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Market Intel Archives

Oil futures rose on an expected bullish EIA inventory report

June 28, 2017

Recap:  Oil futures rose on Tuesday, as traders covered shorts ahead of what is expected to be a bullish inventory report by the EIA. Mixed estimates are calling for a draw of between 2.6 and 3.25 million barrels in U.S. crude oil inventories. This, combined with sentiment that this market may have found a near-term bottom pushed August Brent above $47 a barrel and August WTI above $44 a barrel. Gains were pared, with Brent settling at $46.67 a barrel, up 84 cents, or 1.8% and WTI gaining 89 cents, or 2.1%, to settle at $44.27 a barrel.

July gasoline added 2.1 cents, or 1.5%, to $1.460 a gallon and July heating oil rose 3.4 cents, or 2.4%, to $1.414 a gallon.

Fundamental News:  Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 700,000 barrels to 60.4 million barrels in the week ending June 23rd. 

OPEC delegates stated that OPEC will not rush into making a further cut in oil output or end some countries’ exemptions to output limits.  An OPEC delegate said a larger cut could be an option, adding that further steps could be to place limits on further growth in Nigerian and Libyan output, rather than requiring them to cut back their supply.  Another source stated that removing more crude from the market was an option but said it was not being actively considered. 

Libya’s oil production increased to 935,000 bpd, up from 885,000 bpd last week.  The country is targeting a production level of 1 million bpd by the end of July.  A source stated that Libya’s NOC is repairing several pipelines that connect fields and the Es Sider and Zueitina export terminals. 

Russneft’s Chief Executive Officer, Yevgeny Tolochyok, said it will cut its oil output by about 200,000 tons this year under Russia’s deal with OPEC.  Mikhail Gutseriyev, a co-owner of Russneft, said the company would be able to restore its oil production very quickly after the OPEC and non-OPEC output cut agreement ends. 

Russia’s Rosneft said its servers had been hit by a large-scale cyber-attack but added that its oil production was unaffected. 

The head of Vitol, Ian Taylor, said Brent prices will remain in a range of $40-$55/barrel for the next few quarters. 

US Energy Secretary, Rick Perry, said the US has a unique opportunity to develop a North American energy strategy with Canada and Mexico.  

Based on US Customs data compiled by Bloomberg, the US imported 595,800 bpd of gasoline and gasoline blendstock, excluding naphtha and natural gasoline in the week ending June 22nd.  This is compared with 909,000 bpd in the previous week.   

IHS data reported that crude and refined product shipments from the US Gulf fell to 3.82 million metric tons on 92 ships in the week ending June 22nd.  It is down 12% from the previous week’s 4.32 million metric tons on 102 ships. 

According to Bloomberg, preliminary US waterborne crude imports increased by 102,000 barrels to 4.5 million bpd in the week ending June 22nd.  West Coast imports fell by 75,300 bpd to 757,700 bpd while East Coast and Gulf Coast imports increased by 136,000 bpd and 41,100 bpd, respectively.  Total crude and product imports increased by 8,600 bpd to 6 million bpd.   


Early Market Call - as of 9:00 AM EDT

WTI - Aug $44.11, down 12 cents

RBOB - July $1.4518, down 83 points

HO - July $1.4111, down 27 points


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Oil prices posted modest gains for second straight session

June 27, 2017

Recap:  After trading on both sides of unchanged on Monday, oil prices posted modest gains for the second straight session. Trading was quiet. August Brent settled at $45.83 a barrel, up 29 cents, or 0.64%, while August WTI finished up 37 cents, or 0.86%, to settle at $43.38 a barrel.

Focus once again will be on this week’s U.S. inventory numbers, with analysts estimating a 2.3 million barrel decline in crude oil stocks due to last week’s tropical storm in the Gulf of Mexico. The halt in production was temporary and U.S. producers have returned to production. This, combined with production increases from Libya and Nigeria are making it difficult for OPEC to prop up prices. However, if OPEC had not voted to decrease output, we might have been looking at even lower prices.

July gasoline rose half a cent to $1.439 a gallon, while July heating oil added less than a penny to settle at $1.380 a gallon.

