7/28/2019 Oil Market Report: Crude oil in the middle of this year's soft spot
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Oil Market ReportCrude oil in the middle of this years soft spot
10 APRIL 2013
7/28/2019 Oil Market Report: Crude oil in the middle of this year's soft spot
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SEB Oil Market Report
Crude oil market
Brent crude is currently trading a dollar below ourQ2 average forecast of $107.5/b. Currently in theseasonally weakest part of the year with OPEC
production still high at 30.5 mb/d we expect theBrent price to continue to test the downside overthe coming weeks, based on still soft demand, withthe call-on-OPEC down to around 29 mb/d duringthe current quarter, and continued high carteloutput. In addition there are also signs suggestingincreasing production from several sources towardsthe middle of the year. However, considerableuncertainty surrounds these projected increases,although if they do occur they could certainlyincrease bearish pressures. With demand returningand growth solidifying, our price outlook for H2-13 ishowever still unchanged at $110/b.
With markets increasingly optimistic concerning growthand recovery prospects, Brent crude was forced up to$120/b in early February. Subsequently however, it fellback due to continued high OPEC production during aseasonally weak period against a background of fairlyweak global demand. Indicating an improving supply /demand balance, backwardation in the Brent crude oilcurve has fallen sharply, with one year backwardationnow down to only 3% and the front month actually incontango vs. the second. Recently resumed productionfrom the North Sea Buzzard field (out for almost a year)
has also helped undermine the market balance andsoften Brent crude prices, especially as the fieldproduces Fortis crude which normally sets the Brentcrude price. Further, the likely removal of a South Koreantax break, which has supported the country's imports ofNorth Sea Fortis crude since November 2011, by July isalso eroding the bull-sentiment in Brent.
In addition, several countries project increasedproduction towards the middle of this year, with Yemen,South Sudan and Libya all promising higher output bythen. Repeatedly, such hikes have been prevented byrebel groups blowing up oil pipelines, creatingsubstantial uncertainty over whether or not they willactually occur with rebel attacks potentially reducingproduction instead.
Bullishly, Iranian nuclear negotiations are leadingnowhere with the latest talks in Kazakhstan producing noagreement whatsoever. Nor were any further discussionsscheduled. Instead Iran celebrated its National NuclearTechnology Day a few days afterwards by opening newuranium facilities. If talks break down completely the USis likely to implement new sanctions fairly rapidly.
Crude oil price(NYMEX/ICE, $/b, front month, daily closing)
70
75
80
85
90
95
100
105
110
115
120
125
130
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
dec-12
jan-13
feb-13
mar-1
3
apr-13
NYMEXWTI
ICE Brent
IEA global crude oil demand estimates(mb/d)
84,5
85,0
85,5
86,0
86,5
87,0
87,5
88,0
88,5
89,0
89,5
90,0
90,5
91,0
91,5
jul-10
sep-1
0
nov-10
jan-11
mar-1
1
maj-1
1
jul-11
sep-1
1
nov-11
jan-12
mar-1
2
maj-1
2
jul-12
sep-1
2
nov-12
jan-13
mar-1
3
2011
2012
2013
Chart Sources: IEA, Bloomberg, SEB Commodity Research
Current global crude oil demand estimates2012
(mb/d)
Revision
(kb/d)
2013
(mb/d)
Revision
(kb/d)IEA 89.8 -40 90.6 -60EIA 89.04 -80 90.00 -130
OPEC 88.83 -20 89.67 -10
SEB average Brent crude oil price forecast($/b) Q1 Q2 Q3 Q4 Full
Year2013 112 107.5 110 110 109.92014 - - - - 110.02015 - - - - 115.0
7/28/2019 Oil Market Report: Crude oil in the middle of this year's soft spot
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SEB Oil Market Report
Crude oilCrude oil price(NYMEX/ICE, $/b, front month, weekly closing)
12 month time spread(NYMEX/ICE, %, daily closing, >0: contango,
7/28/2019 Oil Market Report: Crude oil in the middle of this year's soft spot
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SEB Oil Market Report
Crude oilUS crude oil inventories(DOE, mb, weekly data)
OECD total industry oil stocks(mb, monthly data)
320
330
340
350
360
370
380
390
j f m a m j j a s o n d
5 year average
2012
2013
2525
2550
2575
2600
2625
2650
2675
2700
2725
2750
2775
2800
2825
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
OECD Europe industry oil stocks(mb, monthly data)
OECD North America industry oil stocks(mb, monthly data)
900
910
920
930
940
950
960
970
980
990
1000
1010
1020
1030
1040
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
1175
1200
1225
1250
1275
1300
1325
1350
1375
1400
j f m a m j j a s o n d
5 year range, top5 year range, bottom
2013
5 year average
OECD Asia & Oceania industry oil stocks(mb, monthly data)
OPEC production(kb/d, Bloomberg estimate, monthly data)
375
380
385
390
395
400
405
410
415
420
425
430
435
440
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average24000
25000
26000
27000
28000
29000
30000
31000
32000
33000
2007
2008
2009
2010
2011
2012
2013
OPEC-12 production
OPEC-11 production
Chart Sources: Bloomberg, IEA, SEB Commodity Research
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SEB Oil Market Report
European oil product markets
US refineries roared back into action in March as theirmaintenance periods came to unusually early ends, afact also reflected in strong WTI performance vs. Brent.
