Friday Five: What's moving oil markets this week

Friday Five: What's moving oil markets this week

1 GEOPOLITICS — After a series of attacks over the past two months, oil tankers traveling through the Strait of Hormuz remain on edge, forcing ships to either change course or turn off transponders. The UK and US have a substantial military presence in the region, which accounts for about one-fifth of the global oil trade. Britain, France and Germany have called on the Americans to resume diplomatic negotiations to resolve their dispute over Iran's nuclear aspirations, although neither side has yet to make any concessions.

2 SUPPLY — US output has largely recovered from the effects of Hurricane Barry, returning to an estimated 12.2 million bbl/day last week, slightly below the record high of 12.4 million bbl/day reached at the end of May. According to finalized monthly data from the Energy Information Administration, Texas output hit a record 5 million bbl/day in May. According to Baker Hughes, US drillers took another 6 oil rigs out of service this week, a fifth consecutive weekly decline. Crude exports out of Iran continue to decline, failling to an estimated 100,000 bbl/day in July. The country exported 400,000 bbl/day in June, and over 900,000 bbl/day in April, just before the US pulled its waivers for buyers of Iranian crude. Production out of Libya hit a 5-month low of 950,000 bbl/day, after an unidentified group closed a valve of a major export pipeline. Libya's National Oil Corp once again declared force majeure on loadings at its main export terminal, forcing a shutdown of the massive Sharara oilfield. OPEC output was estimated at 29.4 million bbl/day in July, down 280,000 bbl/day from June, and the lowest since 2011. Aside from Iran and Libya, Saudi production was cut to 9.65 million bbl/day, well below its quota of 10.3 million bbl/day. Production out of Venezuela also declined due to more power blackouts last month.

3 DEMAND — Concerns over global trade resurfaced again on Thursday after President Trump announced another 10% tariff on the remaining US$300 billion in US imports from China. The IMF previously warned that existing tariffs will take 0.2% off the global economy next year.

4 US DOLLAR — Despite a 25-point cut in US interest rates this week, the US dollar touched a 2-year high on Thursday, but later retreated, ending the week up just 0.2%.

5 SENTIMENT — Both WTI and Brent posted a small loss this week, falling 1.0% and 2.5%, respectively. Contango steepened slightly on Brent for the second week in a row, while the WTI futures curve remains relatively flat. Traders added short positions on WTI, reducing net longs by 11,000 contracts.

 
 
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