Latin America Oil Production – Another Thorn in OPEC

US equities continue to power higher on the perception that there is just nowhere else to put your money. As the FT puts it Tina (There is No Alternative) is back.

Fed Chairman Powell today stated that the US economy is stronger than they expected, although inflation is still above the target rate.

“The U.S. economy is in very good shape and there’s no reason for that not to continue …the downside risks appear to be less in the labor market, growth is definitely stronger than we thought, and inflation has come in a little higher. So the good news is that we can afford to be a little more cautious as we try to find neutral.”

Expectations are still lean towards another 25bps rate cut later this month.

Alt take: The US has never been so overhyped, relative to the rest of the world​

~Doug​

What’s in this issue:

• Energy Market Recap
• Latin America Oil Production – Another Thorn in OPEC
• Headlines

Energy MarketsOil prices fell by 2% but found some support after the EIA reported a larger than expected draw in inventories.​ “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.1 million barrels from the previous week. At 423.4 million barrels, U.S. crude oil inventories are about 5% below the five year average for this time of year.”​ Notably, the Gulf Coast region showed a draw of 5.0 million barrels while all other districts showed small changes.​ SpreadsJan/Feb: +.35​ Whale Trade​ A large block traded today ahead of OPEC’s upcoming announcement. It’s hard to say for sure the nature of the trade, whether a large hedge or taking/unwinding of a position.​But, as noted in Reuters:​ “The bank sold 4,000 lots of U.S. West Texas Intermediate crude oil futures in a single block at $69.21 a barrel around 1 p.m. EST (1800 GMT), the person said. The buyer then sold the contracts immediately afterwards, putting pressure on prices, they added.”​ Natural gas prices ended unchanged after two attempts to push prices below $3 failed to gain any momentum. $2.98 looks to be the support number to watch in the near term.​ EIA inventory data, the first in two weeks, is due out tomorrow and the WSJ states expectations of a draw of 48 bcf last week. However, the flip-flopping weather narrative has left this a bit up in the air.

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Latin America – The Other Thorn in OPEC’s SideIt’s not just US shale production that is a thorn in the side of OPEC as they look to do the impossible – keep prices high without losing market share.​Latin America also continues to grab headlines. Guyana has been in the news ever since the discovery of the massive offshore Stabroek block. Production from the tiny nation has now reached 645,000 bpd.​ +Guyana becomes key contributor to global crude oil supply growth – EIA​ Argentina wants in on the party as well. Oil production in the Vaca Muerta shale region has hit 400,000 bpd, a 35% increase from last year and 400% rise from 2020.​Source: Rystad Energy ​All of this is confounding OPEC+ efforts to tighten the belt and reign in quota busters. As Jorge León, a Rystad Energy analyst said to the WSJ:​ “It’s really easy to be part of a cartel when a market is growing. Nobody wants to be in a cartel where they are cutting production.”