Q3’17 – something that looks unlikely at this juncture,” they said in a report to clients.

Iran’s oil minister Bijan Zanganeh said on Monday he expected oil prices to remain at around $55 a barrel this yes, according to Mehr news agency.

The Rules Of The Crude Oil Market Have Changed

We gobbled up the CME Group’s recent whitepaper on Crude Oil,  loving all things Oil and Crude Oil futures related; and it is spot on (if not a little self serving) with the new dynamics in the energy sector due to increased supply and the US market’s ability to export that supply.

Remember that everything changed in the crude oil sector when the U.S. officially lifted the export ban on crude in 2015, making WTI Crude Oil (WTI = West Texas Intermediate) more on par with Brent Crude Oil.  Before this period, Brent was used as the international standard, simply because WTI crude (which is US crude oil) wasn’t able to be exported (much less moved out of Cushing, OK very easily); while Brent was shipped around the world without hesitation.  The CME’s in-depth article looks at just how much of an impact lifting the ban has had on the production, distribution, and price fluctuation for the crude oil business. Take a look at the price difference after the US lifted its ban on exporting crude oil, via the CME Group.

Oil Market

(Disclaimer: Past performance is not necessarily indicative of future results)

Crude Oil

You can look at that chart and see the spread roughly at the same level now as when the ban was lifted. But a lot of that has to be buying the rumor, selling the fact amongst traders. The export ban surely didn’t happen overnight, it was months and years in the making. The CME Group suggests this ban lift came from a sharp rise in oil production, going from producing 5.1 million barrels a day in January 2009, to 8.8 million in October 2016. At one point, it was at its highest in March of 2016, producing 9.9 Million b/d. That’s quite a jump, and would definitely help explain why supply is one of the reasons prices have pushed lower over the past two years. The argument is sound… we’re drowning in excess supply of this stuff, pushing down prices, hurting US companies and jobs which has let us ship it out of the country where it is wanted.

If that big increase in supply was the impetus, what happens when supply increases yet again? The CME shows us that according to the EIA, we should expect production to grow by at least another 3 million more barrels a day over the next decade.

Oil Market

The interesting part of this graphic is the breakdown of the different types of ‘US Oil’, with the gray representing the traditional Texas, California, etc. oil rigs, the blue the newer traditional Gulf Of Mexico production – and all those other colors the shale and fracking revolution. You can see from CME’s graph that the major production in oil isn’t coming from conventional oil, but all the alternatives out there like “Tight” produced from shale, sandstone and limestone formations.

Wherever its coming from – this growth in US production, combined with the lift on the ban, has re-energized the debate over which oil contract is the standard in crude oil contracts. Here’s the CME:

 

The WTI-Brent spread has become a true indicator of value for the U.S. crude exporters. With the spread trading between $1 and $2 per barrel discount to Brent, traders say that increased volumes of WTI linked crude oils may flow to countries outside of the US and Canada. Part of this is due to the relatively low cost of freight with traders able to benefit from the ability to offer a US bound cargo and a now a US origin crude oil export cargo as a single transaction to a ship owner. Without US crude oil exports being permissible, ship owners were previously only able to pick up US bound cargoes and struggled to find any return cargoes leaving their vessels out of place for subsequent voyages. Shipowners now have the choice of a back-haul crude oil cargo or a refined product cargo as the US exports both. This tended to result in higher freight costs to a charterer due to the lack of economies of scale (for the ship owner).

Further, the recent expansion of the Panama Canal allows for enhanced shipping alternatives for cargoes to transit from the U.S. Gulf to the Far East. The significant discounts for WTI compared to Brent from the past are unlikely to re-appear as any mispricing would be quickly re-aligned through a rise in U.S. crude exports, which was not the case in the past when U.S. crude remained non-exportable.

Cushing, Oklahoma and Storage Issues

If you’re familiar at all with the physical side of oil, you know that most of it ends up in the Oklahoma town of Cushing. It’s where most of the Shale and Texas Oil is stored until shipped out, but the recent uptick and changing dynamics has spurred changed on that front, via CME Group.

The U.S Gulf Coast comprises approximately 55% of the U.S. crude oil storage capacity, while Cushing comprises 13%. The infrastructure investment in the U.S. Gulf Coast has transformed WTI into a waterborne crude, with extensive export capacity. All in all, the Houston market has become export- focused, with a terminal network with storage capacity of 65 million barrels and an additional 20 million barrels of storage capacity projected to come into service in 2017.

