Russian Oil Company Moves from Dollars to Euros
August 22nd, 2019
The DOE inventory report called crude stocks down 2.73 million barrels and this was not a big shock as it was in line with expectations and the outlook for stocks. Stocks at Cushing, Ok were down 2.5 million barrels and this would normally be supportive to the market but this week has seen the reports of new pipelines being opened from the Permian to the Gulf and more crude stocks are bypassing Cushing and going straight to the Gulf changing the dynamics a bit. Gasoline supplies were up 312,000 barrels and distillates were up 2.6 million barrels. Overall I think the report was a bit bearish but with all the uncertainty the market continues to trade in a range.
Total stocks of crude are now at 437.778 million barrels 29.420 more than last year at this time. US crude oil production was the same as last week at 12.3 million barrels per day leading some to wonder if the DOE really had a correct number. Cushing has seen some good size draws in the last month but stocks there are still roughly 20 million more than last year at this time.
Total gasoline stocks are at 234.072 million barrels 256,000 less than last year at this time but 1.776 million more barrels than the 3-year average.
Total distillate stock are now at 138.123 million barrels which is 7.285 million more barrels than last year at this time.
Propane inventories increased by 3.987 million barrels a bigger increase than expected putting total stocks at 90.496 million barrels. There are roughly six reporting weeks left in the traditional build season for propane and at this point you would think the market will see decent build every week. That means that there is the potential to see total propane stocks get to 100 million barrels. This has put a bearishness over the propane market. It will be interesting to see if propane can move lower over these next week as at some point producer will just become very reluctant to offer propane for sale at some level. My impression is that most everyone has coverage for what they have sold and is just trying to figure out if there are any opportunity in this market. It is fair to assume that prices will have a hard time moving higher until we see demand pick up, which could be from exports and or as cooler weather starts to arrive.
Fed Chairman Jerome Powell is scheduled to speak in Jackson Hole tomorrow and trader will be listening for any hints about rate cuts or what the Fed’s outlook may be for the economy. Most traders have already baked into the market that the Fed will cut a couple more time prior to the end of the year so any sense of a deviation from that may be a surprise to traders. The Fed minutes released yesterday showed that there was a wide variety of opinions among Fed members as some wanted a 50 basis point cut, others wanted no cut and still some that were in the middle. This just confirms that there is a lot of uncertainty for these market and that has created some volatile trading in a range over the last few weeks.
Iran is doing their part to keep things stirred up. Iran’s President, Hassan Rouhani, said if Iran’s oil exports are cut to zero, international waterways will not have the same security as before. Iran’s Foreign Minister, Mohammad Javad Zarif, said Iran may act “unpredictably” in response to the US’ unpredictable policies under President Donald Trump.
Russia’s Rosneft notified customers that future tender contracts for oil products will be denominated in euros not dollars as early as this year. The move is likely to be seen as an attempt to offset any potential negative impact of US sanctions on Russia.