Fundamental NewsIran’s Oil Minister, Bijan Zanganeh, said the country’s crude oil production surpassed 3.8 million bpd and added that Iran expects output to reach 4 million bpd by March 2018.

Libya’s Laheeb field resumed production after eight months.  The country’s production is now running at 950,000 bpd. 

Brazil’s increasing oil production combined with declining domestic demand has increased the country’s exports, undermining OPEC’s efforts to reverse falling prices through output cuts.  Brazil produced a record 1.5 million bpd earlier this year, 26% more than the previous record set in 2010.  Average exports increased by 39% in the first four months of 2017 from the previous year.

VLCC and Suezmax spot chartering in the Middle East increased last week to the highest level since early March.  According to Morgan Stanley, Mideast tanker charters have cast doubt on OPEC cuts.  Charters increased by 5 million bpd to 10.9 million bpd in the week ending June 23rd, up 85% week on week, with the four-week average levels also showing a gain. 

According to Bloomberg, more than nine million barrels of Brent, Forties, Oseberg and Ekofisk crude have accumulated in tankers in the North Sea.  Two VLCCs and nine Aframaxes have been floating off the coast of the UK for as long as three months. 

Mexico’s Pemex is looking for an extra 3.5 million barrels of gasoline to make up for the shut down of its Salina Cruz refinery due to a fire and flooding on June 15th.  Salina Cruz produced between 20-30% of total Pemex gasoline production over the past year. 

Colonial Pipeline Co. said shipping nominations on its main distillate pipeline have fallen below capacity.  It said it will not be calling allocation on Cycle 38 for Line 2, which runs from Houston, Texas to Greensboro, North Carolina. Colonial Pipeline Co said shipping demand on its main distillate line fell below capacity for the first time in nearly six years as the East Coast remained awash in fuel. 

Enterprise Products Partners LP said its Seaway crude pipeline resumed service on Sunday morning following a shutdown due to a leak last week.  The company reported a pipeline incident in Jones Creek, Texas through the National Response Center on Thursday.

IIR reported that US oil refiners are expected to shut in 75,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 93,000 bpd from the previous week. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $43.89, upo 51 cents

RBOB - July $1.4600 , up 2.13 cents

HO - July $1.4011, up 2.07 cents


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Oil futures fell for fifth straight week as U.S. production continues to grow

June 26, 2017

Recap:  Despite the second week of declines in U.S. production, oil futures fell for the fifth straight week as the global oversupply persists and U.S. production continues to grow. This is the longest streak of weekly losses since August of 2015, when prices fell for eight straight weeks.  Although prices fell on the week, Friday’s trading posted slight gains, lifted by weakness in the dollar.  August WTI settled at $43.01 a barrel, up 27 cents, or 0.63%. Brent for August delivery tacked on 32 cents, or 0.71%, to settle at $45.54 a barrel.

July RBOB finished nearly flat at $1.434 a gallon, for a weekly loss of 1.4%, while July heating oil finished unchanged at $1.372 a gallon, with a decline of 3.9% on the week.

Fundamental NewsBaker Hughes reported that US energy firms added oil rigs for a record 23rd consecutive week.  Drillers added 11 oil rigs in the week ending June 23rd, bringing the total count up to 758, the most since April 2015.  That is more than double a year ago at this time when there were only 330 active oil rigs.

Oil Movements reported that OPEC’s oil shipments are expected to fall by 300,000 bpd to 24.11 million bpd in the four weeks ending July 8th compared with the four weeks ending June 10th.

RBC Capital Markets stated that the sudden increase in floating crude storage, despite being uneconomical at present, suggests traders expect oil prices to rally. 

According to Jeffries, as US oil output outpaces domestic refinery demand, US exports must increase by about 760,000 bpd annually through 2021 to about 3.1 million bpd for the market to rebalance. 

