Crude trades $70 to $71.11 on global supply concerns

Crude fell to one of the multi-lows almost by 20 per cent as the supply increased not just in US , but in other regions such as Brazil, Iraq , Russia and Saudi Arabia, that were producing more than estimated, and there were concerns on oversupply, which led to decrease in prices. However, it gained on the concerns of supply cuts from Saudi Arabia on Monday where it announced to reduce output by 500,000 bpd in Dec. Crude gains had been creating strong pressures on some emerging nations that were also facing strong currency issues such as Turkey and Indonesia.

The US is now one of the key crude producers.  In the first week of Nov, the output from the country was over 11.6 m b/d, as per EIA reports. There were reports of rise of 22.2 per cent in the year. The increase in production has been one of the factors for the crude ease, and other factors are Sino-US trade issues and geo-political clashes.

US-Sino crude impact

The crude imports of China grew 32 per cent y-o-y to 9.65 m bpd as per the reports of General Administration of Customers, and the inflow is expected to grow 6.2 per cent from 9.09 m b/d in September.  In April, the crude imports touched a record of 9.6 million b/d. Imports grew 8.1 per cent in the first 10 months as compared to the last year. The crude imports by China were highest in the month of October to 8.88 m bpd. The country gets supply through pipelines as well as through sea route where the crude imports through independent sector grew 28 per cent to one of the peaks in 7 months to 2.2 million barrel per day in the October month – as per Platts survey report.

In the month, the oil product export from China was eight month low and by 17 per cent low in comparison to September but the overall exports grew 7.8 per cent on y-o-y basis. Low export quota was responsible for low exports from China.

The Sino – China trade war is not affecting the energy sectors of either country but the protectionist trade policies on imports added 25 per cent to the cost of steel in US – which is a raw material for some companies such as privately owned oil service company Canary LLC. The company requires steel as a raw material to make the well heads and equipments, valves and apparatus to boom production in the shale regions.

Iran crude exports reduce

In the month of October, oil gained due to the concerns over US sanctions on Iran that led to decrease in supplies, lowering inventories, which led to shortage in some regions of the world. The new US supplies could compensate for the lost Iranian markets and it has been able to reduce the price in the global markets.

US claim it will increase deliveries to such levels to diminish Iranian oil exports to zero. Currently, the Iranian markets are down 50 per cent in the first six months of 2018.

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