We expect European and Asian refinery activity tonormalize during April. Overall, European cracks haverecovered slightly since mid-March, despite the periodbeing dominated by a tug-of-war between reducedsupply (due to refinery maintenance) and weakdemand generally. Abnormally low temperaturesfinally seem to be loosening their grip on continentalEurope following a late winter cold snap that had littleimpact on middle distillate sentiment. With mostcracks either weak or neutral, and the driving andagricultural seasons just around the corner, we seegood prospects for stable or improving refineryeconomics going forward.
Light ends: Light distillate cracks diverged dramaticallyduring the second half of March, with gasoline recovering
previously lost ground and naphtha once again falling backafter outrunning fundamentals at the beginning of the year.As feedstock for the petrochemical industry, naphtha
already suffers from a pricing disadvantage, as well as weakdemand for gasoline blending, with stocks already
apparently full up ahead of the driving season. With boththe European and Asian petrochemical industries going intomaintenance at the same time as refineries are coming back
on-stream, we see little reason to expect much short-termstrength in the naphtha market. However, relatively low
inventories and the upcoming driving season could boostthe market in the medium-term. Despite poor demand,
good US and European inventory levels and turbulencecaused by the switch from winter to summer grade gasoline,the gasoline market is currently supported by imminent
increases in demand from drivers and solid demand fromWest Africa and South America.
Middle distillates: As both the driving and agriculturalseasons approach, increasing temperatures leave little
downside in middle distillate cracks, which have recentlyreceived support from the late winter cold snap and refinery
maintenance. Though refinery economics still favour dieselover jet, the diesel crack is holding its ground due to lowinventories and an imminent pickup in expected demand.
The jet market also awaits a seasonal upturn in demand,while Asian refineries are switching back from kerosene as
the heating season comes to an end. With substantialquantities of jet set to arrive in Europe during April, most islikely to end up in contango storage plays.
Heavy ends: Currently, in an otherwise lacklustre fuel oilmarket, Asian demand shows signs of improvement.Despite several cargoes headed east in March more appear
needed, which could help maintain control of already highEuropean stocks. However, limited Chinese middle distillaterequirements are currently dampening feedstock demand.
Meanwhile, with both bunker and global utilities demandgenerally poor, downside risks appear to dominate fuel oil
cracks, at least in the short-term.
European light end benchmarks($/t, daily closing)
650
700
750
800
850
900
950
1000
1050
1100
1150
1200
jan-1
1
feb-1
1
mar-11
apr-11
maj-1
1
jun-1
1
jul-11
aug-1
1
sep-1
1
okt-11
nov-11
dec-1
1
jan-1
2
feb-1
2
mar-12
apr-12
maj-1
2
jun-1
2
jul-12
aug-1
2
sep-1
2
okt-12
nov-12
dec-1
2
jan-1
3
feb-1
3
mar-13
apr-13
Naphtha
Gasoline
European middle distillate benchmarks($/t, daily closing)
750
800
850
900
950
1000
1050
1100
1150
jan-11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-1
1
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-1
2
nov-1
2
dec-12
jan-13
feb-13
mar-1
3
apr-1
3
Jet fuel
Diesel 10 ppm
Gasoil 0.1%
European fuel oil benchmarks($/t, daily closing)
475
500
525
550
575
600
625
650
675
700
725
750
775
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
dec-12
jan-13
feb-13
mar-1
3
apr-13
High sulphur fuel oil (3.5%)
Low sulphur fuel oil (1.0%)
Chart Sources: Bloomberg, SEB Commodity Research
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SEB Oil Market Report
Oil productsUS gasoline and distillate inventories(DOE, mb, weekly data)
US product benchmarks(NYMEX, /gal, front month, daily closing)
110
120
130
140
150
160
170
180
190
200
210220
230
240
j f m a m j j a s o n d
Gasoline 5 year average
Gasoline 2013
Distillate fuel oil 5 year average
Distillate fuel oil 2013
230
240
250
260
270
280
290
300
310
320
330
340
350
360
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
dec-12
jan-13
feb-13
mar-1
3
apr-13
Gasoline
Heating oil
US refinery utilization(%, weekly data)
ICE Gasoil and European premiums to Gasoil($/t, daily closing)
80
81
82
83
84
85
86
87
88
89
90
91
j f m a m j j a s o n d
2008-2012 avg.
