Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 22 November 2017 at 14:36 GMT

Oil supported by stocks draw, pipeline disruption — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Crude oil heads higher, WTI leading the charge
  • Keystone supplies from Canada disrupted
  • Thanksgiving likely to slow oil markets
Last week's oil spill in South Dakota will significantly disrupt supplies from Canada 
via the Keystone pipeline. Photo: Shutterstock

By Ole Hansen

While November 30's Opec meeting remains the key focus and source of market volatility, attention (at least for now) has once again turned to the weekly dose of US energy data from the Energy Information Administration, due today at 1530 GMT. 

Crude oil trades higher with WTI leading the charge following news that supplies from Canada to US refineries via the Keystone pipeline will experience major disruptions through the end of November. 

The pipeline, which carries 590,000 barrels/day, could see a significant drop in supplies after being partly shut down following a 5,000 barrel spill in South Dakota last week.

Crude oil and spreads
Source: Saxo Bank

Lower supplies into the US from the north and robust exports from the south are likely to support a further reduction in US inventories – not least at Cushing, the landlocked delivery hub for WTI crude oil in Oklahoma. 

Elevated levels of crude oil stocks at Cushing from shale oil production together with inadequate pipeline infrastructure to transport the oil south to the Gulf coast have been one of the reasons behind WTI's elevated discount to Brent in recent months. 

While temporary, the current supply disruption has nevertheless allowed WTI to reach a two-year high while narrowing the discount to Brent crude, currently at $5.4/barrel and down from a peak around $7/b.

Cushing inventories
Additional support came yesterday from the American Petroleum Institute which reported a 6.4 million barrel drop in US inventories. A Bloomberg survey has the number somewhat lower, but it would still be the first reduction in three weeks. 

Apart from changes in crude oil stocks the market will also, as usual, keep an eye on the estimates for crude oil production together with cross-border movements. 

EIA survey and recent results
Once the dust settles following today's report the market is likely to experience a couple of quiet days due to US Thanksgiving celebrations before going full throttle next week ahead of Thursday's meeting. 

On the subject of the Opec meeting, geopolical risks, and speculative positioning i gave this interview to Bloomberg's Daily Brief on oil earlier this week. 

Updates on the EIA's Weekly Petroleum Status Report will be posted below once released. 

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

Ole Hansen Ole Hansen
Crude oil inventories fell 1.9m bbl last week less than surveyed. Gasoline and distillates both rose. Crude oil exports and production both rose to fresh records. The market reaction has been relatively subdued with support coming from a 1.8m bbl decline at Cushing. This even before the pipeline outage from Canada has started to make its full impact.
Ole Hansen Ole Hansen
Correction: The rise in export was not a new record but up 462k b/d on previous week.
Ole Hansen Ole Hansen
Charts below
Олег Комбаев Олег Комбаев
Thanks. Ole could you clarify, is backwardation positive or negative factor for oil now?


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