________________________________
From: Wagner, Jonathan
Sent: Tuesday, September 04, 2018 6:27:03 AM (UTC-06:00) Central Time (US & Canada)
To: Curves
Subject: ION Morning Rundown
Good morning. Oil prices continue to climb led by products with gasoline and distillate flat px trading higher by 3% this morning. Products remain bid as we continue to watch the track of Gordon as it approaches the Gulf Coast. Gordon, with top winds of 65mph, was about 230 miles east-southeast of the mouth of Mississippi River, and the center of the tropical storm will move across the eastern Gulf of Mexico Tuesday. The dollar is stronger trading at 95.6 while US index futures are flat and major European stock indices are down 1%. The WTI/Brent Arb curve continues to flatten as strength in the front end of Brent continues to push the front end arb lower (-8.65 this morning). JBC this morning is using the Brent backwardation argument as a possible increase of flows into the market. According to their note, Brent net longs are down 38% from a high on April 10 and positive monthly roll in contract “should not be underestimated, as it could entice the speculative community to return in full force, considering the more bullish fundamental picture.” US delegates (Mattis and Pompeo) will travel to New Delhi this week for a US / India Ministerial meeting on Sep 6th. Iranian crude oil imports will be of utmost importance as the Nov 4th sanctions deadline approaches and India begins to look at October oil allocations. As August production figures continue to emerge, Kazakhstan’s crude and condensate output dropped month over month due to scheduled maintenance at key oil fields. Output dropped to 1.73m b/d in August from 1.91m b/d in July. Production is likely to remain lower in the coming months, with maintenance planned at Karachaganak in September and October and at the country’s biggest field, Tengiz, in October. Middle east crude prices were mixed today as Cash Dubai dropped 20c to +1.21 over swaps (DME Oman’s prem to swaps continues to climb). According to survey estimates, Saudi Aramco may keep prices for the light crude grades it sells to Asia largely unchanged in October from the previous month to keep its oil competitive against other suppliers. Two Nov Dubai partials traded in the window today with BP and Mercuria buying from Totsa and Reliance. Dubai spreads continue to strengthen with Sep/Oct trading at 69c back while Oct/Nov spreads are trading 63c back. Bloomberg released their latest tanker tracker figures over the weekend (listed below) with higher Saudi, Iraqi and Nigerian flows m/m. Front end vols are out performing this morning with continued interest in upside calls / call spreads seen going through on the screen and blocks (highlights from this morning are below).
ICE Brent Managed money net length
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Top stories listed below
U.S. Throttles Iranian Oil Flows to Buyers Who Vowed Resistance
Libya Leads OPEC Oil Output to 2018 High Despite Iran Losses
Rouhani: Iran to Exert `Every Effort’ to Pump, Export Oil
Middle East Crude-Benchmarks mixed ahead of Saudi OSPs – Reuters News
Kazakhstan August Oil Output Slumps to 1-Year Low as Works Bite
China’s Unipec books tankers to ship crude from U.S. to Asia – Reuters News
India to Stress Its Iran Oil Need in Talks With Pompeo: Official
U.S. Threat to Cut 800K-1M B/D Iran Oil Exports by Nov.: MUFG
Japan’s Cosmo Oil says no plans to load Iranian crude oil in October – Platts
Brent Backwardation May Lure Speculators to Bullish Market: JBC
BNP Paribas Cuts Crude Forecasts as Dollar `Stronger for Longer’
Vessels With Iran Condensate Float Off Dubai Coast: Ship Data
Kpler Says 5.7M Bbl of Oil in Malacca Strait
SAUDI TANKER TRACKER: Exports Rise in Aug. on Korea, China Flows
IRAQ TANKER TRACKER: August Oil Exports Rise to Most Since 2016
KUWAIT TANKER TRACKER: August Cargoes Slump on Lower Asia Demand
NIGERIA TANKER TRACKER: Exports Rise on Bonny, Forcados Flows
QATAR TANKER TRACKER: Flows Hold on Strong Indian Demand in Aug.
