Solid global crude demand growth versus declining/flattening non-OPEC supply

Global demand growth 2015-2017 (quarterly) Non-OPEC supply growth (incl. OPEC NGLs) 2015-2017:

Healthy demand growth in 2016 and 2017 led by emerging markets (China, India, and other emerging Asia).

Also some moderate growth in the US, Gasoline demand growth continues to be stronger than distillate demand growth.  

Non-OPEC supply growth (incl. OPEC NGLs): 1.6 Mb/d 2015, -0.7

Non-OPEC supply growth (incl. OPEC NGLs): 1.6 Mb/d 2015, -0.7 Mb/d 2016, 0.2 Mb/d 2017

The US remains the key driver for non-OPEC supply

OPEC crude supply growth: 1.1 Mb/d 2015, 0.8 Mb/d 2016, 0.45 Mb/d 2017  2015 growth was driven by Saudi Arabia and Iraq   

2016 growth has been driven by post-sanctions Iran.

Iran recovered faster than expected. From 2.9 Mb/d in Dec to 3.6 Mb/d in May-Aug  

A potential OPEC/non-OPEC freeze would have little to no impact on the supply.

Any price impact would come only from sentiment.

Iraq, Iran, and Russia are maxed out or close to it.

Saudi output has increased seasonally, but we expect it to go down starting in Sept.

On balance, we are sceptical that a freeze agreement will be reached. However, a compromise between Saudi Arabia and Iran is possible. They are the two key countries.

WTI crude prices U.S. crude was up 75 cents, or 1.64%, at $46.35.

Yesterday, the official Energy Information Administration (EIA) figure evidences a draw of 6.2 million barrels in U.S. crude stocks in the latest week. The EIA was forecast to report a build-up of 3.4 million barrels. Investors are still weighing up the prospects of an agreement to curb output.

Our call options in the option straddles strategy have been performing effectively to mitigate the upside risks of this commodity price.