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SEB report: Crude market tightening rapidly in Q3

SEB report: Crude market tightening rapidly in Q3

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Published by SEB Group
SEB’s experts expect a continued strong oil price market in the short term, with substantially tighter market balance in the third quarter compared to the second quarter. Fewer disappointing macroeconomic figures vs. expectations, market confidence in policymakers’ credibility and indications of imminent measures to stimulate growth also support the commodity’s current strength.
SEB’s experts expect a continued strong oil price market in the short term, with substantially tighter market balance in the third quarter compared to the second quarter. Fewer disappointing macroeconomic figures vs. expectations, market confidence in policymakers’ credibility and indications of imminent measures to stimulate growth also support the commodity’s current strength.

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Published by: SEB Group on Aug 23, 2012
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08/23/2012

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Oil Market Report
Crude market tightening rapidly in Q3
23 AUGUST 2012
 
 2
 
SEB Oil Market Report
Crude oil market
In the short-term, we expect a continued strongcrude oil price with a substantially tighter marketbalance in Q3-12 vs. Q2-12. Fewer disappointingmacroeconomic figures vs. expectations, marketconfidence in policymakers’ credibility andindications of imminent measures to stimulategrowth also support the commodity’s currentstrength. Absent a further wave of globalpessimism, and there are a lot of potential pitfalls,we expect Brent crude to trade above $110/b duringthe next 1-2 months. Subsequently, prices shouldease, at least temporarily, in late September or earlyOctober as North Sea maintenance end and SouthSudanese oil flows resume following the country’stransit fee agreement with Sudan. Additional supplyfrom Saudi Arabia, Iraq and Libya in coming monthswill be limited at best. We forecast an average Brentprice of $110/b in both Q3 and Q4, representing adownward revision of $5/b in Q4. Growth willaccelerate modestly in 2013, albeit sufficiently toensure oil prices remain well above the minimumdesired by Saudi Arabia, i.e. $100/b. We revise our2013 average price forecast down $2.5/b to $110/b.However, the range of possible outcomes is verywide due, for example, to the Eurozone crisis, theextremely sensitive geopolitical situation in theMiddle East and Chinese growth uncertainties. Inthe short-term, the Atlantic hurricane season mayalso prove a wildcard.
The Atlantic basin is increasingly affected by the Iranianoil embargo which is impacting the overall marketbalance and producing a scarcity of particularly sour andheavy qualities. The current situation underlines thechallenges refiners face due to volatile production (e.g.from Libya, Sudan and Iran). Furthermore, the light sweetmarket has also tightened due to imminent large-scaleNorth Sea maintenance. With BFOE the pricingbenchmark for a substantial share of the global oilmarket, expected September loading of 700 kb/d is avery small amount indeed. The fact that Nigerian oil isonce again finding buyers after struggling with lower USdemand is a good indicator that the light sweet market istightening. Demand has also been affected by Atlanticbasin refinery closures hitting non-complex refineries,typically consumers of light sweet crude.Under no circumstances should the gravity of thesituation in the Middle East be underestimated,threatening as it does to drive oil prices much higher,undermining already weak global growth. The Iranianissue is as far removed as ever from being resolved withglobal superpowers increasingly polarized on how toproceed. A similar situation applies in Syria, nowoverspilling into neighbouring countries. Other regionalconflicts could restart at any time.
Crude oil priceCrude oil priceCrude oil priceCrude oil price
(NYMEX/ICE, $/b, front month, daily closing)
65707580859095100105110115120125130
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2
NYMEXWTIICE Brent
 
IEA gIEA gIEA gIEA global crude oil demand estimateslobal crude oil demand estimateslobal crude oil demand estimateslobal crude oil demand estimates
(mb/d)
 
