For most of the last 2-weeks it has been to products that oil has looked for its forward leanings, but the overnight remarkable draws in the API data sees crude take over the bull baton and give the market another spurring on. Crude inventory drew 15.4 million barrels against a call of -1.4; Gasoline -1.7 against -1.3; Distillate -0.5 against +0.1 and stockpiles at the main crude hub of Cushing -1.8 million barrels. The Cushing decrease is in line with predictions from those such as Tank Watch and we await this afternoon’s EIA/DOE data to confirm APIs and if there is any Pad discrepancy. Confirmation would see the largest draw for some 40 years.

Although rather a sullen day yesterday, due mainly to Monday’s complex expiry hangover, the market was rarely troubled by bad news or increased selling. Continued bullish copy came from OPEC as the cartel showed a decline in production of some 900,000 barrels per day according to a Bloomberg survey with the majority of it unsurprisingly coming from Saudi. With Nigeria experiencing a downturn in production after the leak at Forcados and continued issues with Angolan production, African members continue to help Saudi’s cause even if only by misfortune. But it will be to the US inventory that eyes will fall upon today and with the Platts window seeing renewed interest in the buying of Midland grade, there will be many making a case for a tighter US crude market let alone the product one.

As encouraging as this all seems to bulls, it is peculiar how the wider suite never quite comes into synchronisation. Even with the US Treasury calling the decision ‘arbitrary’, Fitch, the US ratings agency, downgraded the United States to AA+ from AAA citing fiscal deterioration over the next 3-years (Reuters) and referred back to the issues of the debt ceiling drama and the possibility of it being repeated in the future. There might also be hiccups to any risk asset investment as we await important US employment data today in ADP Employment change, tomorrow in jobless claims and Friday’s Non-Farm payrolls.

Oil is still in the thrall of diminishing stock levels but with even the US showing a poor ISM Manufacturing PMI along with European and global peers, scaling new heights from here will continue to feel the burden of wider economic troubles despite rallies in stock markets.

GMT +1	Country	Today’s data	Expectation
12.00	US	MBA 30-Year Mortgage Rate	6.87% Prev
13.15	US	ADP Employment Change (Jul)	189k

 

Will you plug in?

A barrel of oil equivalent (BOE) is a measure used by industry and scientists alike when approximating the amount of energy contained in a barrel of oil. It is often used when oil companies are trying to compare oil with say, its natural gas reserves and is arguably even more useful for investors when attempting a like-for-like study of such reserves between an oil only company and a gas only one. Allowing for variations due to varying oil densities 1 BOE is equivalent to 5.8 million Btu or 1700 kWh.

Using such a measure is difficult when trying to assess the amount of BOE used by individual cars around the world due to the nature of the varying driving habits and size of vehicles. Conformity of standard is also troublesome as car mileage differs globally. Approximately, in the United States, drivers average 14 thousand miles per year, whereas in Europe the spread is quite wide, but with Greece and Italy being low users and Ireland and Finland high, an assumptive average of 8 thousand miles per year would not be too outlandish. Using the US mileage for convenience and that cars achieve 30 miles per gallon in similar mathematical tolerance, allows an estimation that 11 BOE per car (WEF has the same figure) is used each year in the US becoming obviously lower across countries with smaller cars, less mileage and different driving habits.

The World Economic Forum has global car sales for 2017 at 85.09 million units and of them in that year, 1.21 million were Electric Vehicles. Spin forward to 2022, which was a poor year for car sales, total global units sold were 63.2 million but impressively 10.6 millions of those were EVs. When broken down further, sales reveal 1 in every 4 cars sold in China; 1 in every 5 in Europe; and 1 in every 10 in the US were EVs. Therefore, with a 60% increase and for the first time achieving over 10 million sales, EVs in 2022 accounted for 1 in every 7 passenger cars purchased globally. 

An interim report by the International Energy Agency has first quarter sales estimated at 2.3 million, which is still rather impressive in a world outside of the United States that has not enjoyed economic growth particularly in EVs’ biggest fan base, China. One can only imagine what would happen to the US’s BOE if a similar yearning for non-fuel cars took hold. Gasoline based vehicles are part of the American psyche whereas China’s experience of cars is much more contemporary and welcoming of new technology. That does not mean things cannot change. Based on current trends according to the IEA, the rollout of EVs will globally reduce vehicle consumption of oil by 5 million barrels per day by 2030. Unlikely as it is, but a worthy muse is to imagine what that figure might be if the US became fully committed to conversion.

Breaking down BOE loss specifically to the rise in the sales of EVs at present is art rather than science. The vagaries run deep; what type of vehicle, who is driving them and in what country are but a few. 5 million barrels per day in lost BOE by 2030 is hardly the stuff to have refiners reaching for their crackulators, petrochemicals will fill any motor fuel hole when economies eventually buck up, but it is not to be sniffed at either. Gasoline and products in general have been dominating our market moves and narrative of late, which might just nudge those new car buyers, receptive to alternative overtures, into taking an electric leap. Posterity will afford us better data to analyse this and it will be a subject of study to return to again and again. Electric vehicles in a form of onomatopoeia are silently creeping up on us and while we can probably ignore the clamour that we will all be driving one soon, such new technologies will be part of our ever-evolving market.

Overnight Pricing

john.evans@pvm.co.uk