2013
750
775
800
825
850
875
900
925
950
975
1000
1025
1050
1075
1100
jan-11
feb-1
1
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
dec-12
jan-13
feb-13
mar-1
3
apr-13
0
10
20
30
40
50
60
70
80
90
100
110ICE Gasoil 0.1% (left)
Jet fuel premium (right)Diesel 10 ppm premium (right)
European product cracks($/b, daily closing)
European low - high sulphur fuel oil differential($/t, daily closing)
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
jan-
11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-
11
jul-11
aug-1
1
sep-1
1
okt
-11
nov-1
1
dec-1
1
jan-
12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-
12
jul-12
aug-1
2
sep-1
2
okt
-12
nov-1
2
dec-1
2
jan-
13
feb-13
mar-1
3
apr-1
3
Naphtha GasolineJet fuel Gasoil 0.1%Low sulphur fuel oil High sulphur fuel oilDiesel 10 ppm
-15-10-505
101520253035404550
5560657075
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-11
dec-11
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-12
dec-12
jan-13
feb-13
mar-1
3
apr-13
Chart Sources: Bloomberg, SEB Commodity Research
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SEB Oil Market Report
Oil productsRegional 3-2-1 cracks($/b, daily closing)
European naphtha stocks(kt, monthly data)
-6-4-202468
10121416182022242628303234
36384042
jan-11
feb-11
mar-1
1
apr-1
1
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-1
1
nov-1
1
dec-11
jan-12
feb-12
mar-1
2
apr-1
2
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-1
2
nov-1
2
dec-12
jan-13
feb-13
mar-1
3
apr-1
3
Asia (Minas)US (WTI)Europe (Brent)Persian Gulf (Dubai)
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
European gasoline stocks(kt, monthly data)
European jet fuel stocks(kt, monthly data)
400
450
500
550
600
650
700
750
800
850
900
950
1000
1050
1100
1150
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
150
200
250
300
350
400
450
500
550
600
650
700
750
800
850
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
European gasoil stocks(kt, monthly data)
European fuel oil stocks(kt, monthly data)
1100120013001400150016001700180019002000210022002300240025002600
27002800290030003100
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
400
450
500
550
600
650
700
750
800
850
900
950
1000
1050
j f m a m j j a s o n d
5 year range, top
5 year range, bottom
2013
5 year average
Chart Sources: Bloomberg, PJK International, SEB Commodity Research
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SEB Oil Market Report
Oil productsUS implied crude oil demand(DOE, mb/d, weekly data)
US implied gasoline demand(DOE, mb/d, weekly data)
13,6
13,8
14,0
14,2
14,4
14,6
14,8
15,0
15,2
15,4
15,6
15,8
j f m a m j j a s o n d
5y avg.
2012
2013
8,4
8,5
8,6
8,7
8,8
8,9
9,0
9,1
9,2
9,3
9,49,5
9,6
9,7
j f m a m j j a s o n d
5y avg.
2012
2013
US implied distillate demand(DOE, mb/d, weekly data)
Gasoline arbitrage Rotterdam to New York($/t, daily closing)
4,0
4,2
4,4
4,6
4,8
5,0
5,2
5,4
j f m a m j j a s o n d
5y avg.
2012
2013
-20
-16-12
-8-4
0
4
812
16
20
2428
32
36
40
44
jan-11
feb-11
mar-1
1
apr-11
maj-1
1
jun-11
jul-11
aug-1
1
sep-1
1
okt-11
nov-11
dec-1
1
jan-12
feb-12
mar-1
2
apr-12
maj-1
2
jun-12
jul-12
aug-1
2
sep-1
2
okt-12
nov-12
dec-1
2
jan-13
feb-13
mar-1
3
apr-13
Middle distillate arbitrage Rotterdam to New York($/t, daily closing)
-25
-20
-15
-10
-5
0
5
10
15
20
jan-11
feb-1
1
mar-11
apr-11
maj-1
1
jun-11
jul-11
aug-11
sep-11
okt-11
nov-1
1
dec-11
jan-12
feb-1
2
mar-12
apr-12
maj-1
2
jun-12
jul-12
aug-12
sep-12
okt-12
nov-1
2
dec-12
jan-13
feb-1
3
mar-13
apr-13
Heating oil/Gasoil
Jet fuel/Kerosene
Chart Sources: Bloomberg, SEB Commodity Research
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SEB Oil Market Report
Related energy marketsUS natural gas price(NYMEX, $/MMBtu, front month, weekly closing)
UK natural gas price(ICE, front month, weekly closing)
1
2
3
4
5
6
7
8
9
10
1112
13
14
2007
2008
2009
2010
2011
2012
2013
3
4
5
6
7
8
9
10
11
12
13
14
15
2007
2008
2009
2010
2011
2012
2013
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85$/MMBtu (left axis)
GBp/therm (right axis)
Nordic power price(Nord Pool, /MWh, front quarter, weekly closing)
Continental power price(EEX, /MWh, front quarter, weekly closing)
20
25
30
35
40
45
50
55
60
65
70
75
80
2007
2008
2009
2010
2011
2012
2013
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
2007
2008
2009
2010
2011
2012
2013
EUA price(ECX ICE, /t, December current year, weekly closing)
Coal price(CIF ARA steam coal, API#2, daily closing)
3
5
7
9
11
13
15
17
19
21
23
2527
29
31
33
35
2008
2009
2010
2011
2012
70
75
80
85
90
95
100
