Daily Energy Report

Oil inventories are rising, China reselling LNG, Iran expands China exports, Uganda/Tanzania pipeline, Europe taps gas storage, Azerbaijan gas exports, Alaska drilling approval, and more.

Chart of the Day: World oil inventories are rising, led by China.

Summary

Figure (1) above shows world oil inventories and the role of China. They decreased as Chinese oil inventories decreased and increased as China’s oil inventories increased.

EOA’s Main Takeaway

We explained the role of China in the past and how it uses inventories to influence prices. The recent increases in Chinese oil inventories were surprising to us and counter to our expectations. As we explained in recent days, slower growth of demand and running out of export quotas lowered refinery runs and margins, which in turn lowered the demand for crude, which led to an increase in inventories. Should the government expand the quota or if oil prices rise again, we would see declining inventories again. 

Story of the Day

Reuters: Oil prices up 2% but headed for third weekly decline

Summary

Oil prices rose by 2% but speculators and traders are worried about weak oil demand.   At the time of this writing, the increase was more than 2% and Brent stood at $81.69/b.

EOA’s Main Takeaway

We were interested in this paragraph in the news story above:

“Weak Chinese economic data this week increased worries of faltering demand. Additionally, refiners in China, the largest buyer of crude from Saudi Arabia, the world's largest exporter, asked for less supply for December.”

Why?