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Cool summer in the Oil Market

At the beginning of April the crude oil was threatened with a crude oil avalanched as stocks reached their historical maximum due to continued increase in supplies from crude productions, and imported cheap distressed crude cargos from Middle East. With storage facilities on land at its highest level, the investors resorted to the ULCC and VLCC tankers for stocking cheap oil. Pushing hiring rate to 10-20 cent per month per barrel. All in anticipation that prices will go above $60/bbl. Simply, stock is so high now, that even a war in Saudi Arabia did not produce any market response to encourage additional stockpiling . The Data Published today May 13 2015 by EIA () tells different tell Looking at Oil inventories, (The balance sheet of the oil industry) we observeThat the level of Oil Stocks in 2014 was artificially very low( perhaps that was the reason why USA administration ordered destocking from SPR). Therefore, comparing the present level of oil stock with same period of last year produces frightening results of upcoming crude oil avalanche in Jun ,July , August on the same scale of 2014.

But if we were to compare 2015 stock level with the trend from 2009 then we can say safely that “ the market is in balance and those who invested in oil inventories should make easily $10 and more per barrelLooking at production level, which is increasing , and crude oil imports and product exports which are decreasing, we reach the conclusion that massive destocking is going on since the refinery utilization is down by 2% even after the return from maintenance season!! The conclusion is in line with our 2014 article that $60 dollar per barrel (here)is the redline. Therefore the 60.5 million barrels of stocks in Cushing( the delivery point for Nymex contracts) and the 488 mb across the country is not price threatening.

The OPEC June meeting will see a very normal atmosphere. In June we will have the Iran P5+1 meeting, the lifting of the embargo will depress the market, but we do not expect any change. Another issue is today’s Camp David Summit, aimed at endorsing Carter Doctrine in written binding format, which started badly due to a wrong choice of time and place for the summit . see picture above And finally, this meeting could have helped President Obama to prepare the ground for finalizing in his term in office ,”the unarmed victory” in disarming Iran, without any sacrifices. But it looks it has to wait until the next president takes office. With rubble picking up, we expect a badly needed “cooling down” in the Middle East , and enjoy a cool summer

2014 price collapsed revised

One thing is very clear, The major Oil companies and the USA Administration were helpless towards the frackers .The fall in oil price not only drove them out (here) but also showed these newcomers that you will pay hefty price if you compete with the integrated oil companies Looking at the data you see clearly that 2014 is divided into three parts Part1 :Those companies who had the knowledge of what was happing in 2014 destocked crude before august and sold crude at 100 level, while their refineries were firing away and exporting at very high margin ( $15 ) . Part 2: Started after august when prices slumped and many companies and drillers were caught with high level of unsold of crude in a market a washed with crudes Part 3, Started in Oct 2014, were the integrated companies who destocked in part 1 started to restock and operate their refineries at 94 % and they are now the owners of most of 2015 crude stocks bought at least at $50 per barrels. If this senior is true , then $55 is the price floor for the rest of year Look at the earning of the integrated companies who showed earning for 2014 compared to 2013 and the earning for 2015, is very promising they are from group one and three ,while those companies that are struggling with the banks are the companies who started the drilling boom To support this scenario, is by looking at the refinery margin of the major refineries in 2014 , and also the earning of the integrated companies in the coming quartersJabbar Aliaf