Archive for the ‘Article’ Category

“Lower Forever ??” (ICP Forecast as of 10 August 2017)

Thursday, August 10th, 2017

The summary of market info as of 10 August 2017 is as follows:

  • Last month, the crude prices increased in response to strong U.S. refinery demand as well as the rate of U.S. oil production growth will slowing down due to some U.S. companies will reduce its investment spending for the rest of the year. In addition in supply side factors, Saudi Arabia announced a cap on the country’s crude oil exports in August.
  • However, for upcoming months, the price will be difficult to exceeds $50 a barrel on concerns that supplies may rise once the summer driving season ends. This is also supported by EIA’s latest forecast on increasing U.S. oil output and cutting price estimates for this year as signs of elevated global supplies stoked due to OPEC’s cut-campaign aren’t helping to rebalance the market as expected.
  • Shell’s CEO talked about oil being “lower forever”. He didn’t actually mean forever-ever, rather he thought that the market will have quite a bit of movement in the oil price going forward under unsure long-term demand growth, there is a 50-50 chance that we will see oil prices trend up.
  • EIA forecasts WTI at $48.93, while Brent at $50.75/bbl for FY2017.

ICP was forecasted at 48.06/bbl in August 2017 and will average at $ 49.6/bbl for full year 2017.

 

August 2017

“Lower for longer is the new normal” (ICP Forecast as of July 2017)

Wednesday, July 12th, 2017

The summary of market info as of 12 July 2017 is as follows:

  • Even though the OPEC delivered on pledges to reduce supply, its output still exceeded demand in the first half of this year. Its ally, Russia would stick to the current deal and oppose any proposal for deeper production cuts to avoid sending the wrong message to the oil market. This pact continue to strongly defend the deal, which they believe to be the best way to re-balance the market by letting supply, demand and prices work.
  • The rapid increase in U.S. oil production is more obvious. Shale revolution has turned the U.S. into a big producer of oil, allowing it to become less reliant on imports. U.S. exports in the first three months of 2017 exceeded five of the 14 members of the OPEC.
  • Three years into the biggest oil downturn, some analyst see the recovery slipping further from view. The strategy to cut the production is suggested to be abandon entirely and revert to its previous policy of maximizing production to squeeze rivals out of the market, to limit growth in U.S. shale oil.
  • EIA forecasts WTI at $49.01 for 2017, while Brent at $50.84/bbl for 2017.

ICP was forecasted at 45.2/bbl in July 2017 and will average at $ 48.5/bbl for full year 2017.

Jul 2017

“The market still had low expectation” (ICP Forecast as of 9 Mar 2017)

Thursday, March 9th, 2017

The summary of market info as of 9 March 2017 is as follows:

  • Since the OPEC countries and Russia agreed to cut output, oil prices have stabilized at around $50-$55 a barrel, up from $45-$50 a barrel before. Yet, prices are struggling to rise further as U.S. crude stocks increase to record levels.
  • Global crude inventories aren’t draining as quickly as  expected, opening the door for an extension of the production cuts into the second half of the year. “Until the new agreement made, prices threatened to return to the levels seen in early 2016” of less than $30 a barrel, the IEA said.
  • China’s crude imports surged after the government granted import quotas, unfortunately didn’t make big impact to the price. In addition, there is a global assumption of slowing growth of oil demand, that will further triggering price shocks.
  • EIA forecasts WTI at $53.50 for 2017, while Brent at $54.63/bbl for 2017.

Based on the graph, we estimate SLC will be a little bit increased to $54.59/bbl in March 2017 and will average $ 54.43/bbl for full year 2017.

SLC Mar Edition 2017

“Deal or No deal” (ICP forecast as of 9 Nov 2016)

Wednesday, November 9th, 2016

The summary of market info as of 9 Nov 2016 is as follows:

  • OPEC warned of prolonged instability in the oil market if the producer group and other major crude suppliers fail to agree on the next meeting in Vienna on November 30 2016. This meeting is intended to curb a global glut to re-balancing the market by limiting output. Without a deal, OPEC will return to the policy of pumping without limits to secure sales and back to battle for market share.
  • Oil investors are growing more doubtful that OPEC can seal a deal. Recent production gains from producers outside the OPEC including Russia, the United Kingdom, and Brazil, and the continued resiliency of onshore U.S. producers are applying downward pressure on crude oil prices. Increased volumes from Nigeria, Libya, Iran, and Iraq are set to enter the market and could complicate efforts of OPEC’s members to reach agreement on production quotas.
  • EIA forecasts WTI at $42.68 for 2016, while Brent at $43.13/bbl for 2016.

Based on the graph, we estimate SLC will be a little bit increased to $43.50/bbl in Nov 2016 and will average $ 40,35/bbl for full year 2016.

nov-2016

“Now, It depends on Iran” (ICP forecast as of 8 Sept 2016)

Thursday, September 8th, 2016

The summary of market info as of 8 Sept 2016 is as follows:

  • Crude rallied last month as investors parsed comments from OPEC and Russia for signs of whether oil producers will agree on measures to revive prices.
  • OPEC will held meeting with outside producers include Russia in Algiers at the end of Sept. Market looks there is a possibility Iran will likely be more open to joining a production freeze agreement since the current situation is different than April when Iran rejected the previous agreement. Now, Iran has reached full capacity.
  • Industry data showed U.S. stockpiles dropped last month, trimming inventories that are at the highest seasonal level in more than 30 years. However, as some drilling rigs return to work and productivity from existing wells increases, the dropped will be no longer.
  • EIA forecasted a little bit higher prices than previous month. EIA forecasts WTI at $41.92 for 2016, while Brent at $42.54/bbl for 2016.

