June 03, 2015Volume 5, No. 5
docFinder alert

OPEC meeting this week

No change expected as free market sorts it out


Spare Capacity just 4%

Not a repeat of 1980's

May 21, 2015

Full Presentation


Price War and Red Ink

Pressures brewing within OPEC

May 20, 2015

Full Presentation

Email us to start your free trial to docFinder!

This docFinder Alert compiles a few of the many variables at play as investors, executives and analysts keenly dissect daily headlines to sort out "price" in the global oil markets. OPEC is meeting this Friday, though there is little expectation much will change from last Thanksgiving when OPEC opted to defend its market share, instead of cutting production resulting in a NYMEX near-month drop of $7.54 to $66.15 and a later fall to $43.46 on March 17 before recovering recently. Yesterday's close of $61.26 is up 41% from the low.

Courtesy of US-based Plains All American Pipeline, the slide above left shows that 2015 is not a repeat of the global oversupply of oil seen in the early 1980’s when OPEC willingly cut production to allow for price recovery after prices dipped to $10.42 on March 31, 1986. Nor is 2015 a repeat of the 2008/2009 crash, which saw not only commodities dropping but also the burst of the tech bubble, a stock market crash and a meltdown in the financial institutions. In 2008, prices slid from $145.29 on July 3, 2008 to $33.87 on December 19, 2008. Digging deeper into the fundamentals, Plains' slide shows that OPEC spare capacity is now just 4% of current global demand – versus 26% back in 1984. It also shows the strong global growth in oil demand overtime – an underlying driver that should prevail long-term. The proverbial “running up the down escalator” has only gotten more strenuous in the US where shale operators face unprecedented 30% declines in the first year. With the rest of the world showing flat oil volume growth over the last 4 years, the current price war is truly between North America and OPEC, but US oilmen are already showing their flexibility and expertise in cutting costs and drilling on.

Many believe OPEC’s cartel is under pressure as Saudi Arabia is currently driving the ship with other cartel members facing financial losses. The slide above right, courtesy of Approach Resources, is a healthy depiction of the tug-of-war within OPEC itself. The slide shows break-even prices necessary for OPEC countries, as well as Russia. With Brent at $66.98 on May 15, the only two countries in the black are Kuwait and Qatar. The Saudis are bleeding roughly $40/bbl and producing a record 10.3 MMbbl/d – or burning cash at a rate of $12 billion/month. Russia has roughly the same break-even and with production of 10.7 MMbbl/d is burning nearly $13 billion/month. As long as this price war continues, there is little doubt that internal strife will wreak additional havoc in Venezuela, Algeria, Iran, Nigeria and Iraq – who combined produce 12.3 MMbbl/d. The historical “fear premium’ appears to have been baked out of the cake – as opposed to increasing. This is perplexing.

For clients, PLS will issue an upcoming docFinder alert that focuses on some of the winners of the current price war, in particular the larger net consuming countries, not the least of which is China.

More HOT slides and data below.
Shown below are more hot slides from PLS’s docFinder database from participants across the energy complex that present a few of the inputs into the complicated calculus market analysts are now wrestling with regarding future oil pricing. Below are slides from Ardmore Shipping, Bangchak Petroleum, Valero and RBSA Advisors. PLS’ docFinder database covers the entire energy complex.

Did you know?
Oil company execs, investors and bankers know full well the value of "competitive reconnaissance." PLS' docFinder database is COMPREHENSIVE and VALUABLE data source to help you stay current on industry and company developments.

Click here to sign up for a free trial!

featured.slides from docFinder

Slide Slide Slide Slide

OPEC Growth

Hinges on Iraq

May 18, 2015

Price Recovery

Limited in short term

May 14, 2015

US Storage rolling over

Gasoline exports rising

May 13, 2015


Economic Troubles

April 10, 2015

Reaching beyond the upstream sector, other energy players are also watching oil dynamics. Ireland-based owner of product and chemical tankers Ardmore Shipping shows key slides from the IEA 2015 Medium-Term Market Report. The slide above shows that, despite OPEC’s drive to defend market share, virtually all of increased OPEC supply thru 2020 hinges on Iraq. The rest of OPEC is expected to struggle with low prices and security issues. To Ardmore’s benefit, this new oil market volatility is increasing volumes and complexity for shipping crude which ultimately adds demand for sea-borne tankers.

Publicly-traded Thailand refiner Bangchak Petroleum held an analyst meeting where the company showed the slide above concluding that in 2015 oil price recovery will be limited. Forecasted average 2015 Dubai oil is $62/bbl, with an exit rate of $72/bbl. Upside drivers include unrest in MENA and US shale oil decline. Downside risks are Europe and China slowdowns and a Fed rate hike. This slide shows Bangchak’s price drivers for its refined products. Helping gasoline demand in 2Q 15 was higher travel during the Muslim fasting month. In 2H 15, risks include slower Indonesian, Chinese and Japanese demand.

Valero is the world’s largest independent refiner with 2.9 MMbbl/d of capacity. The slide above shows very clearly the record oil storage build in the US, and at Cushing and at PADD 3. As refiner maintenance season concludes and summer driving demand picks up, the inventory level is rolling over – providing some comfort that US storage will not be tapped out. This slide shows US transportation indicators, which are a mixed bag. Another slide shows Mexico’s increasing gasoline and diesel imports. Finally, to wrap it up, here is VLO’s latest view of world oil demand growth, driven almost exclusively by non-OECD countries.

RBSA Advisors is a research firm based in India. The title of this presentation is Crude Oil Price Crash – Black Gold loses its Glitter. Among other things, the study looks at the impact of low oil prices on Russia, Iran, Venezuela, Saudi Arabia, US, Europe, China and India. As the slide above shows, RBSA believes that at $60 oil, Russia’s GDP will shrink 4.5% and will cause the Ruble’s value to collapse and stoke inflation. Russia’s December 2014 hike in interest rates from 10.5% to 17% is expected to further slow the economy.


Full Presentation


Full Presentation


Full Presentation


Full Presentation