As the global oil market worries about an oversupply, declining demand growth in key Asian crude markets is further hampering efforts to restore market balance.  A fuel oversupply in China, a recent demonization in India that has impacted consumption, as well as an ageing and declining population in Japan are holding back crude oil demand growth in three of the world’s top four oil buyers.  The three countries make up 97 million bpd in global oil demand and any fall in demand among those countries will mean lower than expected oil demand growth in Asia, helping to undercut the OPEC-led effort to support prices.  In the latest indicator of a supply overhang, traders said that five very large crude carriers have been chartered in recent days to store unsold oil.  Each VLCC can hold about 2 million barrels of oil, and the five charted for storage add to about 25 supertankers already sitting in southern Malaysian waters. 

Platts reported that the amount of BFOE crude being stored on stationary tankers around the North Sea continues to increase.  S&P Global Platts trade flow software cFlow reported that there were about 9.7 million barrels of BFOE crude engaged in floating storage operations.  It is up from a previous estimate of 8.5 million barrels. 

IIR reported that US oil refiners are estimated to shut in 168,000 bpd of capacity in the week ending June 23rd, increasing available refining capacity by 26,000 bpd from the previous week.  IIR expects offline capacity to fall to 75,000 bpd in the week ending June 30th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $43.21,up 20 cents

RBOB - July $1.4358,, up 14 points

HO - July $1.3790, up 77 points


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Oil rig and platform closures due to Tropical Storm Cindy propped up oil prices

June 23, 2017

Recap:  Oil prices bounced on Thursday, after recent price declines had caused many technical indicators to reach oversold levels. This combined with oil rig and platform closures in the Gulf of Mexico, due to Tropical Storm Cindy, propped up prices. Oil prices have fallen over 16% since the end of May, as  production continues to rise  out of the U.S., and Nigeria and Libya counteracts OPEC and some non-OPEC output cuts.

Both WTI and Brent fell 0.64% on the day before rebounding, and settling into a sideways pattern during the AM session.  News reports of Saudi Arabia wanting to see $60 oil pushed prices out of this pattern to achieve new highs on the day. August Brent peaked at $45.79 a barrel before paring gains for a settlement of $45.22 a barrel, up 40 cents, or 0.89%, while August WTI tacked on 21 cents, or 0.49%, to settle at $42.74 a barrel.

July RBOB gained 2.4 cents, or 1.7%, to $1.435 a gallon, while July heating oil added under a cent, or 0.5%, to $1.372 a gallon.

Fundamental News Talks this week between OPEC and non-OPEC producers focused on how to deal with rising Libyan and Nigerian crude output, rather than deepening output cuts by other members.  Delegates said there was no serious discussion of making further production cuts at a meeting of the Joint Technical Committee, comprised of representatives from Algeria, Kuwait, Saudi Arabia, Venezuela, Russia and Oman.  Libya is producing the most since 2013, with output currently above 900,000 bpd.  The country was producing just 580,000 bpd in November, when OPEC agreed on its cuts.  In Nigeria, the Forcados export terminal restarted after a 15-month halt caused by sabotage and is scheduled to ship about 250,000 bpd this month.

Kuwait’s Oil Minister, Essam al-Marzouq, said he was optimistic that oil markets will gradually return to balance supported by the record compliance with the OPEC and non-OPEC output cut agreement.  He confirmed earlier reports suggesting that compliance with the output cut agreement was running at 106%. 

The US National Hurricane Center said Tropical Storm Cindy moved inland near the Louisiana-Texas border and weakened into a tropical depression later on Thursday morning.  The Louisiana Offshore Oil Port suspended vessel offloadings but expected no interruptions to deliveries from its hub in Clovelly, Louisiana.  Offloading operations are expected to resume on Friday evening.  Energy companies with operations in the Gulf of Mexico reported little impact on production.  Shell suspended some well operations and Anadarko Petroleum and Enbridge said they had evacuated non-essential personnel.   The US Bureau of Safety and Environmental Enforcement stated that energy companies had shut about 16% of US Gulf of Mexico oil output as of midday Thursday, representing 288,186 bpd of the region’s production.  A total of 39 or about 5% of platforms in the Gulf of Mexico were evacuated.     

Colonial Pipeline Co is allocating space for Cycle 37 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee.  Colonial Pipeline also stated that shipping nominations on its gasoline line had declined below capacity for the first time in nearly six years, driving Gulf Coast cash gasoline prices lower.  Colonial will not allocate space on Cycle 37 shipments on Line 1.