105
110
115
120
125
130
135
jan-1
0
mar-10
maj-1
0
jul-10
sep-1
0
nov-10
jan-1
1
mar-11
maj-1
1
jul-11
sep-1
1
nov-11
jan-1
2
mar-12
maj-1
2
jul-12
sep-1
2
nov-12
jan-1
3
mar-13
Chart Sources: Bloomberg, SEB Commodity Research
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SEB Oil Market Report
Market indicatorsMSCI World equity market index(weekly closing)
UBS Bloomberg CMCI commodity market index(price index, weekly closing)
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
2007
2008
2009
2010
2011
2012
2013
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
2007
2008
2009
2010
2011
2012
2013
JPM global manufacturing PMI(monthly, PMIs >50 expansive)
Regional PMI:s(monthly data)
34
36
38
40
42
44
46
48
50
52
54
56
58
2007
2008
2009
2010
2011
2012
2013
32
34
36
3840
42
44
46
48
50
52
54
56
58
60
62
2007
2008
2009
2010
2011
2012
2013
US
Eurozone
China
Reference
Regional industrial production growth(%, y/y, monthly data)
OECD composite leading indicators(monthly, 100 corresponds to long term trend growth in industrial production)
-22-20-18-16-14-12-10-8-6-4-202468
101214161820
2007
2008
2009
2010
2011
2012
2013
US
EurozoneChina
93
94
95
96
97
98
99
100
101
102
103
104
2007
2008
2009
2010
2011
2012
2013
China
Eurozone
OECD
USA
Reference
Chart Sources: Bloomberg, OECD, SEB Commodity Research
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SEB Oil Market Report
COMMODITY RESEARCH DISCLAIMER
This statement affects your rightsThis report has been compiled by SEBs Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (SEB),
to provide background information only. It is confidential to the recipient, any dissemination, distribution, copying, or other use ofthis communication is strictly prohibited.
Good faith & limitationsOpinions, projections and estimates contained in this report represent the authors present opinion and are subject to changewithout notice. Although information contained in this report has been compiled in good faith from sources believed to be reliable,
no representation or warranty, expressed or implied, is made with respect to its correctness, completeness or accuracy of thecontents, and the information is not to be relied upon as authoritative. To the extent permitted by law, SEB accepts no liabilitywhatsoever for any direct or consequential loss arising from use of this document or its contents.
DisclosuresThe analysis and valuations, projections and forecasts contained in this report are based on a number of assumptions andestimates and are subject to contingencies and uncertainties; different assumptions could result in materially different results.The inclusion of any such valuations, projections and forecasts in this report should not be regarded as a representation or
warranty by or on behalf of the SEB Group or any person or entity within the SEB Group that such valuations, projections and
forecasts or their underlying assumptions and estimates will be met or realized. Past performance is not a reliable indicator offuture performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or relatedinvestment mentioned in this report. This document does not constitute investment advice and is being provided to you without
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The SEB Group: members, memberships and regulators
Skandinaviska Enskilda Banken AB (publ) is incorporated in Sweden, as a Limited Liability Company. It is regulated byFinansinspektionen, and by the local financial regulators in each of the jurisdictions in which it has branches or subsidiaries,including in the UK, by the Financial Services Authority; Denmark by Finanstilsynet; Finland by Finanssivalvonta; Germanyby Bundesanstalt fr Finanzdienstleistungsaufsicht and Norway by Finanstilsynet. In the US, SEBAB is a U.S. broker-dealer,registered with the Financial Industry Regulatory Authority (FINRA). SEBAB is a direct subsidiary of SEB. SEB is active onmajor Nordic and other European Regulated Markets and Multilateral Trading Facilities, in as well as other non-Europeanequivalent markets, for trading in financial instruments. For a list of execution venues of which SEB is a member or
participant, visit http://www.seb.se.
7/28/2019 Oil Market Report: Crude oil in the middle of this year's soft spot
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www.seb.se
SEB Commodity Research
Bjarne Schieldrop, Chief Commodity [email protected]
+47 9248 9230
Filip Petersson, Commodity [email protected]
+46 8 506 230 47
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