Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Reports that Saudi are selling uncontracted supplies to Asia for June delivery - but making them pay for it. Seems like the demand is strong as ever, at least. Not impressed that the Saudis bent over though. Doesn't matter in the long run if G&R are right: https://cdn2.hubspot.net/hubfs/4043042/Commentaries/2019%20Q1%20Commentary/2019.Q1%20Goehring%20&%20Rozencwajg%20Market%20Commentary.pdf
Keeping it tight today. Looks like they want to offload their stockpile before opening it up again. Contrary to common belief MMs don’t like holding stock on their account as it is the spread where they make money, not speculation. Over the last couple of trading sessions they will have acquired stock from sellers sub-ems of 20k blocks that they are required to buy to provide liquidity but they won’t raise the price until they have these off their books. General market sentiment seems to be very negative today so I expect there will be little enthusiasm for a bit. Happy to be wrong about this though!
I wouldn’t take too much notice of those sorts of auto indicators. They take a bunch of commonly used indicators such as rsi and momentum, pile them in a basic algorithm and use it as an auto-promo tool on social media. I haven’t looked at that one specifically but I would imagine it is being used to promote some kind of paid-for service. About as sophisticated as licking your finger to find out what the weather is going to be like tomorrow. I find the changing rate of excitement from new posters on twitter to be a better gauge of sentiment! Although not very scientific of course.
Without question. I was trying to answer the bear case with the least positive bull case. Many of those points have far more extreme upside than I stated. For an example by my (admittedly rather amateurish maths) the Shale production rates should have peak and now be entering a plateau period that will last around 4 months before declines start to show. Given the huge correction numbers in the EIA reports that process could have begun a while back, we won’t know until corrections to the corrections start being issued. I notice that the bears never talk about the refining issue either.
Thanks for your comments everyone. A lot of that tallies with my thoughts. Much of the build is down the the refineries and demand issues for WTL I think. Ep121 comment that Asian light demand will take WTL barrels to replace Iran’s is very plausible and corroborated by other commentators. This could be happening already so might show in the numbers as soon as week after next. Basically if net result of all the oil macro is US stocks building then even though this is the market watches main indicator for market dynamics there is loads of room for a shock to the system. The big bear arguments I’ve heard are as follows (and my thoughts on them): 1) Venezuela could be politically resolved much more quickly than anticipated and production could come back to market in short order - True for the first part but not true for the second. Without question there is slack in Ven’s production capacity due to sanctions but their expertise and infrastructure are shot all to hell. Yes 300k barrels prob, 1m bbls not this side of the next 1.5 years. 2)Shale growth curtailment as per e&p statements of financial discipline all bogus and it’s drill baby, drill - irrelevant speculation, rig count tells the truth about investment (although it’s a very long-lead indicator) and there is no getting around those pesky decline rates. 3) Iran’s fall in exports is entirely artificial and they can come back any time. - sure but unless they lube up for ‘Merica they are not going to be allowed to sell it (save what they can sell across land boarders to Syria and Turkey and sneak past the sanctions police. 4) OPEC has 3.3m of capacity to turn on at any time - yes but a> will they after their treatment last time around and b> Saudi pumped at full bore to fulfil missing barrels last year. They absolutely have 2mbpd spare capacity but they absolutely can’t use it for more than a short time period due to their ageing infrastructure and fear of loosing their status as swing producer (although their power in that role is obviously diminishing) 5) Libya will return to normal - Sure and they are, infact there is really only downside to Libya’s supply. upside is max 500kbpd. That’s a lot I grant you but not enough to overcome the supply deficit 6) Global slowdown questions demand narrative - possibly but it’s not showing in the figures yet and China’s demand growth curve hasn’t flattened yet. Additionally India’s, Indonesia’s and South America’s have begun steepening in a significant way. Any other bear arguments to add?
I’ve got 2 questions RE EIA numbers. 1) why are production numbers increasing weekly when monthly’s keep getting revised down and 2) why is no one buying US stockpiles? It’s rhetorical really but if anyone wants to put up an answer I’ll be interested to know if it tallies with my theories.
That solar will, I assume, be farmed out. I’ve heard no mention of capex relating to it. Don’t really want it on our books, if we can get a JV on the mid stream to offset set-up costs that would be a win all round. Also don’t forget that we already have a downstream JV so only paying for half the generation capex costs.
I’m thinking the build is related to limited US exports due to demand for ultra-light grades being somewhat limited. In other news looks like earlier rumours that Russia had solved their contaminated pipelines issue was greatly exaggerated: https://uk.reuters.com/article/us-russia-oil-insight/how-russia-contaminated-2-7-billion-of-oil-exports-to-europe-idUKKCN1S61YM Sooooo if US production IS falling and Russia just had up to 1mbpd of exports clipped at the same time as chaos in Venezuela and Libya all whilst Saudi and OPECs response to DT asking for more production is ‘nah, I’m good’ there could be quite the setup in place.
@auston it sure will. I’ve followed enq since the depths of 2016 and it does seem to lag others. Usually a good bit of news reminds the market of the opportunity that has been overlooked. Top end production numbers or surprise upside to debt repayment should do the trick. @pelle I’m unlikely to be here in a few years, just as long as the uptrend in oil and enq lasts. Great numbers btw.