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending June 22nd fell by 2.36% on the week and by 14.72% on the year to 869,000 tons.  Gasoil stocks increased by 2.65% on the week but fell by 6.79% on the year to 2.867 million tons. 

Genscape reported that crude oil stocks in the Amsterdam-Rotterdam-Antwerp hub increased 3% to 64.2 million barrels in the week ending June 16th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $42.84, up 10 cents

RBOB - July $1.4384, up 46 points

HO - July $1.3682, down 35 points


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Oil prices fell to near 10-month lows after release of EIA report indicated continued increases in U.S. production

June 22, 2017

Recap: Trading in oil futures was extremely choppy on Wednesday, with prices coming under pressure in overnight trading, only to be driven higher after the release of the EIA report. Holding on to gains proved difficult, with prices falling to near 10-month lows on continued increases in U.S. production. August WTI fell as much as 3.3%, to a low of $42.05 before paring losses for a settlement at $42.53 a barrel, down 98 cents, or 2.25%. Brent for August delivery fell $1.20, or 2.61%, to settle at $44.82 a barrel.      

Brent’s premium over WTI continues to erode, falling 34 cents, to $2.29, from its June peak of $2.63.

July RBOB fell 1.4 cents, or 1%, to $1.411 a gallon, while July heating oil settled $1.365 a gallon, down 3 cents, or 2.2%.

Fundamental News Oil refining and production facilities and communities on the US Gulf Coast were bracing for potential disruptions as Tropical Storm Cindy strengthened of the US Gulf of Mexico.  On the forecast track, the center of Cindy will approach the coast of southwest Louisiana and southeast Texas late Wednesday, and move inland over southeastern Texas on Thursday.  Royal Dutch Shell suspended some offshore well operations but production was so far unaffected.  Anadarko Petroleum evacuated non-essential staff from its Gulf of Mexico facilities.  Exxon Mobil Corp, Phillips 66 and Motiva Enterprises said the storm had not affected their refining operations.  The Bureau of Safety and Environmental Enforcement reported that personnel have been evacuated from a total of 40 production platforms, 5.43% of the 737 manned platforms in the Gulf of Mexico.  It is estimated that 17.24% of the current oil production in the Gulf of Mexico has been shut in or 301,618 bpd.  It also estimated that 0.32% of natural gas production in the Gulf of Mexico was shut in or 10,089 mmcf/d.     

Iran’s Oil Minister, Bijan Zanganeh, said that OPEC members are considering further oil output cuts but should wait until the effect of the current cuts is made clear.  He  said OPEC members are in talks to prepare for a new decision.  He also said the reason for the discussions is an increase in the levels of US production which OPEC members had not predicted.

Lukoil’s chief executive, Vagit Alekperov, said the current decline in world oil prices is of speculative nature. 

Genscape reported that crude inventories in the ARA region increased by 2.05 million barrels in the week ending June 16th to 64.16 million barrels. 

Energy Aspects reported that OPEC’s failure to help the oil market rebalance ensures diesel supplies will be unchecked heading into summer.  It said barring major action by OPEC to tighten up crude markets, refining margins are likely to remain strong enough to ensure high refinery runs worldwide for the next few months.

IIR reported that US oil refiners are expected to shut in 266,000 bpd of capacity in the week ending June 23rd, cutting available refining capacity by 72,000 bpd from the previous week.  IIR expects offline capacity to fall to 122,000 bpd in the week ending June 30th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug  $42.72, up 18 cents

RBOB - July $1.4272, up 1.73 cents

HO - July $1.3718, up 71 points


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Oversupply concerns continued to impact the oil market on Tuesday

June 21, 2017

Recap:  On Tuesday, the oil market sold off sharply as oversupply concerns continued to impact prices.  The July crude contract, on its last trading session as the spot contract, posted a high of $44.40 overnight before it tumbled and extended its losses to $1.45 as it posted a low of $45.42 by mid-morning.  The market later retraced some of its losses during the remainder of the session and settled down 97 cents at $43.23.  It is interesting to note that since June 1st of last year, there were 266 trading days and there were only 21 of those days when the market settled at $43.50 or lower.  The August crude contract settled down 92 cents at $43.51 while the August Brent contract settled down 89 cents at $46.02.  Meanwhile, the product markets also settled in negative territory, with the heating oil market settling down 2.66 cents at $1.4240 and the RBOB market settling down 2.66 cents at $1.4240.

