Daily Energy Report
Oil inventories and oil prices, Aramco OSP, oil industry and climate change, Venezuela’s oil exports, decline in costs in shale plays, oil prices forecasts and more
Chart of the Day: Correlation between Days of Supply Cover and Oil Prices
Summary:
Figure (1) above shows the correlation between days of inventory supply cover and oil prices. In other words, if everything is cut off, and consumption continues as is, how many days will the inventory last? Right now we are at around 61 days with prices at about $75.
EOA’s Main Takeaway:
As production cuts take hold, demand increases, and inventories draw, the number of days of cover will decline and prices will rise. The ultimate case is to reduce the number of days to around 58. While it is true that OECD inventories do not represent the whole world, it is clear that markets focus on OECD inventories and on prices in OECD: Brent and WTI. The Chinese inventories will play a big role in capping oil prices.
STORY OF THE DAY: As predicted, Saudi Aramco raises prices to Asia
REUTERS: Saudi Arabia hikes most August oil prices to Asia after supply cuts
Summary:
Saudi Aramco raised oil prices to Asia. It raised Arab light by 20 cents to $3.20/b above Oman/Dubai prices. Until Monday, traders and refiners expected a decline. But the statement was reversed when the Saudis announced the extension of the 1 mb/d voluntary cut to August. Prices of various crudes to different markets are mentioned in the link above.
EOA’s Main Takeaway:
We went against the grain and told our readers that Aramco would increase prices, and that was before announcing the extension of the production cut. We cited a few reasons including the fact that we were the first to report that Aramco will extend the cuts about a week before the announcement. We also cited the increase in Russian oil prices as the price discount decreased.
NEWS OF THE DAY
1- BBC: Shell & Climate Lobby Have Opposite View of “Dangerous”
2- REUTERS: French court rejects NGOs' bid to compel TotalEnergies to curb emissions
3- BLOOMBERG: Germany’s Green Slowdown
Summary:
BBC interview with Shell Upstream Director, Wael Sawan: Sawan told the BBC it would be “dangerous and irresponsible” to cut oil and natural gas production in the near term. Sawan used the example of children in Pakistan and Bangladesh having to learn by candlelight because of the high cost of natural gas. The BBC interviewer referenced climate scientists who have said that it is dangerous to produce more oil and natural gas. They claim renewables are cleaner, cheaper, and better for public health.
As for Germany and the rest of Europe, this paragraph from Bloomberg sums up the situation: “Polls show Europe’s electorates still broadly support net-zero goals but faced with the pressure of higher inflation, that doesn’t mean they’re on board with the climbing costs of making the switch to a greener economy.”
EOA’s Main Takeaway: