Recap: Oil prices fell by 4% on Friday, posting their first weekly loss in 5 weeks. Traders were focused on Tropical Storm Nate, and its potential of reaching the Gulf of Mexico. After a mixed trading session, November WTI slipped $1.50, or 2.95%, to settle at $49.29 a barrel, while December Brent settled at $55.62 a barrel, down $1.38, or 2.42%.
The possibility of Tropical Storm Nate affecting refinery operations in the Gulf of Mexico is seen as impacting refinery capacity, while at the same time backing up crude oil stockpiles. This should give rise to product prices, while pressuring crude oil.
Although post Hurricane Harvey refinery operations have returned to near normal conditions, it appears that U.S. refiners are grappling with strong demand for distillates. For the week ending September 30th, total distillate stocks fell 2.6 million barrels to 135.4 million barrels. This is 25 million barrels below the level at the start of 2017, and 4% below the 5-year average.
Fundamental News: Oil and gas producers were preparing for the second storm in as many months to impact the US Gulf Coast as Tropical Storm Nate threatened to develop into a hurricane. The tropical storm is expected to strike the US Gulf Coast by early Sunday. ConocoPhillips began evacuating non-essential personnel from its Magnolia oil platform in the central Gulf of Mexico, joining six other producers that have withdrawn workers or cut production. The US Department of the Interior’s Bureau of Safety and Environmental Enforcement said about 1.24 million bpd or 71% of US Gulf of Mexico oil production is offline ahead of Tropical Storm Nate.
Oil Movements reported that OPEC shipments are expected to fall by 150,000 bpd to 21.71 million bpd in the four week period ending October 21st, compared with the previous four week period ending September 23rd. Middle East shipments, including from non-OPEC countries Oman and Yemen, are expected to fall by 150,000 bpd to 17.06 million bpd.
Baker Hughes reported that the worldwide rig count for September was 2,081, down 35 from 2,116 in August. The US rig count for September was 940, down 7 from 947 in August. Baker Hughes reported that the number of rigs searching for oil in the week ending October 6th fell by 2 to 748.
The Kremlin said that Russian President, Vladimir Putin, did not propose extending the OPEC and non-OPEC output cut deal but said he recognized it was a possibility.
BMI Research raised its 2018 Brent crude price forecast to $57/barrel from a previous estimate of $55/barrel, as a deficit is expected to emerge. It also raised its 2020 outlook to $73/barrel from a previous forecast of $70/barrel.
According to Morningstar, US Gulf Coast crude storage capacity will increase by 56 million barrels in 2018 and beyond amid record US oil exports.
Energy Aspects reported that global crude stocks are forecast to fall by 100,000 bpd in 2018. It said strong demand and a more muted supply response from US shale will ensure stock builds will be limited.
Bloomberg reported that global refinery outages reached 4.56 million bpd in the week ending October 5th, down from 4.85 million bpd in the previous week.
IIR reported that US oil refiners are estimated to have shut in 1.342 million bpd of capacity in the week ending October 6th, increasing available refining capacity by 508,000 bpd from the previous week.
Early Market Call - as of 9:00 AM EDT
WTI - Nov $49.68, up 39 cents
RBOB - Nov $1.5524, down 68 points
HO -Nov $1.7388, down 50 point
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