JAPAN TANKER TRACKER: Iran Oil Imports Rise ~31% M/M in August
Implied Vol Change from COB Friday
WTI Vol
31-Aug
31-Aug
Change
V8
22.85
24.25
1.4
X8
23.56
24.13
0.57
Z8
24.08
24.35
0.27
F9
24.58
24.65
0.07
G8
24.27
24.21
-0.06
H9
24.30
24.23
-0.07
M9
24.05
23.90
-0.15
BRT Vol
31-Aug
31-Aug
Change
X8
24.16
25.50
1.34
Z8
24.79
25.23
0.44
F9
24.53
24.65
0.12
G8
25.26
25.15
-0.11
H9
24.91
24.72
-0.19
M9
24.85
24.62
-0.23
Block Trades see so far this morning on ICE/CME
BRT M19 55 Put TRADES 49 700x
BRT Z18 70/75 Put Spread x78.80 TRADES 97 300x 18d
BRT Z18 80/85 1×2 Call Spread TRADES 56 325x
BRT Z19 65 Put x75.25 TRADES 388 100x 21d
WTI H19 50 Put x69.35 TRADES 23 1,000x 3d
WTI F/G19 70 Call Roll x70.15/69.80 TRADES 99 200x 57d/57d
WTI V18 75 Call TRADES 22 600x
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U.S. Throttles Iranian Oil Flows to Buyers Who Vowed Resistance
The world’s top oil buyers are discovering that U.S. sanctions on Iran will squeeze their trade flows whether they agree with America or not. It was only about three months ago that India’s foreign minister said that the country won’t adhere to unilateral restrictions and will continue buying Iranian crude. China also made similar comments and was said to have rejected an American request to cut imports. Japan and South Korea have held talks with the U.S. aimed at securing exemptions. Yet for all the pushback and negotiations, an emerging pattern shows U.S. sanctions are succeeding in throttling Iran’s sales to its customers even before the measures take effect in early November. While America initially wanted a complete halt in purchases, traders are now concerned that even a revised aim for only cuts would take out enough supply to create a market deficit — which other producers may struggle to fill. “All of Iran’s oil customers are affected by increasing U.S. pressure to halt purchases, even as they request for concessions to cope with the consequences,” said Den Syahril, a senior analyst at industry consultant FGE. “We expect India and especially China to maintain some degree of imports, while buyers in Japan and Korea who’ve cut imports considerably will continue to aggressively seek waivers up till the last minute.” Since the comments about opposing U.S. sanctions, India’s imports from Iran have tumbled and it’s said to be mulling a 50 percent cut in purchases. Latest data show flows to China, the top crude buyer, have also shrunk and the Asian country’s own tankers have stopped hauling supply from the Islamic Republic. Cargoes to South Korea plunged over 40 percent in July, while Japanese firms have said September-loading shipments may be their last. After continuing imports, albeit at reduced levels, the buyers must now contend with the ever-closer Nov. 4 deadline, when the U.S. will reimpose sanctions targeting Iran’s crude industry. Countries that deal with the Middle East producer after that will risk being cut off from the American financial system, unless they receive a waiver. While a cargo would need to load only in mid-October to arrive in North Asia the following month, its purchase will have to be decided in September. With the U.S. not yet saying whether it’s granting any nation an exemption, all shipments from Iran to its leading customers may be in peril starting this month. Even if the waivers are provided, they will be based on the promise of keeping flows limited. FGE estimates Iran’s exports will slump to below 1 million barrels a day by mid-2019, while industry consultant Energy Aspects Ltd. expects a plunge of 1.5 to 1.7 million in daily shipments by the end of this year from current levels of about 2.5 million. With concerns growing that global spare capacity will be stretched if other producers such as Saudi Arabia pump more to make up for the loss, the oil market is revealing risks of a crunch. Near-term futures for Brent crude, the benchmark for more than half the world’s oil, are trading higher than later contracts in a market structure known as backwardation that typically signals a supply squeeze. Front-month prices have soared almost 50 percent over the past year. “There’s been a significant bump in the prompt oil contract that’s contributed to the backwardation, and this bullishness is backed by factors such as U.S. sanctions on Iran,” said Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore. The market will look to other producers such as Russia to fill the void, even as Nigeria’s oil minister remains confident of OPEC’s ability to pump more, said the Singapore-based analyst. Apart from refiners, shipowners whose vessels help ferry the Middle East nation’s supply, insurers who cover those cargoes as well as banks that help process payments for the crude are at risk from the sanctions, further complicating any trade with Iran. Indian Oil Corp., the nation’s biggest refiner, doesn’t have clarity on purchasing Iranian oil for October due to payment issues, and will wait for direction from the country’s government, a company official said last month. Japan’s Fuji Oil Co. has effectively stopped buying crude from the Persian Gulf state because it’s becoming difficult to secure a ship to transport oil, according to a company spokesman.
