us crude oil reshaping international crude oil flows opec and price is dependent of opec policies...
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US Crude Oil Reshaping International Crude Oil Flows Olivier Jakob, ojakob@petromatrix.com
www.petromatrix.com
Claimer Petromatrix publishes since 2006 a daily market note on the oil markets Our reports are trading oriented and offer a mix of fundamental, technical and investment flow analysis Our customers include the largest oil traders, oil majors, hedge funds, investment banks but also small oil companies and private traders. For more information or a free trial please visit www.petromatrix.com or email info@petromatrix.com
WTI is the real price of crude oil Brent is the reality of the price of crude oil.
The two crude markets
• WTI: • Free-market • Efficient allocation of
resources. If pricing differentials exist, then infrastructure will be developed.
• Trend of increasing production
• Brent: • Ultimately it is the OPEC
market. Supply is controlled by OPEC and price is dependent of OPEC policies
• Trend of decreasing production in the price-making benchmark
From the price being set by OPEC…
• 2000: OPEC price band of 22 $/bbl to 28 $/bbl on basis of OPEC basket
• Below 22 $/bbl for 10 days or above 28 $/bbl for 20 days triggers production adjustments.
• Abandoned in early 2005.
Y-O-Y Growth myn b/d (source: IEA)
-1.5-1
-0.50
0.51
1.52
2.53
3.5
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
World Oil Demand
0
500
1,000
1,500
2,000
2,500
3,000
Jan-
02Ju
n-02
Nov
-02
Apr-
03Se
p-03
Feb-
04Ju
l-04
Dec-
04M
ay-0
5O
ct-0
5M
ar-0
6Au
g-06
Jan-
07Ju
n-07
Nov
-07
Apr-
08Se
p-08
Feb-
09Ju
l-09
Dec-
09M
ay-1
0O
ct-1
0M
ar-1
1Au
g-11
Jan-
12Ju
n-12
Nov
-12
Crude Oil lost to wars/strikes in OPEC countries (k bpd)
…to the price being set by the
market…
• Until end-December 2010: price of crude oil has to be set by the marginal cost of production.
• Deemed to be deep-offshore then Canadian sands
• 70-80 $/bbl floor • King Abdullah, 2008/2009: fair price is 75 $/bbl or maybe 80 $/bbl.
…and back to OPEC…
• Since early 2011: price has to be set at a floor that allows budgetary requirements of OPEC nations facing civil pressure.
• More or less 100 $/bbl floor • Targeting 100 $/bbl or 110 $/bbl?
There used to be only one benchmark WTI was the price maker. Had the most liquidity and Brent was also a WTI market due to North Sea shipments up the pipe to Padd2
Brent was being priced as a differential to WTI. Dubai set as a differential to Brent. World crudes could be linked to a WTI or Brent formula, WTI was the ultimate price maker
And then there were two • With reduced flows from the US Gulf to Padd2, the arbitrage started to move to the US Gulf values
• Relationship between Brent and WTI has been broken.
• OPEC walks from WTI reference • Passive investors have lost in the WTI contango, loosing appetite in WTI and favoring Brent since 2011
• Increased calls that «WTI is disconnected» to the world.
-In early 2010, Petromatrix calls for Brent premium to WTI for 1Q2011 -But not to the 15 $/bbl+ -Would we have a Brent/WTI at 15 $/bbl if OPEC target was still 80 $/bbl?
