While the weather in China is very cold, it appears their economy is starting to get red hot. China’s export growth exploded, rising 14% in the month of December. Because of that petroleum demand, expectations are rising as China oil imports increased by 6.8% and that could be with a bullet. China imported 271.02 million metric tons of crude or the equivalent of 5.43 million barrels a day. While that growth is a far cry from China’s oil demand growth glory days, it does signal that China’s oil demand could make a major rebound and exceed expectations in the first quarter. Add to that the record cold and it seems that the market is ready to ignore yesterday’s stunning builds in U.S. oil products.
U.S. oil product demand grounded to a halt over the New Year’s holiday week. Product demand fell to an eleven-month low while gasoline stockpiles exploded to 7.4 million barrels, triple the average estimates. Distillate fuels also surged by 6.777 million barrels. Despite the surge, those supplies are still below normal.
Crude oil supply did not rebound like I expected as supply in the Gulf Coast actually fell! Come on guys! It’s time to start letting those tankers unload! Look for a big build next week!
Adding to the supportive tone is the fact that Saudi Arabia is cutting back on production. Dow Jones reported that Saudi Arabia has cut its oil production by nearly 5% in December to 9.025 million barrels per day compared with 9.49 million barrels per day a month earlier. The kingdom supplied the market with 9.151 million barrels per day of crude oil last month, according to Dow Jones Newswires.
The International Energy Agency suggested to Saudi Arabia that instead of cutting production they should work toward finding new ways to send more oil to more customers in Asia. Saudi Arabia's Oil Minister Ali al-Naimi said in December that the Gulf state will adhere to the 30 million barrels-a-day production ceiling maintained by the Organization of the Petroleum Exporting Countries, but will meet any customer demand for additional crude. Yet one of the Saudis' best customers is going to be cutting their imports.
The International Energy Agency said that the U.S. will cut their oil imports by half by 2035. A nightmare for many OPEC producers.
Natural gas is collapsing under its own weight. More North Dakota gas going into Henry Hub and warm temperatures are taking its toll. Yet Dow Jones reports that while Nymex front-month natural gas fell to its lowest level since late September, an after-market change in forecast from NOAA may chill market bears who see February gas at $3.113/mm Btu making a run soon to $3/mmBtu. Gas has dropped 17.4 cents this week as above-normal temperatures linger in the eastern U.S., a major market for gas-heating. NOAA's latest 6-10 day forecast shows normal temperatures returning to the east between Jan. 15-19, with the southeast coast staying above-normal. In the 8-14 day outlook, below-normal temperatures take hold of Northeast while normal temperatures are expected in the mid-Atlantic through southeast.”
Today the key whether gas bottoms is the EIA storage report! We are looking for a 170 withdrawal.