Libya Leads OPEC Oil Output to 2018 High Despite Iran Losses
OPEC crude production rose in August to the highest level this year as a recovery in Libyan output helped to offset a cut in Iranian exports due to U.S. sanctions. The group’s 15 members, which now include the Republic of Congo, collectively produced 32.74 million barrels a day last month, an increase of 420,000 barrels a day from July, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. The Organization of Petroleum Exporting Countries and its allies agreed in June to increase combined output by 1 million barrels a day to meet consumer demand and prevent a sharp rise in prices. That followed U.S. President Donald Trump urging the group to act in order to prevent further rises. Libya was the biggest contributor to the rise in output across the group, pumping 970,000 barrels a day last month compared to 660,000 barrels a day in July. The country’s biggest oil field, Sharara, has restarted following a kidnapping, a person familiar with the situation said on Sunday. Even though Libya’s recovery boosts OPEC’s combined oil output, the country remains an unreliable supplier as civil strife continues to disrupt its petroleum industry. The second-largest production increase came from Iraq and the United Arab Emirates: each raised daily oil output by 80,000 barrels last month. Iran suffered the biggest output drop across the group, of 240,000 barrels a day, pushing its production down to 3.5 million barrels a day. Even though sanctions don’t officially take effect until November, Iran is already seeing customers flee as the U.S. imposes penalties on buyers after Trump quit a 2015 nuclear accord with the country. Top exporter Saudi Arabia increased its production by 20,000 barrels a day in August from a revised level of 10.37 million barrels a day a month earlier. The country had indicated it would make a much larger output boost in July, but held back after it wasn’t able to find enough buyers to justify pumping crude at record levels. Russia, which is cooperating with OPEC along with several other non-members, kept pumping at near post-Soviet records last month as it reaped the benefits from the June deal to ease output caps. The country produced an average of 11.21 million barrels a day of crude in August, according to data emailed Sunday by the Russian Energy Ministry’s CDU-TEK unit. Volumes were little changed from July, when output soared to just shy of a peak in 2016.
Rouhani: Iran to Exert `Every Effort’ to Pump, Export Oil
Iran is facing economic war and oil, gas and petrochemicals are at the frontline of that conflict, President Hassan Rouhani says on state TV.
* Iran to make “every effort” to continue to produce and export oil, though there may be some “ups and downs”
* Works underway, should be completed by end of current Rouhani administration term to export bulk of Iranian oil from Jask port on the Gulf of Oman instead of Kharg on Persian Gulf; plan “strategically very important”
Middle East Crude-Benchmarks mixed ahead of Saudi OSPs – Reuters News
Middle East crude benchmarks were mixed on Tuesday with DME Oman’s premium to Dubai swaps extending gains while cash Dubai edged lower. Peak fuel demand in the northern hemisphere during winter and impending sanctions on Iran that could reduce oil supply are factors that are supporting the market, traders said. A wider Brent-Dubai price spread is also expected to reduce arbitrage flows from the Atlantic Basin to Asia while traders eyed supplies from the United States.
Saudi Aramco and ADNOC are expected to announce official selling prices soon. Saudi Aramco may keep prices for the light crude grades it sells to Asia largely unchanged i