Daily Energy Report
China crude inventories, War’s impact on oil, Russia’s credibility problem, Turkey exports diesel, Failure of Russia price cap, Mongolia uranium, Russia’s dark fleet, Japan’s emissions fail & more
Chart of the Day: China’s Crude Inventories Declined by 71 mb.
China’s crude oil inventories declined by 71 mb from their peak three months ago as shown in Figure (1) above. We decided to display the chart in two panels to avoid any bias. Panel A shows the inventory data starting from zero, while Panel B shows the same data starting from 800 mb.
EOA’s Main Takeaway
As we predicted, China continued to withdraw oil from its strategic and commercial inventories. As we discussed in the past, using inventories as prices exceed a certain limit is China’s policy. The objective is to prevent pricing from rising or even reduce prices. Unlike the decline in inventories in OCED countries, declining inventories in China are neutral to bearish. Reason? It is a policy and not a reflection of market forces. We believe that China will continue with this policy until the end of the year. We expect an additional 20+ mb to be withdrawn.
Story of the Day
Potential repercussions to the Israel/Hamas conflict include:
The U.S. might increase sanctions on Iran if linked to the Hamas attack, straining the oil market.
A U.S.-brokered deal to normalize Saudi-Israeli relations, which could boost oil production, is at risk.
Despite U.S. sanctions, Iranian oil exports have risen this year. Iran denies involvement in the Hamas attack, and the U.S. hasn't confirmed any new sanctions based on current information.