A couple of stories from Bloomie add to my bearish morning report on oil. First Russia is pumping at record rate:
Russian crude exports are on track to set a record this year, which is intensifying competition in Europe as Iran boosts shipments to the region.
Exports rose 4.9 percent to 5.55 million barrels a day in the first half of the year from the same period in 2015. Russia’s output in June climbed 1.14 percent from a year earlier to 10.843 million barrels a day, with increases every month since July 2014, according to data from the Energy Ministry.
“If production remains steady, then it will likely be a record year for exports,” said Christopher Haines, head of oil and gas at BMI Research. “This should mean competition is strong, especially with Iran sending more oil into southern Europe.”
…Russia is now on track to surpass Energy Minister Alexander Novak’s recent estimate of 252 million tons (5.05 million barrels a day) of exports and forecasts of as much as 255 million tons Novak’s first deputy Aleksey Teksler made in April. Shipments reached a record of 253.9 million tons in 2007, according to Energy Ministry data.
And more on the sudden reappraisal of US oil demand:
American drivers’ seemingly insatiable thirst for gasoline is running into a flood of supply.
Refineries across the nation are operating full-out and imports are pouring into the East Coast, boosting gasoline supplies to a record. At the same time, consumption has turned out to be less robust than thought. That’s weighed on prices, threatening to stem oil’s rebound from a 12-year low.
“Earlier this year there was a lot of hope that gasoline would lead crude higher,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “That’s not turned out to be the case and gasoline will soon be a weight on the market.”
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AddNorway settling its oil worker strike. Nigeria making progress towards higher production. Libya managing to unify its warring oil champions. Canada returning incrementally, US rigs rebounding, Chinese demand slumping and US demand coming in lower than previously thought.
All of it is incremental but add it adds up to a lot. The oil glut is back.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