7980818283848586878889909192
    j   u    l  -    0    9   o    k    t  -    0    9    j   a   n  -    1    0   a   p   r  -    1    0    j   u    l  -    1    0   o    k    t  -    1    0    j   a   n  -    1    1   a   p   r  -    1    1    j   u    l  -    1    1   o    k    t  -    1    1    j   a   n  -    1    2   a   p   r  -    1    2    j   u    l  -    1    2
2010 2011 2012 2013
 
Chart Sources: IEA, Bloomberg, SEB Commodity Research
MonthlyMonthlyMonthlyMonthly global crude oil demand estimatesglobal crude oil demand estimatesglobal crude oil demand estimatesglobal crude oil demand estimates
2012
(mb/d)
Revision
(kb/d)
2013
(mb/d)
Revision
(kb/d)
IEA
89.6 -250 90.5 -400
EIA
88.83 +190 89.70 +330
OPEC
88.72 +30 89.52 +30
SEB average Brent crude oil price forecastSEB average Brent crude oil price forecastSEB average Brent crude oil price forecastSEB average Brent crude oil price forecast
($/b)
Q1
 
Q2
 
Q3 Q4
 
FullYear
 
2012
(118) (109) 110 110 111.8
2013
105 105 115 115 110.0
 
 3
 
SEB Oil Market Report
Crude oil
Crude oil priceCrude oil priceCrude oil priceCrude oil price
(NYMEX/ICE, $/b, front month, weekly closing)
 
12 month12 month12 month12 month time spreadtime spreadtime spreadtime spread
(NYMEX/ICE, %, daily closing, >0: contango, <0: backwardation)
102030405060708090100110120130140150
    2    0    0    3    2    0    0    4    2    0    0    5    2    0    0    6    2    0    0    7    2    0    0    8    2    0    0    9    2    0    1    0    2    0    1    1    2    0    1    2
NYMEXWTIICE Brent
 
-10-8-6-4-2024681012141618
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2
ICE BrentNYMEXWTI
 
Brent futBrent futBrent futBrent futures curveures curveures curveures curve
(ICE, $/b)
WTI futures curveWTI futures curveWTI futures curveWTI futures curve
(NYMEX, $/b)
87899193959799101103105107109111113115117
   o    k    t  -    1    2    j   a   n  -    1    3   a   p   r  -    1    3    j   u    l  -    1    3   o    k    t  -    1    3    j   a   n  -    1    4   a   p   r  -    1    4    j   u    l  -    1    4   o    k    t  -    1    4    j   a   n  -    1    5   a   p   r  -    1    5    j   u    l  -    1    5   o    k    t  -    1    5    j   a   n  -    1    6   a   p   r  -    1    6    j   u    l  -    1    6   o    k    t  -    1    6
12-06-2212-07-2012-08-22
 
798081828384858687888990919293949596979899100
   o    k    t  -    1    2    j   a   n  -    1    3   a   p   r  -    1    3    j   u    l  -    1    3   o    k    t  -    1    3    j   a   n  -    1    4   a   p   r  -    1    4    j   u    l  -    1    4   o    k    t  -    1    4    j   a   n  -    1    5   a   p   r  -    1    5    j   u    l  -    1    5   o    k    t  -    1    5    j   a   n  -    1    6   a   p   r  -    1    6    j   u    l  -    1    6   o    k    t  -    1    6
12-06-2212-07-2012-08-22
 
Speculative positions WTISpeculative positions WTISpeculative positions WTISpeculative positions WTI
(NYMEX, lots, futures and options, weekly data)
 
Benchmark spreadsBenchmark spreadsBenchmark spreadsBenchmark spreads
(daily closing)
050000100000150000200000250000300000350000400000450000
    2    0    0    8    2    0    0    9    2    0    1    0    2    0    1    1    2    0    1    2
ShortLongNet
 
-28-26-24-22-20-18-16-14-12-10-8-6-4-202468
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2
WTI minus BrentBrent minus DubaiBrent minus Urals
 
Chart Sources: Bloomberg, SEB Commodity Research

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