Daily Energy Report
Global crude oil inventories, EIA’s short-term energy outlook, Saudi Arabia’s output reductions, Russian crude flows, Chinese and Indian investments in Russia, and more
CHART OF THE DAY: India Needs to Significantly Increase Oil Storage Capacity
Summary:
Figure (1) above shows global crude oil inventories until a week ago, according to Kpler’s data. It reveals trends in global inventories including in the US, China, and India.
Most of the world’s inventories are in China and the US, as the figure shows. China’s crude inventories, commercial and the Strategic Petroleum Reserve (SPR), are larger than those of the US. Although the US is a larger oil consumer, it is a net oil exporter, while China is a net importer.
EOA’s Main Takeaway:
Global oil inventories have been rising
The rise has been mostly due to increases in China’s inventories
India needs to quadruple the size of its inventories and expand its SPR substantially since the current flow of cheap Russian oil is not going to continue forever. Any disruption in Russian oil supplies in the coming months will wreak havoc on the Indian economy.
STORY OF THE DAY
EIA revises forecast for non-OPEC production from 1.89 mb/d to 2.17 mb/d
Summary:
In its short-term energy outlook published today, the US Energy Information Administration (EIA) said it expected global oil inventories to “fall slightly in each of the next five quarters” following the recent OPEC+ decision to extend crude oil output cuts.
“We expect these draws will put some upward pressure on crude oil prices, notably in late-2023 and early-2024,” the EIA said, adding that it expected the Brent crude oil spot price to average $79/b in the second half of 2023 and $84/b in 2024.
Regarding global oil demand, the EIA raised its global oil demand outlook to 101.01 mb/d for 2023 from a previous forecast of 100.99 mb/d.
Meanwhile, the EIA revised its forecast for non-OPEC production from 1.89 mb/d to 2.17 mb/d.
EOA’s Main Takeaway
The EIA’s upward revision of its forecast for global oil demand is small, yet it is way lower than the estimates of the International Energy Agency (IEA) and OPEC, as shown in Figure (2) below.
What’s surprising, however, is the large upward revision in non-OPEC production from 1.89 mb/d to 2.17 mb/d (see Figure 3 below), making the EIA’s estimates the highest compared to the other two forecasts (OPEC and IEA)
NEWS OF THE DAY
1- TIP RANKS: Oil Trading Daily: Oil Fails to Hold Onto Gains from Saudi Production Cut
Summary:
In a report published today, Tip Ranks wrote that oil prices “have failed to hold onto earlier gains” following Saudi Arabia’s announcement of an additional 1mb/d of voluntary cut.
EOA’s Main Takeaway:
There is a fundamental misunderstanding among many people in the media industry and the oil market about the impact of Saudi Arabia’s recent move to deepen its output reductions. Several observers are looking for further increases in prices. But this is a flawed way of assessing the Saudi decision.We explained in our recent commentaries that if OPEC+ had decided to do nothing during its meeting this would have been considered a BEARISH event. However, the Saudi cut staved off this state of bearishness. If it weren’t for the deepened Saudi reductions, oil prices would have been $3-$4 dollars lower, and probably more. Therefore, the Saudi cut announcement had an immediate impact since it pushed up prices.2- BLOOMBERG: Surprise Saudi Move Leaves Asian Buyers Exploring More Russian, African Oil
Summary:
Bloomberg today cited sources as saying that some Asian refiners may request less contracted crude from Saudi Arabia in July, and purchase more crude cargoes from Russia and Africa after Aramco increased prices for its oil heading to Asian markets. Shipments could also be sourced from the US, Persian Gulf, or Brazil, Bloomberg reported citing sources familiar with the matter.
EOA’s Main Takeaway: