IEA Reports Increasing Oil Production
January 17th, 2020
The United States and China phase 1 trade deal has been signed and in it the\Chinese have agreed to buy a lot more energy. There are a lot of people that are questioning the ability of the Chinese to do this. The market will just have to wait and see how things progress, but this does imply a strong increase in demand for our crude. China is expected to buy $52.4 billion in US energy products over the next 2 years.
The market got some good economic data that last couple days. The Philly Fed was a strong 17 with the expectations for it to be 3.8. Retails sales for December were up 0.3%. The housing market appears to be hot again as the January NAHB housing market index came it at a strong 75. A number above 50 is expanding and a number below 50 is contracting.
The International Energy Agency reported that increasing oil production from non-OPEC countries led by the United States along with OECD stocks totaling 9 million barrels above the five-year average will help the market weather political shocks such as the US-Iran standoff. It expected production to outstrip demand for crude from OPEC even if members comply fully with a pact with Russia and other non-OPEC allies to cut output.
The International Energy Agency reported that global supplies of marine fuel compliant with the new International Maritime Organization rules are increasing fast as concern over quality remain marginal. IMO rules that took effect January 1 require ships to use fuels with sulfur content of no more that 0.5%, down from 3.5% previously, unless they are equipped with exhaust-cleaning systems know as scrubbers. The IEA reported that in Rotterdam, supplies of VLSFO increased from almost nothing in September to more than 20,000 bpd in November. In Singapore, VLSFO deliveries increased from 40,000 bpd in September to 355,000 bpd in November.
Iran’s President, Hassan Rouhani, said Iran is now enriching more uranium than the country did before it agreed to a nuclear deal with world powers in 2015. He said, “pressure has increased on Iran, but we continue to progress.” Iran said Britain, France, and Germany had succumbed to “high school bully” Donald Trump when they triggered a dispute mechanism in a nuclear pact the US President opposes, a step that could eventually lead to reimposing US sanctions.
The US Senate approved the US-Mexic0-Canda (USMCA) trade agreement which the market also saw as a positive.
China reported their economy grew by 6.1% in 2019, in line with expectations.
The US stock futures continue to rally and point to another strong opening today. The Dow Jones Industrial Average, the S&P 500 and NASDAQ closed Thursday at record highs.