Next week's edition of Perspectives will be published on Tuesday 30th August, owing to the UK bank holiday.
Oil fundamentals have improved markedly in recent days, buoyed by the return of Asian buying, namely for the Chinese SPR, although buying for October delivery has been muted. The lull in October buying is likely to prove temporary however, as plenty of storage units are still scheduled to come online, notwithstanding the recent delays, and as Chinese teapots will be keen to use up their unused crude import quotas for the year—especially as new import infrastructure starts up.
South Korean and Indian buying are slowly picking up too, having declined in June and July, which resulted in crude stockdraws. With IOC’s Paradip refinery finally set to ramp-up from end-August after a three-month long unplanned outage, Indian runs are likely to hit new highs soon, much like Chinese runs, which are poised to rise further once the 0.26 mb/d Kunming refinery starts.
WAF differentials, which have struggled despite a plethora of attacks on Nigerian infrastructure, have finally started to rise too. With storage levels running low, exports are finally starting to fall, while planned works have pushed the Angolan October export programme to a five-year low.
But even beyond a maintenance-affected October autumn, deepwater decline rates are stepping up. Angolan exports are only up y/y by 8 thousand b/d in the year-to-September. This is despite 0.41 mb/d of new projects starting up over 2014 and 2015, and several of them reaching peak output this year. Field declines have stepped up to 15% in H1 16, compared to 11.5% in H1 15.
There is plenty to be cautiously optimistic about, but if attention centres on the potential Nigerian ceasefire or record Saudi output, especially if the OPEC talks in Algeria fail, prices can fall again.