Remember Wednesday’s rout in crude? Well, what a difference a day and a tape bomb makes.
At around 9:30 this morning, Dow Jones reported the following:
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Saudi Arabia’s energy minister says talks with producers could include possible action to stabilize oil market,
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Global demand still strong; mkt rebalancing taking place
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Supply outside OPEC is declining fast; current oil prices unsustainable
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Clearing of crude, products inventories will take time
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Kingdom of Saudi would act to help rebalance market if needed
So basically a bunch of meaningless soundbites, but that’s all the market needs to ramp. Here’s how crude responded:
Also out Thursday is the IEA’s closely watched monthly report and frankly, you’d have to use a magnifying glass to find something bullish in there. Check out these hilariously bearish bullets (via Bloomberg):
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Saudi crude supply rose 240k b/d from yr ago in July
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Saudi crude exports “held well above” 7m b/d this yr: IEA, citing shipping data
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Saudi Aramco cut monthly formula price for Arab Light for Sept. loadings to Asia by $1.30/bbl “in a bid to stay competitive in the region”
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Saudi crude supply rose 240k b/d from yr ago in July as kingdom covered higher domestic demand and increased sales to world markets, IEA says in mkt report.
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Saudi Arabia pumping more oil to satisfy increased demand from domestic power plants during summer when air conditioning usage soars; last yr average 860k b/d was burned in power plants from June-August out of ~10.4m b/d of crude produced
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Additional export volume estimated at >100k b/d, mainly destined for Asia, the kingdom’s biggest market: IEA, citing preliminary tanker tracking data
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Saudi crude exports “held well above” 7m b/d this yr: IEA, citing shipping data
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Saudi Aramco cut monthly formula price for Arab Light for Sept. loadings to Asia by $1.30/bbl “in a bid to stay competitive in the region”
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Iran output at or above 3.6m b/d for 3rd straight month, up ~700k b/d since start of year when sanctions were eased, suggesting level can be sustained
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“Drilling in the U,S, is on the rise, but a substantial boost in activity may require oil prices nearer to $60/bbl,” IEA says in monthly report. Rig count is gaining.
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OPEC output rose by 150k b/d in July to 8-yr peak of 33.39m amid higher Saudi production; kingdom’s output rose to record 10.62m b/d during peak summer season
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Kuwait, U.A.E production also set new highs in July at 2.87m b/d and 2.97m b/d, respectively
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Oil inventories in industrialized nations rose to record of more than 3b bbl in June, w/ stocks of refined products expanding by more than 4 times seasonal average
Now from our point of view, all of that seems to very clearly suggest that the supply/demand picture is not improving. And that would be an understatement. But traders (both human and non-human) seem to have latched onto a single statement amid that sea of bearish banter. Here’s the saving grace: “Global oil markets will continue to re-balance this year as refining demands absorb record output from Persian Gulf.”
Oh well we suppose everything is fine then. They also added this, for good measure:
"Oil's drop has put the 'glut' back into the headlines even though our balances show essentially no oversupply during the second half of the year. Our crude oil balance indicates a hefty draw in the third quarter after a lengthy stretch of uninterrupted builds."
Right, because nothing in the data presented above suggests there’s a glut. Still, some are trying desperately to remain optimistic. Goldman, for instance, has a pretty constructive outlook despite soaring product inventories attributable to the following:
(Charts: Goldman)
Collectively, analysts don’t know what to think. Bloomberg’s weekly survey showed 14 respondents bearish, 13 neutral, and 9 bullish.
One thing’s for sure, risk better hope all of these rather amorphous claims about a global rebalancing turn out to be true because, well, because have a look at the YTD correlation between the S&P and crude prices:
