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Refined Products

Recap: Oil futures fell on Thursday after reaching their highest level in six weeks. Trading was choppy as traders grappled with a global supply glut amidst concern about next week’s meeting between top producers from inside and outside of OPEC. Despite trading above $50 a barrel for the first time since June 7, Brent slipped, settling at $49.30 a barrel, down 40 cents, or 0.8%. The expiring August WTI fell 33 cents, or 0.7%, to settle at $46.79 a barrel.

The last EIA report showed sharp declines in both gasoline and distillates inventories.  However, the data wasn't free of bearish news.  With production at a 2-year high of 9.4 million barrels per day, we could see supplies ramp up rather quickly once summer demand wanes. Also, gasoline supplied to the market, a representation of demand, fell by 194k barrels per day over the week to 9.6M bpd. Gasoline stocks held on the East Coast currently sit at 64,800, higher than the 61,819 5-year average.  

Fundamental News:  The EIA reported that Saudi Arabia’s shipments of crude to the US fell to a seven year low last week, a trend likely to continue through the summer amid OPEC’s output cuts and the country’s seasonal increase in domestic consumption.  The US imported 524,000 bpd of Saudi crude in the seven days ending July 14th, just 36,000 barrels above a record low set in June 2010.

Colonial Pipeline Co said Line 1 is currently down for repair work.  It is projected to restart late Thursday or early Friday morning.  It said that based on current nomination levels, it expects to remain on its normal, 5-day schedule. 

Kinder Morgan Canada Ltd’s Trans Mountain pipeline expansion will undergo some maintenance this year, which is expected to begin in September.  Most of the work on the expansion this year will be in preparation for major construction in 2018.  It expects the Trans Mountain Pipeline expansion, which is expected to triple the pipeline’s capacity, to be in service by the end of 2019. 

Nigerian exports of Bonny Light and Forcados crude are each expected to fall in September from the previous month.  Bonny Light loadings are scheduled at just 129,000 bpd on five cargoes, down from a planned 226,000 bpd on seven cargoes in August.  Forcados exports are expected to fall to 249,000 bpd, down from 284,000 bpd in August. 

Gasoline stocks held in independent storage at the Amsterdam-Rotterdam-Antwerp terminal in the week ending July 20th increased by 1.38% on the week but fell by 40.32% on the year to 808,000 tons.  Gasoil stocks fell by 2.95% on the week and by 16.27% on the year to 2.831 million tons while fuel oil stocks increased by 31.76% on the week and by 26.84% on the year to 1.087 million tons. 

Iraq’s Oil Minister, Jabbar Al-Luiabi, said the country is proceeding with plans to increase its production to 5 million bpd by the end of the year, including the Kurdistan region.

Pemex said Tesoro Corp could begin transporting gasoline and diesel through the pipeline network owned by Pemex in September.  On Tuesday, Tesoro signed three year contracts with Pemex to use surplus capacity on Pemex pipelines and storage facilities in the northern border of Baja California and Sonora. 

Mexico’s oil regulator, the National Hydrocarbons Commission, set January 31st as the date for the next round of auctions for deep-water oil and gas tenders in the Gulf of Mexico. 

One of the two force majeure on Congo’s flagship export grade Djeno has been lifted.  There were two force majeures issued, one due to the strike was lifted while the other is still in place. 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $46.56, down 36 cents

RBOB - Aug $1.5799, down 2.63 cents

HO -Aug $1.5278, down 1.59 cents

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Natural Gas

Thursday, July 20th, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.071, slightly above Wednesday’s closing price of $3.067.  Prices rose steadily through the morning to plateau at $3.114 soon after the weekly storage report was released. A sharp dip then brought the contract down to $3.051 by 11:30AM. Prices rallied for the next hour before tumbling downward to mark the intraday low of $3.017 around 2:40PM.  August closed lower on Thursday at $3.043.

The EIA Natural Gas Storage Report published on Thursday showed a 28 BCF injection to storage for the week ended July 14th – below the market estimate of 32 BCF. Total working gas in storage was reported as 2,973 BCF; 9.1% below this time last year and 5% above the five-year average

This morning in Globex, WTI Crude was down 38 cents; Natural Gas was down one cent; Heating Oil was down two cents; and, Gasoline was down two cents.

New York basis values were lower for the remaining summer months and unchanged for the coming winter season, whereas New England basis values were lower for all seasons.  Additionally, cash prices were lower in both regions.