Fundamental News:  According to Bloomberg, crude stocks held in Cushing, Oklahoma are expected to fall by 850,000 barrels to 61.35 million barrels in the week ending June 16th.

Louisiana Offshore Oil Port LLC said it suspended vessel offloading operations at its marine terminal ahead of Tropical Storm Cindy, which formed in the Gulf of Mexico and threatened to hit refining and production centers.   Meanwhile, Exxon Mobil Corp, Phillips 66 and Motiva Enterprises have stated that the potential storm has not yet impacted operations at its facilities.  Royal Dutch Shell said some offshore well operations had been suspended but production was currently unaffected.  According to the National Hurricane Center, it is expected to approach the coast of southwest Louisiana late Wednesday or Wednesday night and move inland over western Louisiana and eastern Texas on Thursday.   

OPEC and non-OPEC oil producers’ compliance with a deal to cut output has reached its highest in May since they agreed on the cuts last year, reaching 106% in May.  OPEC compliance with the output cuts in May was 108%, while non-OPEC compliance was 100%. 

Russia’s Energy Minister, Alexander Novak, said there are no plans for Russia to have an extraordinary meeting with OPEC and US shale producers.  He also said he did not believe that a monitoring committee meeting of OPEC and non-OPEC producers scheduled to take place next month in Russia could be expanded into a broader meeting between producers. 

Rystad Energy stated that Saudi Arabia increased its recoverable oil resources by 73 billion barrels this year after lower tax rates for Saudi Aramco increased the country’s estimated prospective resources.  The new recoverable contingent resources took Saudi Arabia’s total recoverable oil resources to 276 billion barrels.  In the US, recoverable oil resources increased 13 billion barrels with unconventional shale making up over 50% of the country’s total oil resources, estimated at 263 billion barrels.  Globally, the world’s total recoverable oil resources have increased 29 billion barrels since 2016 to 2.2 trillion barrels. 

Libya’s National Oil Corp said production at Libya’s Sharara oil field has recovered to 270,000 bpd, the same level as before it was shut last month. 

According to data from cFlow, S&P Global Platts trade flow software, expected arrivals of distillates into Europe and the Mediterranean basin in June from the US Gulf Coast are around 1.45 million metric tons. 

IHS reported that crude and refined product shipments from the US Gulf increased to 4.32 million metric tons on 102 ships in the week ending June 15th.  It is up 3.1% from the previous week’s 4.19 million metric tons on 100 ships. 


Early Market Call - as of 9:00 AM EDT

WTI - July $43.62, up 11 cents

RBOB - July $1.4286, up 45 points

HO - July $1.4006, up 52 points


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Increased production in Libya and Nigeria continues to erase market gains

June 20, 2017

Recap:  At the onset of trading, oil futures climbed higher on follow through buying from Friday. August WTI reached a high of $45.28, up 31 cents, or 0.6%, while its European counterpart rose 39 cents, or 0.8%, to a high of $47.76. However, the ever increasing number of active US oil rigs, combined with increasing Libyan and Nigerian production is making it difficult for this market to hold onto to gains. Prices came under pressure, falling below unchanged, where they remained for the remainder of the session. August WTI settled at $44.43, down 54 cents, or 0.95%. Brent for August delivery fell 46 cents, or 0.97%, to settle at $46.91.

Brent’s premium over WTI rose to its widest in more than 3 weeks on Monday. This spread hit a low of -$2.50, its lowest level since May 26.

July RBOB fell 0.42 cent, or 0.3%, to $14506 a gallon, while July heating oil declined 1.59 cents, or 1.1%, to $1.411 a gallon.