Right on cue,  the CME Group has created a Crude Oil Storage contract. Each month, 7,000 contracts are sold auction still – which gives the buyers the right to store 1,000 barrels of oil off the gulf coast. The Wall Street Journal describes what happens next.

Once the contracts are sold through the auction, they can be bought and sold freely. At the end of the month, anyone holding a contract can use the storage space, which will hold the oil in either an above-ground storage tank or an underground cavern.

Of course, this is mainly for the players in the business….

So, who will use the oil-storage futures?

Producers, transportation companies and refiners all have exposure to commercial storage rates. A storage futures contract could allow those parties to lock in those costs ahead of time or trade them for profit.

Foreign companies might be interested too. Waterborne deliveries can be delivered to the Clovelly hub, along with oil from Texas and offshore Gulf of Mexico production.

Put this together and Cushing is no longer the crude oil storage capital is once was. Take a look at the change is U.S. working crude oil storage capacity.

Oil Market

What Does This All Mean?

Well, for one, it’s the CME tooting their own horn here, a bit. They would like nothing more than for the majority of Oil hedging and trading to be done on their own WTI Crude Oil Futures contract, versus the ICE’s competing Brent Crude Oil Futures Contract. What better way to convince you to trade it than point out how its supply is growing impressively both in sheer numbers, and in number of places producers can put it. With a more diverse storage geography in the US (plus the ban on exports being lifted), WTI can be sold to

US Crude settles at $52.75

CNBC

US crude settles at $52.75, down 43 cents, after EIA reports bearish oil, fuel stockpile data

Build in crude oil inventories

Build in crude oil inventories   

Oil prices fell on Wednesday after earlier shrugging off a report from the U.S. Energy Information Administration that showed the nation’s crude inventories rose and gasoline stocks increased sharply.

U.S. light crude settled down 43 cents at $52.75. Benchmark Brent crude fell 25 cents a barrel to $55.19 by 2:54 p.m. ET (1954 GMT).

Futures fell early in the day after builds in U.S. inventories reinforced expectations that increasing shale output this year would reduce the impact of production cuts by OPEC and other major exporters. However, they turned positive after the EIA report amid market strength.

Again Capital founding partner John Kilduff said there was little to cheer in the report, but oil futures can’t fight the strength on Wall Street on a day when the Dow crossed 20,000 for the first time ever and markets were broadly higher.

“It was a very bearish report, and it’s a cloud over this market, but it’s no asset class left behind at the moment,” Kilduff said.

Trump revives pipelines: Who wins & loses?

Trump revives pipelines: Who wins & loses?   

U.S. crude stockpiles rose by 2.8 million barrels in the week through Jan. 20, matching analysts expectations and roughly in line with an earlier report from the American Petroleum Institute.

U.S. gasoline futures fell to a session low after EIA reported gasoline stocks rose by 6.8 million barrels, compared with analysts’ expectations in a Reuters poll for a 498,000-barrel gain. It pared losses shortly after the report came out.

Distillate stockpiles, which include diesel and heating oil, increased by 76,000 barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

Oil prices have found support in recent weeks from plans by the Organization of the Petroleum Exporting Countries and other producers to reduce output.

Around 1.5 million barrels per day (bpd) has already been taken out of the market from about 1.8 million bpd agreed by oil majors starting on Jan. 1, energy ministers said on Sunday, as producers look to reduce oversupply.

Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. The amount remaining equates to about 60 days of world oil consumption.

Bearish on oil for the short term: Pro

Bearish on oil for the short term: Pro   

But as OPEC is cutting, U.S. shale output is rising.

U.S. oil production has increased by more than 6 percent since mid-2016, although it remains 7 percent below its 2015 peak. Output is back to levels reached in late 2014, when strong U.S. crude output contributed to a crash in oil prices.

President Donald Trump‘s promise to support the U.S. oil industry has encouraged analysts to revise up their forecasts of growth in U.S. oil production, which is already benefiting from higher prices.

A push by Republicans in the U.S. House of Representatives for a shift to border-adjusted corporate tax could help push U.S. crude prices higher than global benchmark Brent, triggering large-scale domestic production, according to Goldman Sachs.

— CNBC’s Tom DiChristopher contributed to this report.

