Daily Oil Market Report - 26th November

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Saudi’s Dilemma: Oil prices started on a positive foot this week with prices over $1.68 for Brent and $1.21 for WTI. Brent and WTI structure also strengthened with Jun/Dec up over 10c for both the contracts. Prompt Brent spreads settled 16c higher on headlines about Buzzard field still shut after the discovery of corrosion in its pipelines. Its this time of the year again when something always goes wrong in the Forties field.

 Saudi Crude Production (Million Barrels Per Day)

Saudi Crude Production (Million Barrels Per Day)

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Saudi headlines came out in the morning stating that they are producing 11.2 million barrels per day. If this headline is true, that is a huge number. That is a monthly production jump of over 500KBD. It seems that Saudi is trying to maximize their production before the OPEC meeting in early December. However, some think that Saudi must be running down their crude stocks in order to make that number. It is very hard to say exactly how they are managing such record high production given many people were skeptical of Saudi producing over 11 million barrels per day. Saudi say that the increased production is to meet the increased demand in Q4 and nothing to do with Trump’s pressure on them. This OPEC meeting will be very interesting in the next 2 weeks as a production rollover is still a possibility which will be very bearish for the market.

The Nymex spec length came out this evening, delayed due to Thanksgiving. WTI spec length is down for the 11th week in a row but the pace of decline has finally slowed down. Spec length for WTI is now at the lowest level in around 16 months.

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In France, Total’s Gonfreville 253KBD refinery is shutting down due to strike action. In addition, product output will be reduced from La Mede refinery as well. While, in Germany the continued low Rhine water levels in affecting refinery production as well. Due to these shutdowns, European refinery margins have rebounded very strongly from the run cut levels seen in early October. According to European refiner, Neste, their benchmark margin has increased by $7 in the past few weeks. The drop in crude prices, a contango market and strong diesel and fuel oil cracks is good news for European refiners.

In non oil news, the selloff in bitcoin continued. Prices dropped another 8% and are now at $3600. Equity markets were in positive territory with S&P up 1.5%. However, post close Trump renewed pressure on China tariffs. He remains adamant on increasing tariffs on $200bn of Chinese goods. Apple got caught in between the 2 nations as Trump said Iphones could be hit with a 10% duty. As a result, Microsoft briefly overtook Apple as the most valueable company in the world.

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