Fundamental News Saudi Arabia’s Energy Minister, Khalid al-Falih, said the oil market is heading in the right direction but still needs time to rebalance.  He said the oil market is expected to balance in the fourth quarter even as output from Libya and Nigeria as well as from shale oil producers is increasing.  He said there was a relatively large draw of around 50 million barrels from floating storage and a decline in industrialized nations’ onshore storage of 65 million barrels compared to July last year.

According to Bloomberg Intelligence, most OPEC countries are failing to comply with the Saudi Arabia-led push to cut output and cut the world’s oversupply.  Saudi Arabia produced 9.94 million bpd in May, 178,000 bpd below the mandated level.  However, this was not enough to offset a cumulative 397,000 bpd surplus from Venezuela, Iraq and the UAE.   

According to the Joint Organizations Data Initiative, Saudi Arabia’s oil exports fell by 226,000 bpd to 7.006 million bpd in April from 7.232 million bpd in March.    Saudi Arabia produced 9.946 million bpd in April, up from 9.9 million bpd in March.  Saudi Arabia’s crude inventories fell by 3.927 million barrels to 263.927 million barrels in April from 267.854 million barrels in March.  Saudi’s local refineries processed 2.651 million bpd in April, up from 2.261 million bpd in March.  It also reported that Iraq’s oil exports fell to 3.75 million bpd in April, down from 3.78 million bpd the previous month. 

Kazakhstan agreed to the extension of OPEC-led oil production cuts, even as it ramps up its long-delayed Kashagan field, because it’s counting on the deal to increase oil prices. 

Libya is producing the most oil in four years after a deal with Wintershall enabled at least two fields to resume production, adding to the challenge that OPEC and allied producers face in trying to pare global crude inventories.  Libya’s oil production has increased by over 50,000 bpd to 885,000 bpd.   

Angola is scheduled to export 52 cargoes or 1.61 million bpd of crude in August.  It is up from 1.55 million bpd in 50 cargoes scheduled for July.

The EIA reported that US refiners imported 62.6 million barrels of crude from Venezuela in the first quarter.   

Morgan Stanley analysts stated that OPEC will need to continue its current supply quota for all of 2018 to prevent any inventory increase unless rig counts decline substantially.


Early Market Call - as of 9:00 AM EDT

WTI - July $43.12 down $1.00

RBOB - July $1.4268, down 2.36 cents

HO - July $1.3938, down 1.74 cents


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Oil prices continued to fall for the fourth straight week

June 19, 2017

Recap:  Oil prices recouped some of this week’s losses on Friday after hitting six-month lows on Thursday. However, this was not enough to stem prices from falling for the fourth straight week. July WTI gained 28 cents, or 0.63%, to settle at $44.74 a barrel, a fresh seven-month low, while Brent for August delivery settled at $47.37 a barrel, up 45 cents, or 0.96%.

July RBOB rose 1.9 cents, or 1.3%, at $1.455 a gallon—though finishing down about 3.1% on the week, and July heating added 1.2 cents, or 0.9%, to $1.427 a gallon, paring its weekly loss to about 0.3%.

Fundamental News:  Baker Hughes reported that oil companies added oil rigs for a record 22nd week in a row.  Drillers added six oil rigs in the week ending June 16th, bringing the total count up to 747, the most since April 2015.  This is compared with 337 rigs in the same week a year ago. 

Oil Movements reported that OPEC shipments are set to increase by 270,000 bpd to 24.39 million bpd in the four weeks ending July 1st compared with the four week period ending June 3rd.

Russia’s oil production in June stood at 10.94 million bpd, which was in line with the OPEC/non-OPEC output cut agreement. 

Kazakhstan’s Energy Minister, Kanat Bozumbayev, will comply with the global oil output reduction deal in June and July after overproducing for three consecutive months.  

Libya’s National Oil Co said the country’s oil output is expected to reach 900,000 bpd in two days.  The country’s oil production will then reach 1 million bpd by the end of July, the first time it has reached that milestone since 2013. 

According to Bloomberg, waterborne crude imports to the US East Coast reached their highest level since at least 2013 in May.  The bills of lading show that Padd 1 imports increased to nearly 1.05 million bpd.  This increase is likely to further erode demand for domestic grades such as Bakken and WTI.