Based on the graph, we estimate SLC will be a little bit increased to $42.06/bbl in Sept 2016 and will average $ 39.49/bbl for full year 2016.

sept-2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Lingering concerns (ICP forecast as of 12 August 2016)

Friday, August 12th, 2016

The summary of market info as of 12 August 2016 is as follows:

  • Start on July 2016, ICP formula referred to dated Brent + alpha. Based on the actual July, alpha for SLC is – 4.33 while dated Brent is US$45.1
  • The weakness of crude market may persist as demand slows seasonally mainly due to the end of the driving season in US and the high inventories of fuel in the supply side continue exerting pressure.
  • However, IEA sees  global oil markets will continue to re- balance this year as a pick-up in demand from refiners absorbs record output from several Persian Gulf producers.
  • Opec has plan to meet in September to discuss ways to stabilize falling prices
  • EIA forecasted higher prices than previous month. EIA forecasts WTI at $41.16 for 2016, while Brent at $41.60/bbl for 2016.

Based on the graph, we estimate SLC will be decreased to $38.90/bbl in June 2016 and will average $ 38.06/bbl for full year 2016.

August 2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Back on track (ICP forecast as of 9 June 2016)

Friday, June 10th, 2016

The summary of market info as of 9 June 2016 is as follows:

  • For the first time in eight consecutive months, ICP has finally back to its track, which is higher than the WTI.
  • Oil rose to the highest level in more than 10 months as government data showed U.S. crude supplies declined, crude stockpiles dropped by 3.23 million barrels, according to EIA. Market expect supply and demand to come closer into balance, which will result in higher oil prices through the end of the year.
  • U.S. crude oil production is projected to decrease from 9.4 million b/d in 2015 to 8.6 million b/d in 2016 due to decline in Lower 48 onshore production.
  • China’s consumption is forecast to grow by 0.4 million b/d in both 2016 and 2017. On the other hand, non-OECD consumption growth is expected to be 1.3 million b/d in 2016 and 1.4 million b/d in 2017.
  • EIA forecasted higher prices than previous month. EIA forecasts WTI at $42.94 for 2016, while Brent at $43.10/bbl for 2016.

Based on the graph, we estimate SLC will be increased to $53.01/bbl in June 2016 and will average $ 46.59/bbl for full year 2016.

June 2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

“A little Hope” (ICP forecast as of 11 May 2016)

Wednesday, May 11th, 2016

The summary of market info as of 11 May 2016 is as follows:

  • On June 2nd OPEC meeting, Saudi Arabia will probably keep producing crude at current levels under its newly appointed oil minister, Khalid Al-Falih. He  sticks with his predecessor’s policy of defending market share against higher-cost shale.
  • EIA reported an improved economic data. Growing supply disruptions, and falling U.S. crude oil production and rig counts contributed to the price increase.
  • OPEC sees  global oil demand is catching up with supply and the market should see a “rebalancing” in the second half of the year as cheaper crude has forced some production to close. U.S. shale producers require a price of at least $50/bbl in order to hedge future production.
  • EIA forecasted higher prices than previous month. EIA forecasts WTI at $40.19 for 2016, while Brent at $40.39/bbl for 2016.

Based on the graph, we estimate SLC will be increased to $40.57/bbl in May 2016 and will average $ 38.94/bbl for full year 2016.

May 2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

“Bearish catalyst” if the talks fail (ICP forecast as of 13 April 2016)

Wednesday, April 13th, 2016

The summary of market info as of 13 April 2016 is as follows:

  • Market is currently waiting for April 17 meeting in Doha. The market is showing a lot of cautious optimism that some sort of deal might be agreed. The current $40 prices could tumble to $33 or even $30 a barrel if the meeting ends without an agreement.
  • Saudi Arabia has been indicated that they will only prepared to abide by a freeze if all countries agree. if other countries raise their output, the kingdom will boost its own sales. Iran has repeatedly made clear its intention to revive production
  • EIA reported the same forecast prices than previous month, reflects there is no expectations for forecast oil demand growth and even though there is an agreement after the meeting, this would not accelerate the rebalancing of the oil market. EIA forecasts WTI at $34.60 for 2016, while Brent at $34.73/bbl for 2016.

Based on the graph, we estimate SLC will be increased to $35.66/bbl in April 2016 and will average $ 35.37/bbl for full year 2016.

April 2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Unsustainable upswing (ICP forecast as of 10 March 2016)

Thursday, March 10th, 2016

The summary of market info as of 10 March 2016 is as follows:

  • The recent rally is the result of a sentiment shift after a number of countries agreed to freeze output at January levels, however it seems unstable due to some OPEC country member such as Kuwait and Iran is disagree to join the deal. There will be a meeting schedule on March 20 to renew talks among them on an agreement to cap oil output.
  • Some analyst see that this freeze-supply-act would only crystallize oversupply currently running at two million barrels a day. The main concern is a big slump in exports in China, as reported on Monday, which will be negative for demand, while US output has remained stubbornly above nine million barrels a day.
  • EIA reported lower forecast prices than previous month, reflects oil production that has been more resilient than expected in a low-price environment and lower expectations for forecast oil demand growth. WTI crude price are expected to average the same as Brent in 2016 and 2017. EIA forecasts WTI at $34.29 for 2016, while Brent at $34.32/bbl for 2016.

Based on the graph, we estimate SLC will be increased to $33.20/bbl in March 2016 and will average $ 33.77/bbl for full year 2016.

Mar 2016

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.