Russia is China’s top crude oil supplier

Russia beats Saudi Arabia as China’s top crude oil supplier in 2016

By Chen Aizhu and Meng Meng | BEIJING

BEIJING Russia overtook Saudi Arabia in 2016 to became China’s biggest crude oil supplier for the first year ever, customs data showed on Monday, boosted by robust demand from independent Chinese “teapot” refineries.

Russian shipments surged nearly a quarter over 2015 to about 1.05 million barrels per day (bpd), the data showed, with Saudi Arabia coming in a close second with 1.02 million bpd, up 0.9 percent in 2016 versus the previous year. China is the world’s second-largest oil buyer and the fastest-growing major importer.

While Saudi Arabia counts China’s state oil firms as backbone clients through long-term supply contracts, China’s independent refineries – nicknamed “teapots” due to their smaller processing capacity – saw Russia as a more flexible supplier.

For the teapot plants, authorized to import crude oil for the first time in late 2015, shipments from Russia’s eastern ports are easier to process, coming in smaller cargo sizes at a closer proximity.

Russia may be able to maintain the top spot in 2017 as it expands exports of its East Siberian-Pacific Ocean (ESPO) pipeline blend crude. Saudi Arabia, meanwhile, is set to shoulder the lion’s share of supply cuts agreed to last year by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers.

“OPEC cuts means Gulf producers take a hit in terms of market share, even though most of their cuts are to Europe and US …Russia has an ESPO expansion coming up as well as supplies via Kazakhstan earmarked for China,” said Michal Meidan of consultancy Energy Aspects.

State-run Saudi Aramco is expected to look to a new refinery under state-run CNOOC to lift sales.

For December, Russia also held the top spot with supplies up 4.8 percent from the same month a year earlier at 1.19 million bpd. Meanwhile Saudi sales dropped nearly 20 percent from a year earlier to 841,820 bpd, data from the Chinese General Administration of Customs showed.

Total crude oil imports in December hit a record as refiners stepped up purchases ahead of a deal by oil-producing countries to reduce supply and bolster prices.

For the whole of 2016, imports gained nearly 910,000 bpd over 2015, the strongest annual growth on record and mostly driven by teapot buying.

Third-largest supplier Angola shipped 13 percent more crude last year versus 2015, while No. 4 seller Iraq recorded similar growth.

China also boosted imports from South American producers last year, with growth of 37.6 percent from Brazil and 26 percent from Venezuela, the data showed.

Imports from Iran expanded nearly 18 percent last year to a record 624,260 bpd, as Chinese state oil firms started to lift barrels from their investments in Iranian oilfields in addition to term supply agreements.

(Reporting by Chen Aizhu and Meng Meng; Editing by Kenneth Maxwell and Christian Schmollinger)

New Washington Reports Shows No Crude Oil by Rail in Grays Harbor

KBKW

A new report from the Washington State shows no crude oil traveled by railroad to Grays Harbor County in the 4th quarter of 2016. The Department of Ecology was tasked with releasing the “Crude Oil Movement by Rail and Pipeline Quarterly Report” by code adopted last summer (Chapter 173-185 WAC) which established reporting standards for facilities that receive crude oil by rail and pipelines that transport crude oil in or through the state. Additionally, the rule identified reporting standards for Ecology to share information with emergency responders, local governments, tribes, and the public.

This quarterly report for the reporting period October 1, 2016, to December 31, 2016, provides aggregated information on crude oil transported by rail to facilities in Washington, information on crude oil movement by pipeline, and information on crude oil spilled during transport and delivery for rail and pipeline.

In addition, information is provided about the volume of crude oil transported into the state by vessel, and eventually by pipeline. Although the report said that pipeline data was delayed and will be added later this month.

View the entire report here: https://fortress.wa.gov/ecy/publications/documents/1708002.pdf

A summary of the data shows:

  • Two regions of origin are reported: Alberta and North Dakota.
  • Three types of crude oil are reported: heavy, medium, and light.
  • The total volume of crude oil transported by rail during the quarter was 14,708,705 barrels (617,765,610 gallons).
  • The average weekly volume of crude oil transported by rail was 1,050,622 barrels (44,126,124 gallons).
  • The total number of rail cars moving crude oil by rail was 21,603 cars.
  • The average number of rail cars per week moving crude oil by rail was 1543 cars.
  • 1% of crude oil transported by rail was heavy crude, 5% was medium crude, and 94% was light crude.
  • Alberta was the region of origin for 6% of crude oil transported by rail, while North Dakota was the region of origin for 94% of crude oil transported by rail.