Myth: US does not export crude oil. Versus Jan 2008 (‘000 bpd):
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Product Exports Crude Oil Production
Myth: US does not export Natural Gas (US Coal Exports, thou short tons)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
US crude prodn & imports vs Jan 2008 (‘000 b/d)
-2,500-2,000-1,500-1,000
-5000
5001,0001,5002,0002,500
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Imports Production
IEA (OECD) outlook for US crude production growth (‘000 bpd)
0
100
200
300
400
500
600
700
800
900
2012 2013Dec11 Dec12 Jul12 Jan13
US imports from Saudi Arabia (‘000 b/d)
800900
1,0001,1001,2001,3001,4001,5001,6001,7001,800
Imports from S.Arabia Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-20
0
20
40
60
80
100
120
140
OECD Europe OECD Asia US China
Iraq production increase (‘000 bpd)
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
Jan-
12
Apr
-12
Jul-1
2
Oct
-12
Jan-
13
US imports from Iraq (‘000 b/d)
0
100
200
300
400
500
600
700
800
Imports from Iraq Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-20
0
20
40
60
80
100
120
140
160
OECD Europe OECD Asia US China
Imports from Iran (‘000 bpd)
-
500
1,000
1,500
2,000
2,500
3,000
Belgium France Greece Italy Netherlands SpainTurkey Japan South Korea China India Taiwan
US imports from Colombia (‘000 b/d)
0
100
200
300
400
500
600
Imports from Colombia Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-80
-60
-40
-20
0
20
40
OECD Europe OECD Asia US China
US imports from Brazil (‘000 b/d)
050
100150200250300350400450
Imports from Brazil Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-150
-100
-50
0
50
100
OECD Europe OECD Asia US China
US imports from Russia (‘000 b/d)
0
50
100
150
200
250
300
350
400
Imports from Russia Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-300-250-200-150-100
-500
50100150200
OECD Europe OECD Asia US China
US imports from Algeria (‘000 b/d)
0
50
100
150
200
250
300
350
400
Imports from Algeria Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-50
-40
-30
-20
-10
0
10
20
30
OECD Europe OECD Asia US China
US imports from Angola (‘000 b/d)
050
100150200250300350400450
US imports from Angola (‘000 b/d)
0
50
100
150
200
250
Jan-
11
Feb-
11M
ar-1
1
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb-
12M
ar-1
2
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Padd1 Padd3 Padd5
Imports from Angola Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-250
-200
-150
-100
-50
0
50
100
150
OECD Europe OECD Asia US China
US imports from Nigeria (‘000 b/d)
0
200
400
600
800
1000
1200
US imports from Nigeria (‘000 b/d)
0
100
200
300
400
500
600
700
Jan-
11
Feb-
11M
ar-1
1
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb-
12M
ar-1
2
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Padd1 Padd3
Imports from Nigeria Oct-Nov 2012 vs Oct-Nov 2011 (‘000 b/d)
-200-150-100
-500
50100150200250300350
OECD Europe OECD Asia US China
Increased Nigeria to Europe offset by FTA for European crude to S.Korea (‘000 bpd)
0
50
100
150
200
250
Jan-
11Fe
b-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12Fe
b-12
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Norway UK
Policy decisions on small flows but key benchmarks can have significant price impact
US crude imports 4 week avg to Feb 15th ‘000 bpd vs year ago level
Canada +350 2’534
Saudi Arabia -416 996
Mexico -75 865
Venezuela -82 745
Iraq +40 499
Nigeria -50 317
Kuwait 0 293
Colombia -120 271
Angola -84 245
Ecuador 60 216
Russia -151 81
Brazil -269 75
Norway -96 0
Algeria -89 0
US crude oil imports (excl. CAN, ‘000 bpd)
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000Ja
n-07
Apr
-07
Jul-0
7O
ct-0
7Ja
n-08
Apr
-08
Jul-0
8O
ct-0
8Ja
n-09
Apr
-09
Jul-0
9O
ct-0
9Ja
n-10
Apr
-10
Jul-1
0O
ct-1
0Ja
n-11
Apr
-11
Jul-1
1O
ct-1
1Ja
n-12
Apr
-12
Jul-1
2O
ct-1
2Ja
n-13
US crude oil imports (excl. CAN) and China crude oil imports (vs Jan 2007, ‘000 bpd)
-3,000
-2,000
-1,000
0
1,000
2,000
3,000Ja
n-07
Apr
-07
Jul-0
7O
ct-0
7Ja
n-08
Apr
-08
Jul-0
8O
ct-0
8Ja
n-09
Apr
-09
Jul-0
9O
ct-0
9Ja
n-10
Apr
-10
Jul-1
0O
ct-1
0Ja
n-11
Apr
-11
Jul-1
1O
ct-1
1Ja
n-12
Apr
-12
Jul-1
2O
ct-1
2Ja
n-13
US China
US crude oil imports (excl. CAN) and China crude oil imports (‘000 bpd)
3,000
4,000
5,000
6,000
7,000
8,000
9,000Ja
n-07
Apr
-07
Jul-0
7O
ct-0
7Ja
n-08
Apr
-08
Jul-0
8O
ct-0
8Ja
n-09
Apr
-09
Jul-0
9O
ct-0
9Ja
n-10
Apr
-10
Jul-1
0O
ct-1
0Ja
n-11
Apr
-11
Jul-1
1O
ct-1
1Ja
n-12
Apr
-12
Jul-1
2O
ct-1
2Ja
n-13
US China
US obligatory oil stocks in days of net imports (End-Nov, IEA)
100
110
120
130
140
150
160
170
180
2008 2009 2010 2011 2012
US Sweet SPR days of cover for USG imports of NIG+ALG+ANG+BRAZ
-100
100
300
500
700
900
1,100
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