Diesel exports from the US to Europe are expected to see a sharp increase in June to levels not seen in nearly two years, as refineries on the Gulf Coast pump at near record levels.  A stream of tankers is set to cross the Atlantic from US’ refining hubs in Texas and Louisiana in June, carrying more than 2 million tons of diesel, the highest level since July 2015.   

Tanker firm, Frontline, expects an increasing number of supertankers to be used for storing crude in anticipation of higher oil prices. 

IIR reported that US oil refiners are estimated to shut in 194,000 bpd of capacity in the week ending June 16th, increasing available refining capacity by 259,000 bpd from the previous week.  IIR expects offline capacity to increase to 339,000 bpd in the week ending June 23rd but fall to 90,000 bpd in the following week. 

Early Market Call - as of 9:00 AM EDT

WTI - July $44.90, up 15 cents

RBOB - July $1.4645, up 97 points

HO - July $1.4342, up 72 points


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Oil futures hit six week low weighed down by persistent global supply overhangs

June 16, 2017

Recap:  Oil futures fell to a six week low on Thursday, weighed down by persistent global supply overhangs despite OPEC efforts to remove the overage. July WTI fell 41 cents to a low of $44.32 a barrel, while August Brent hit a low of $46.70 a barrel, down 30 cents. July WTI remained below $45 a barrel, putting the 16,274 puts into play, while settling just below $44.50, which held an open interest of 5,595 in puts, exercising those as well. July WTI settled at $44.46 a barrel, down 27 cents, or 0.60%. August Brent fell 8 cents, or 0.17%, to settle at $46.92 a barrel.

The discount in long dated spreads for both WTI and Brent continues to widen, with Dec17/Dec18 WTI widening to as much as -$1.82, its lowest level since Nov. 14. Dec17/Dec18 Brent slipped to -$2.12, its lowest level since Nov. 15. The widening of these spreads indicates that traders believe a rebalancing of this market may be slower than originally thought. 

July RBOB fell less than half a cent, to settle at $1.436 a gallon, while July heating oil settled at $1.415 a gallon.

Fundamental News Saudi Arabia’s crude exports are expected to fall below 7 million bpd this summer.  Exports in May averaged below 7 million bpd and early indications suggest that remains the case for this month.  Lower exports could help reduce high inventories in the US.  Overall, Saudi Arabia’s exports are set to be lower than last year, when the kingdom shipped about 7.4 million bpd on average from May to August.

PIRA Energy stated that OPEC and non-OPEC producers should have deepened its production cuts in May.  PIRA’s Gary Ross said OPEC should have agreed to cut an additional 1 million bpd for 90 days when they last met to create oil-price backwardation. 

Libya’s National Oil Corp in Benghazi has ordered a halt to exports arranged by Glencore from the port of Hariga, although oil officials said the terminal was working normally.  The NOC in Benghazi, which has repeatedly tried and failed to impose control over oil exports from the NOC in Tripoli, published the order late on Wednesday.  However, a spokesman from Arabian Gulf Oil Co, which operates exports of Messla and Sarir crude from Hariga, said it had not received the instruction. 

Saudi Arabia and the UAE are expected to announce what they want Qatar to do in return for ending their isolation of the country.  The proposals, which may come in the next two days, would make it easier to end the dispute.

Some US shale producers claim they can produce oil profitably with prices well below $50/barrel or even $45/barrel.  Baker Hughes reported shale firms have hired an extra 425 rigs to drill for oil since the end of May 2016, more than doubling the active rig count.  Producers have continued adding rigs even though benchmark oil prices have fallen almost $10/barrel since the middle of February and are now almost $4/barrel below year ago levels.  The EIA forecast that onshore production from the Lower 48 states will grow by 340,000 bpd in 2017 and another 500,000 bpd in 2018.  As a result, US shale producers together with other non-OPEC suppliers are expected to capture all of the increase in the global oil demand in 2018 and raise their share of the market significantly at the expense of OPEC. 

