Tag: OECD Global Inventories

Oil Market Readies For Iran Sanction Waivers, Round 2

Posted on by Robert Boslego

Crude oil production in Iran had reached 3.84 million barrels per day (mmbd) in the period following the lifting of sanctions by the Obama Administration. But following President Trump’s announcement in May 2018 that the U.S. would re-impose sanctions in November, demand for Iranian crude dropped to 3.7 mmbd by October. In November, the Trump Administration allowed limited waivers to the sanctions to eight countries, but Iranian production dropped by another 700,000 b/d by March.

The waivers were designed to terminate on May 2nd, but Secretary of State Mike Pompeo announced April 22nd that the waivers would not be extended. "This decision is intended to bring Iran's oil exports to zero, denying the regime its principal source of revenue," the White House said in a statement.

According to the International Energy Agency (IEA), Iran’s exports of crude and condensates are running about 1.1 mmbd in April. President Trump tweeted Saudi Arabia and others in OPEC had assured him that they would make up the impact of any decline in Iran’s exports:

Iran

In the months leading up to last November, KSA had increased its output to 11.1 mmbd, at the request of the White House, to ensure that oil supplies would be adequate once the Iranian sanctions took effect in November. But Trump’s granting of the waivers immediately created an oversupply in the global oil market, and oil prices collapsed as a result. Continue reading "Oil Market Readies For Iran Sanction Waivers, Round 2" →

World Oil Supply, Demand And Price Outlook, November 2018

Posted on by Robert Boslego

The Energy Information Administration released its Short-Term Energy Outlook for November, and it shows that OECD oil inventories likely bottomed in June at 2.807 billion barrels. It estimated a large 20 million barrel gain for October. Though it forecasts that stocks will drop in December to 2.867 billion, that is 50 million barrels higher than in the October outlook.

Throughout 2019, OECD inventories are generally expected to rise, reaching 3.0 billion barrels in August. It projects ending the year with 138 million barrels more than at the end of 2018 in glut territory.

OECD Oil Inventories

The moment of truth has come, and it appears that the sanctions will cut less of Iran’s production and exports than has been added by OPEC+ producers and the U.S. That is why oil prices have been dropping for eight straight sessions.

Oil Price Implications

I performed a simple linear regression between OECD oil inventories and WTI crude oil prices for the period 2008 through 2017. As expected, there are periods where the price deviates greatly from the regression model. But overall, the model provides a reasonably high r-square result of 79 percent. Continue reading "World Oil Supply, Demand And Price Outlook, November 2018" →

World Oil Supply, Demand And Price Outlook, October 2018

Posted on by Robert Boslego

The Energy Information Administration (EIA) released its Short-Term Energy Outlook for October, and it shows that OECD oil inventories likely bottomed in July at 2.806 billion barrels. It shows inventories rising in the third quarter, contrary to the normal seasonal trend. However, it forecasts that stocks will drop in December to 2.817 billion after the Iranian sanctions are expected to go into effect.

Throughout 2019, OECD inventories are generally expected to rise, ending the year with 98 million barrels more than at the end of 2018. The expected drop in Iranian production, due to the U.S. sanctions, is forecast to be more-than-offset by increases from other producers, such as the U.S., Canada and the Gulf states of Saudi Arabia, Kuwait and the UAE.

oil inventories

Crown Prince Mohammed bin Salman of Saudi Arabia has recently stated that KSA can produce at least 12 million barrels per day. If it does increase output to that level, this would be a major “surprise” to world markets since its production has never exceeded 11 million. Continue reading "World Oil Supply, Demand And Price Outlook, October 2018" →

Saudi Crown Prince Claims Lost Iranian Barrels Will Be Offset

Posted on by Robert Boslego

Back in 1973, Saudi Arabia took a very aggressive move against the U.S. by starting the Arab oil embargo:

Saudi Crown Prince

But the Trump Administration has taken a strong position against Iran, Saudi Arabia’s nemesis. KSA also depends on the U.S. for its protection as well as its economic development. The current relationship between Washington and Riyadh could not be better:

"I love working with him (Trump)." - Crown Prince Mohammed bin Salman, October 5, 2018

Saudi Crown Prince
Photo Courtesy Of AFP)

Prior to announcing the U.S. pull-out of the Iranian nuclear deal in May, the White House had secured assurances from producers, namely Saudi Arabia, that any disruptions in Iran’s exports would be offset by higher production by countries with spare capacity, according to Treasury Secretary Mnuchin. The Saudi energy minister confirmed it. Continue reading "Saudi Crown Prince Claims Lost Iranian Barrels Will Be Offset" →

World Oil Supply, Demand And Price Outlook, September 2018

Posted on by Robert Boslego

The Energy Information Administration released its Short-Term Energy Outlook for September, and it shows that OECD oil inventories likely bottomed in July at 2.804 billion barrels. It shows inventories rising in the third quarter, contrary to the usual seasonal trend. However, it forecasts that stocks will drop in December to 2.798 billion after the Iranian sanctions are expected to go into effect.

Throughout 2019, OECD inventories are generally expected to rise, ending the year with 72 million barrels more than at the end of 2017. The anticipated drop in Iranian production, due to the U.S. sanctions, is forecast to be offset by increases from other producers, such as the U.S., Canada and the Gulf states of Saudi Arabia, Kuwait and the UAE.

World Oil Supply

Saudi Arabia has recently stated that it can produce at least 12 million barrels per day. If it does increase output to that level, this would be a major “surprise” to world markets since its production has never exceeded 11 million. Continue reading "World Oil Supply, Demand And Price Outlook, September 2018" →