After a lesser draw than expected to crude inventories, oil is selling off on this third Wednesday in April. As strong imports from the Middle East this week should help to buoy inventories for next week's report, hark, here are five things to consider in oil markets today.
1) Much is being made of Saudi Arabia's February exports, which showed a drop to the lowest since mid-2015, according to JODI data. But we can see in our Clipperdata that this drop is superseded by a solid rebound in March exports. We see exports rebounded to over 7.2 million barrels per day, with flows bound for East Asia (think: Japan, South Korea, China) accounting for 45 percent of loadings.
This is the second-highest monthly volume heading to East Asia from Saudi on our records. The highest was in January. In the aftermath of the OPEC production cut, East Asia has been strongly favored for OPEC barrels. Total OPEC loadings bound for East Asia in March have clambered above the 10mn bpd level, the highest on our records, although April so far is looking considerably weaker as total OPEC export volumes drop.
2) It is also interesting to note that Saudi Arabia oil inventories rose in February amid the export lull. We discussed earlier in the month how JODI data showed that oil inventories dropped to 262 million barrels in January, down from a peak of 329 million barrels in October 2015.
After dropping thirteen out of the previous fourteen months - and for seven months in a row - Saudi crude inventories for February rebounded by 2.74mn bpd. This appears due to less crude leaving the country, and more finding its way to be both refined and put into storage:
3) As the Dakota Access Pipeline (DAPL) starts up, the largest refiner on the East Coast - Philadelphia Energy Solutions (PES) - is not expected to take any deliveries of Bakken crude by rail in June. Once DAPL starts up, it is more profitable for oil to be sent by pipe to the U.S. Gulf Coast than it is to send it by rail to the East Coast.
As our ClipperData illustrate below, the marginalization of Bakken barrels to the East Coast has been underway for a good while. Waterborne imports bottomed out in early 2015 - at exactly the same time that Bakken shale crude production was peaking out.
As Bakken production has dropped off since, and as oil prices have remained low (making waterborne imports a more economically viable option than crude by rail), waterborne imports have risen ever since. While Canadian and Brazilian grades are consistently delivered to the refinery, West and North African grades have accounted for nearly 60 percent of imports since the start of last year.
4) Today's key EIA inventory numbers have been driven in large part by big swings on the US Gulf Coast. While total US refinery runs rose by 241,000 bpd, an increase of 260,000 bpd was seen from Gulf Coast refiners.
This uptick in Gulf Coast refining activity, in combination with imports remaining somewhat in check, has meant oil inventories have drawn down on the Gulf Coast by 3 million barrels. Next week's report is set to be impacted by super-strong waterborne imports from the Middle East, but for now, the increase in refining activity is taking center-stage. Crude inputs are now a whopping 958,000 bpd above year-ago levels.
5) Finally, the IMF has published its April 2017 World Economic Outlook. It projects world economic growth is going to be at 3.5 percent in 2017, rising to 3.6 percent in 2018. As we know all too well, all paths lead back to energy, hence downward revisions have been made to Latin American and Middle East nations due to the impact of lower oil prices and production cuts.
While the Russian economy is seen turning a corner as oil prices rebound, Saudi Arabia's economy is projected to grow at 1.3 percent in 2018, down from an estimate of 2.3 percent in January, due to austerity measures and production cuts.
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Tyre market in Bangladesh is forecasted to grow at over 9% until 2020 on the back of growth in automobile sales, advancements in public infrastructure, and development-seeking government policies.
The government has emphasized on the road infrastructure of the country, which has been instrumental in driving vehicle sales in the country.
The tyre market reached Tk 4,750 crore last year, up from about Tk 4,000 crore in 2017, according to market insiders.
The commercial vehicle tyre segment dominates this industry with around 80% of the market share. At least 1.5 lakh pieces of tyres in the segment were sold in 2018.
In the commercial vehicle tyre segment, the MRF's market share is 30%. Apollo controls 5% of the segment, Birla 10%, CEAT 3%, and Hankook 1%. The rest 51% is controlled by non-branded Chinese tyres.
However, Bangladesh mostly lacks in tyre manufacturing setups, which leads to tyre imports from other countries as the only feasible option to meet the demand. The company largely imports tyre from China, India, Indonesia, Thailand and Japan.
Automobile and tyre sales in Bangladesh are expected to grow with the rising in purchasing power of people as well as growing investments and joint ventures of foreign market players. The country might become the exporting destination for global tyre manufacturers.
Several global tyre giants have also expressed interest in making significant investments by setting up their manufacturing units in the country.
This reflects an opportunity for local companies to set up an indigenous manufacturing base in Bangladesh and also enables foreign players to set up their localized production facilities to capture a significant market.
It can be said that, the rise in automobile sales, improvement in public infrastructure, and growth in purchasing power to drive the tyre market over the next five years.
Headline crude prices for the week beginning 14 January 2019 – Brent: US$61/b; WTI: US$51/b
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GEO ExPro Vol. 15, No. 6 was published on 10th December 2018 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.
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