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Refined Products

Recap: The day’s trading range in crude oil was established in less than two hours, with the bulk of the trading taking place within a 20 cent range. Early losses gave way to mid-session gains, as prices garnered support from the outage of the Forties crude pipeline in the North Sea. January option expiration in WTI pushed January futures above $57 in pre-settlement trading. As of the close yesterday, the January $57 call had 9,828 contracts of open interest, while the $57 puts had 7,685 contracts, nothing too alarming in either one. January WTI settled at $57.04 a barrel, up 44 cents, or 0.78%, while Brent for February delivery finished at up 87 cents, or 1.3%, at $63.31 a barrel. This put the February spread between the two blends at -$6.23, a widening of WTI’s discount to Brent at 38 cents. January RBOB rose 1.5% to $1.671 a gallon, while January heating oil rose 0.3% to $1.91 a gallon.

Fundamental News:  Deliveries of crude and natural gas through the Forties pipeline are still under force majeure and operator, INEOS, said there currently is no timeline for repair work that is expected to last several weeks.  The pipeline has been closed since Monday, following the discovery of a small crack in part of the system onshore in Scotland.  It's the first declaration of force majeure on shipments of a North Sea crude in many years. 

The IEA stated that the global oil market will likely show a surplus in the first half of 2018, as rising US supply offsets OPEC’s production cuts.  It said that in the first half of the year, the surplus could be 200,000 bpd before reverting to a deficit of about 200,000 bpd in the second half, leaving 2018 as a whole showing a closely balanced market.  The IEA said US crude output next year would increase by 870,000 bpd, up from its November forecast of 790,000 bpd.  The IEA left its forecast for global oil demand growth unchanged for 2017 at 1.5 million bpd and for 2018 at 1.3 million bpd.  Production from non-OPEC producers is expected to have risen by 600,000 bpd this year, before increasing by 1.6 million bpd next year.  The IEA also stated that OECD commercial stocks fell by 40.3 million barrels in October to 2.94 billion barrels, the lowest since July 2015 and 111 million barrels above the five-year average.  The IEA estimates that the average call on OPEC crude in 2018 will be 32.5 million bpd, up 100,000 bpd on the year. 

Kuwait’s Oil Minister, Bakheet al-Rashidi, said it was too early to talk about a strategy to exit the current OPEC and non-OPEC supply cutting pact.  The developments of market fundamentals will continue to be closely monitored by the Joint Ministerial Monitoring Committee to ensure that the target of rebalancing the market and restoring its stability is achieved. 

Macquarie raised oil price estimates for Brent in 2018 by 13% to $55.70/barrel and by 2% to $54/barrel in 2019.  It raised its WTI forecast by $4 to $50.46/barrel for 2018 and by 25 cents to $49/barrel in 2019. 

US lawmakers from states that produce corn for ethanol plants said they would consider proposals from Senator Ted Cruz of Texas to help the oil refining industry cope with the country’s biofuels regulation, but would never agree to anything that would diminish the program. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp hub in the week ending December 14th fell by 1.27% on the week and by 12.45% on the year to 858,000 tons.  Gasoil stocks fell by 6.08% on the week and by 25.23% on the year to 1.917 million tons while fuel oil stocks fell by 1.02% on the week but increased by 49.62% on the year to 1.17 million tons. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $57.43, up 39 cents

RBOB - Jan $1.6816, up 1.09 cents

HO - Jan $1.9265, up 1.67 cents

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Natural Gas

Thursday, December 14th saw the front-month NYMEX Natural Gas Futures Contracts open at $2.681, three cents below Wednesday’s closing price of $2.715.  With sights set to recover any ground lost overnight, the contract rose to the $2.70 mark by 9:30AM, even as bullish expectations for this week’s storage report pale in comparison to last year’s withdrawal of 147 BCF.  Launching from $2.680 an hour later as the storage publication was released, a momentary climb to the intraday high of $2.710 quickly collapsed.  Finding the intraday low of $2.643 thirty minutes later, January managed to step gradually upward into the afternoon before closing ultimately lower on Thursday at $2.684.

The EIA Natural Gas Storage Report published on Thursday showed a 69 BCF withdrawal from storage for the week ended December 8th – above the market estimate of 67 BCF.  Total working gas in storage was reported as 3,626 BCF; 5.3% below this time last year and 0.7% below the five-year average.

This morning in Globex, WTI Crude was up 24 cents; Natural Gas was up three cents; Heating Oil was up one cent; and, Gasoline was up one cent.  

Natural Gas Glossary

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