No One Is Abandoning Asia as Crude Rushes to Market

In one of our articles in the previous edition of The Five Star Standard,  we noted that North Sea crude was rushing to fill demand created by Asia’s oil refiners.  Crude exports to Asia from the North Sea are poised to reach a record 12 million barrels in January according to Bloomberg.

Apparently, those crazy Europeans are not the only ones trying to cash in on the Asian Market. According to an article published by Reuters, 3 major oil companies and trading houses are set to ship large volumes of U.S. crude oil to Asia in the coming weeks.  Traders have estimated that some 700,000 to 900,000 barrels per day is set to leave the United States in February, with the majority of the cargoes headed to Asia.That volume would be the highest monthly level on record, according to the U.S. Energy Information Administration, helping reduce a U.S. inventory glut that has continued to pressure prices.  The U.S. crude cargoes are bound for China, Japan, and Singapore.  

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The Week In Numbers for the Week 02-10-2017


In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

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Ty’s Take 2-10-17

Well, the good news seems to keep coming in. And we remain cautiously optimistic, but more optimistic than we have been. For Five Star, January was still well below our average, but a significant improvement year of year and month over month. February seems to be trending even better. So while we are not where we need to be, we are certainly on an uptrend. And we hope that continues.

This week there is a lot to talk about. First and foremost, is the earnings that we reported. More than ever, I am going to encourage all of our readers, particularly those of you responsible in any capacity for planning for your business, to at least skim the earnings report we provided this week (FMC, NOV and Oceaneering to follow in our next edition). The CEOs of these big companies are much smarter than me, and I think their guidance is very telling. From reading all of the transcripts from the earnings calls, I discerned a few key patterns where all of the CEOs seem to be in agreement.

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Ty’s Take for 01-27-17

This week I’m traveling so please do not expect long prose or an overly complicated analysis. I will save that for two weeks from now, once I have had an opportunity to review all of the major OEMs and Big Oil’s final 2016 reports. And while I have been monitoring some of the news surrounding the release of these reports, I have not personally dove into them in detail or read the transcripts from the various CEOs earnings calls.

Things are rocking along. Almost all of our customers are reporting significant increases in activity. And what we have noticed at FSM is that we are not only seeing an increase in the number of quotes and order conversion, we are also seeing bigger and bigger orders – an indication that for the first time in a long time people may be ordering for stock. Steel pricing has stabilized and is increasing as input costs are increasing (scrap, Nat Gas, and various alloying elements). Mills are starting to build backlog again (we are ordering now for May delivery). Major OEMs are reporting service price increasing. And at least for us, for the first time in over two years, we are developing holes in our inventory that we cannot fix in the short-term as we can’t find the material (on one order for a good customer, we had to call 10 different places to source it, and ended up having to source out of state). In short, we appear to be entering recovery.

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Trump Helps Out Steelworkers?

President Trump announced on Tuesday, January 24, 2017, that he had signed Executive Orders designed to promote construction of the Keystone XL and Dakota Access pipelines which were long blocked by the Obama Administration. According to Mr. Trump, construction of the pipeline could mean 28,000 jobs.

The Keystone XL pipeline would carry oil from the tar sands area of Canada into the United States. As mentioned in the last edition of the Five Star Standard, this could be beneficial to WTI pricing as condensate is needed to refine those dirty crude products and thereby increases demand for light, sweet crude.

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BP Revises 2035 Energy Projections

Each year, our friends at BP release a new energy outlook for the coming years. This energy outlook, which was released on January 25, 2017, is very well respected. At the very least, it gives us insight into how one of the largest oil companies in the world is thinking, and therefore, what they are planning for in the near and long term.

This year, the Energy Outlook largely corresponds to the predictions by the EIA in its updated outlook that we wrote about in the last edition of The Five Star Standard. And while I wish I could tell you that I was planning for 2035 when little Ty takes over Five Star (or little Tiffany depending on God’s plan), I am not that astute of a businessman – but it is something I keep in the back of my mind (as an aside – we will know if my lovely fiancé Gabi reads this as I will get a pretty quick text telling me we are not naming our children, should we be lucky enough to have them Little Ty and Tiffany – LOL).

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Where Would Various States Rank in OPEC?

Markets are abuzz with speculation as to what will happen should OPEC cut production as they promise. Obviously, the big issues are how much of a dent it will make in inventories, will OPEC adhere to its promises, and will non-OPEC countries who agreed to help actually cut production as promised?

But one thing I was a bit curious about is where the U.S., and various states would rank if they suddenly joined OPEC. I am not saying this is even feasible, but I wanted to compare U.S. oil production to OPEC members so that we would have an understanding of just how large the role the U.S. as the new swing producer, plays in oil markets. The most recent data we have from OPEC is from their December monthly report which has production numbers from November 2016,. Since the cuts are not anticipated to take place until this month, this will allow us a bit of an unfettered look at OPEC’s production. A few caveats. First, as I mentioned in a prior article, OPEC doesn’t trust itself, and therefore publishes two different numbers. One is their self-reported number, and the second is derived from secondary sources. Those numbers do differ. For our purposes, I’m just going to use the secondary source numbers. Second, many OPEC members still claim that they are not producing at full capacity. Despite these persistent claims, I firmly believe most OPEC producers are producing at maximum capacity without further CAPEX – something current oil prices keep them from doing. So needless to say, there is some debate about whether how much more OPEC could actually produce given economic constraints.

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Do Conflict Mineral Regulations Work?

Its that time of year again – when my inbox begins filling with emails from Schlumberger, GE, and many others asking me to fill out their conflict minerals forms certifying that our material is free of conflict minerals. To be candid, these forms and requests usually end up being put aside or finding their way to the bottom of my to-do list as everything else takes precedent. Until I get the follow-up email, and then I feel guilty for having completely forgotten about them.  

The last time I filled them out, I pondered what a great cottage industry had been created by these U.S. regulations. And I wondered to myself, as I started getting the requests in this year, does this do anything?

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OPEC and Friends Are Complying?!?1?

Well folks, less than a month into the OPEC / non-OPEC production cuts and we already have good news: various oil ministers are reporting that 1.5 million barrels per day have been taken out of the market place already of the total 1.8 mpd planned.

Russian oil Minister Alexander Novak stated that he anticipates a total of 1.7 million bpd could leave the supply side by the end of the month.

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The Week In Numbers for the Week Ending 01-13-2017

In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

Since we have not sent the Newsletter in about a month, I will give you the prior numbers from the last Newsletter followed by current:

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