Rebalancing Act

By: Daniel Guttman / June 14, 2016

OPEC believes that the second half of 2016 will be much tighter than expected. OPEC reported that “China’s output is expected to increase by 60,000 b/d and production in Brazil is expected to increase by 270,000 b/d due to the start-up of two new projects. In the U.S., despite higher growth in the Gulf of Mexico, total U.S. output will decline by 150,000 b/d in the second half of the year compared to the first half of 2016. With the recovery of production disrupted by wildfire, supply in Canada is expected to grow by 60,000 b/d compared to 1H16." OPEC noted that the above projections show that “the excess supply in the market is likely to ease over the coming quarters. To some degree, this has started to be seen in the slowing pace of inventory builds in U.S. commercial crude stocks.”

A bit of a contradicting statement if you ask me. Recovery of production disrupted by the wildfires screams “inventory build!” In defense of OPEC’s opinion, there are non-OPEC producers that have dramatically cut back on production due to the 2016 price drop, while OPEC has not cut back. The slowing pace of U.S. inventory builds is likely due to the Canadian wildfires and rising demand across the country because of driving season. There seems to be a rebalancing act that OPEC is informing us about. While some countries increase their supply and production per day, others are struggling due to geopolitical and environmental issues.

OPEC is onto something here. Even though its assumption of excess supply in the market is likely to ease over the coming quarters sounds broad and vague, the price of crude has been fluttering around $46-$51 a barrel for the past month. Looking back at early April into May, the spread was around $35-$46 a barrel. We have witnessed a sharp rise in pricing and draws in inventory while also witnessing a rebalancing act of refined products and crude for the past month.

Interesting news:

  • Iranian crude oil output reaches 3.8 mbpd, June exports expected to hit 2.31 mbpd.
  • IEA raises 2016 oil demand growth to 1.3 mbpd, signals rebalancing in 2H 2016.
  • OPEC’s bullish report failed to support pricing this Tuesday.
  • Today the market is down for crude and refined products, with crude, diesel and gasoline down $.57, $.0190 and $.0197, respectively.

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Categories: Daily Market Update


Daniel Guttman

Written by

Daniel Guttman

With a background in wholesale and commercial sales as well as pipeline scheduling, Daniel is currently the Manager, Business Development in the Card Access Fuels department. He is tasked to find new and innovative solutions to increase sales opportunities for the sales team while managing and evaluating internal department processes. He assists with day to day personnel management, customer data analysis, as well as the daily Pacific Pride inventory and pricing direction.


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


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