Daily Oil Market Report - 27th November
Everyone awaits the OPEC meeting: Oil prices traded in a $2.50 range despite a fairly uneventful day. Prices were mostly in positive territory after falling in mid day trading on no major headline. Market remains jittery on Trump-China trade war. Market awaits the OPEC meeting on the 6th of December and its doubtful that the market will move much before that. Brent settled 27c lower and WTI closed 7c lower. Prompt Brent spreads weakened further and the prompt North sea market must be really weak as the pipeline outage in the Buzzard field has failed to get the prompt market excited. However, saying that physical crude differentials are holding up really well. Russia’s Urals crude is trading at a premium to Dated Brent as there is nothing stopping the fuel oil crack rally. The fuel oil rally has been the best counter consensus trade of this year.
One of the reasons behind the lackluster European crude market is the ongoing refinery issues. There are now production issues in 3 of the French refineries due to strike action and the ongoing low Rhine water levels will continue to keep German refinery runs low.
As the OPEC meeting gets closer, we expect a lot more headlines, most of which is just noise. Kuwait started the headlines this morning by saying that its too early to talk about OPEC+ cuts. With only 9 days left, we don’t think its that early.
Nigerian and Angolan programs came out today and they paint very different stories. The Angolan January loading program came out at 1.33 million barrels per day which is the lowest in 10 years. Most people forget about Angolan declines as its normally Iran and Venezuela that make up the OPEC headlines. The Angolan Jan program is 200KBD lower than their last reported production number. Meanwhile Nigerian' January program is at 1.87 million barrels per day, which is 100kbd higher from the December program. Nigeria’s new offshore field called Egina will eventually produce 200KBD. Angolan crude differentials are trading very strongly not only due to lower production, but the strong fuel market and the increased Chinese refinery runs is keeping their heavy crude in strong demand.
API stats came out with +3.4mln crude, -2.6mln gasoline and +1.18 for distillate. The forecast was for a modest build in crude and gasoline and modest draw for distillate. We will keep a close eye on refinery runs as US has finished their refinery maintenance and should be ramping up their crude runs. US refinery runs hit a peak of 17.6MMBD last December and we expect this number to be even higher as the US refineries continue to improve their utilization. However, the weak gasoline market might trim some refinery runs especially in the East Coast. There will be a 2 million SPR draw as well this week which should add pressure on commercial crude inventories. US SPR has drawn by 13 mln barrels from this year’s high and more selling is planned next year as US’s strategic stocks is far greater than 90 days of net imports as required by the IEA.
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