Daily Energy Report
OPEC+ meeting and China’s inventories, US oil rig count, Mexico’s Zama oilfield, Venezuela’s oil exports, Exxon and Chevron’s gas talks with Algeria, Russia’s LPG exports, and more
CHART OF THE DAY: Should OPEC+ Worry about China’s Increasing Crude Oil Inventories?
Kpler’s data on China’s crude oil inventories in Figure (1) above, shows an increase in recent weeks. They are edging closer to the record levels seen at the end of 2020 and early 2021.
EOA’s Main Takeaway:
Should OPEC+ worry about the rising inventories in China and elsewhere ahead of the much-awaited meeting? As we said in our latest commentary on Sunday’s event, the oil group is facing a catch-22 situation: If OPEC+ cuts production, China will use its massive inventories, both commercial and SPR, to prevent prices from rising, and probably even lower them. Meanwhile, and if OPEC+ decides to keep production unchanged, prices will still decline, giving China an additional incentive to store more steeply discounted Russian oil.
The rise in China’s inventories is a warning sign for the ultra-bulls in the oil market: adjust or get burned.