Amidst all the chaos

Published at 12:15 20 Mar 2017 by . Last edited 18:27 20 Mar 2017.

The fallout from CERAWeek continues even a fortnight later. A series of OPEC PR gaffes that started at the conference went on for longer than OPEC or the market would have liked. Various contradictory statements from oil ministers raised concerns about the chances of the OPEC deal rolling over in May, especially as the lack of visible stockdraws has the market on the edge already.

Iraq’s minister insisted that the current OPEC deal was based on exports (which it is not); Saudi Arabia added to the confusion by introducing the term ‘supplies to the market’, which is new for many participants; and Iran simultaneously claimed to be happy to cap production at 3.8 mb/d if the current deal rolls over (a huge deal, in our view), but also that it will reach 4 mb/d by 20 April.

Some of these statements cannot be taken at face value—such as the Iraqi claims of keeping exports at 3.2 mb/d in H2 17 but raising production by 0.5 mb/d to 5 mb/d. Others, such as the Saudi supply figures, are important to understand. The Kingdom has depleted over 60 mb of stocks since January 2016 and has to rebuild some of that, but this does not imply higher exports.

However, this is not a time to add to market confusion. Already, destocking has hit the physical crude market hard, as offshore stockdraws have led to onshore stockbuilds. The best course of action for OPEC is to say nothing and let markets do the work for the next few months.

The good news for the bulls is that at least the products markets are starting to look healthier as end-user destocking comes to an end and buying is picking back up again. With product stocks starting to deplete heavily, the incentive for refiners to run post maintenance will be high.

Fig 1: Saudi production vs supplies, mb/d Fig 2: Planned refinery maintenance, mb/d
Saudi Production vs Supplies Refinery Maintenance
Source: MEES, JODI, Energy Aspects Source: Energy Aspects

Log in to download

Other Perspectives publications

A new narrative

Published 5 days ago

2018-01-15 Oil - Perspectives - A new narrative cover

To say that there has been a paradigm shift in sentiment in the oil market would be an understate..

Read more

Over to the upside

Published 1 week ago

2018-01-08 Oil - Perspectives - Over to the upside cover

Oil prices have started 2018 on a strong note. While the cold spell in the US and Asia and severa..

Read more

Pace yourself

Published 1 month ago

2017-12-11 Oil - Perspectives - Pace yourself cover

This is the final edition of Perspectives for the year. Normal service will resume on 8 January 2..

Read more

Taper tantrum 2.0

Published 1 month ago

2017-12-04 Oil - Perspectives - Taper tantrum 2.0 cover

OPEC and non-OPEC countries decided to extend the current output cut deal through 2018, albeit wi..

Read more

Job done or unfinished business?

Published 1 month ago

2017-11-27 Oil - Perspectives - Job done or unfinished business? cover

Helped by an extended outage on TransCanada’s Keystone pipeline, WTI—the very last cr..

Read more