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp hub in the week ending June 15th fell by 0.22% on the week and by 14.67% on the year to 890,000 tons, while gasoil stocks increased by 3.56% on the week but fell by 11.36% on the year to 2.793 million tons. 


Early Market Call - as of 9:00 AM EDT

WTI - July $44.80, up 34 cents

RBOB - July $1.4543, up 1.87 cents

HO - July $1.4312, up 1.63 cents


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Oil market sold off sharply following the release of the EIA's weekly inventory report

June 15, 2017

Recap: The oil market opened lower and rallied to a high of $46.49 ahead of the release of the EIA’s weekly inventory report.  However, the market sold off sharply following the report, which showed a smaller than expected decline in oil stocks of 1.661 million barrels, compared with expectations of a 2 million barrel draw.  The report failed to convince the market that the oversupply is easing.  The market tumbled to a low of $44.54, the lowest level since May 5th.  The crude market later bounced off its low and settled in a sideways trading pattern ahead of the close.  The July WTI settled down $1.73 at $44.73 while the August Brent contract settled down $1.72 at $47.00.  Meanwhile, the product markets also sold off sharply, with the heating oil market settling down 3.75 cents at $1.4102 and the RBOB market settling down 6.68 cents at $1.4327.  The markets were pressured in light of the EIA reporting a larger than expected build in distillate stocks of 328,000 barrels and an unexpected build of 2.096 million barrels in gasoline stocks. 

Fundamental News:  The EIA reported that US Midwest refinery utilization increased to 98.7% in the week ending June 9th, a record high for June.  It also reported that crude exports increased to 722,000 bpd on the week from 557,000 bpd a week earlier.  US crude production increased to 9.33 million bpd, up 12,000 bpd on the week.

The IEA stated in its monthly report that growth in oil supply next year is expected to outpace an anticipated increase in demand that will push global consumption above 100 million bpd for the first time.  The IEA said non-OPEC production is expected to increase by 700,000 bpd this year and by 1.5 million bpd in 2018.  OECD oil inventories in April increased by 18.6 million barrels to 3.045 billion barrels, due to higher refinery output and imports.  The IEA said stocks were 292 million barrels above the five year average.  It stated that production cuts by OPEC and non-OPEC producers are failing to cut global oil inventories, with stockpiles increasing by more than the seasonal norm in April.  Global crude demand is expected to increase by 1.4 million bpd in 2018 compared with 1.3 million bpd in 2017.  Crude demand is expected to average a record 99.27 million bpd in 2018 compared with 97.84 million bpd in 2017.  The IEA reported that new oil supplies from non-OPEC producers will be more than enough to meet growth in demand next year.  It said the US, Brazil, Canada and other producers outside OPEC will increase its output next year by the most in four years.  The IEA also reported that OPEC crude production increased by 290,000 bpd in May to 32.08 million bpd.  Global oil supply increased by 585,000 bpd in May to 96.69 million bpd.      

Saudi Aramco’s major buyers in Asia are receiving full allocations for Saudi crude oil loading in July, with some Japanese refiners receiving higher volumes. 

Vessel-tracking and port data showed that for the first five months of 2017, OPEC exported 25.6 million bpd.  In May, OPEC shipments totaled 25.6 million bpd, up from April’s 25.02 million bpd. 

Nigeria’s crude exports are set to reach 1.84 million bpd in July, slightly higher on the month, due to a recovery in Forcados exports. 

Several tankers have been booked over the past day to ship diesel from the US Gulf Coast to Europe and the Mediterranean as demand from Latin America fell in recent weeks and US refineries operate at near record levels.  Imports from the US were expected to reach 1.9 million tons in June, significantly higher than in previous months. 

IIR reported that US oil refiners are expected to shut in 126,000 bpd of capacity in the week ending June 16th, increasing available refining capacity by 327,000 bpd from the previous week.  IIR expects offline capacity to increase to 253,000 bpd in the week ending June 23rd. 


Early Market Call - as of 9:00 AM EDT

WTI - July  $44.49, down 25 cents 

RBOB - July $1.4221, down 1.05 cents 

HO - July $1.4078, down 26 points


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