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Market Intel Archives

Oil prices settled up on the expiration of the September options contract

August 18, 2017

Recap: On Thursday, WTI bounced around unchanged in a narrow range on what was expiration of the September options contract. After bouncing off of the 50-day moving average, this spot contract rebounded, slowly creeping above the $47 dollar mark, faltering momentarily before regaining ground. September WTI settled at $47.09 a barrel up 31 cents, or 0.66%.  Brent for October delivery tacked on 76 cents, or 1.51%, to settle at $51.03 a barrel.

September RBOB gained 2.3 cents, or 1.5%, to $1.587 a gallon, while September heating oil rose less than a penny to $1.582 a gallon.

Fundamental NewsGenscape reported that crude stocks held in Cushing, Oklahoma fell by more than 1 million barrels in the week ending Tuesday, August 15th.

Saudi Arabia shipped the least oil in almost three years in June, just as domestic stockpiles are declining.  According to the Joint Organizations Data Initiative, Saudi Arabia’s exports fell to 6.9 million bpd, the lowest since September 2014, from 6.92 million bpd in May.  Saudi Arabia produced 10.07 million bpd in June, up 190,000 bpd from May.  The country’s domestic stockpiles stood at 256.6 million barrels, the lowest since January 2012.    

Europe is set to take a record of more than 2 million tons of US diesel in August after several refinery issues pulled in cargoes that have for months been diverted elsewhere.  Refinery fires and falling stocks have made Europe a target destination for US exports. 

Nigeria’s exports of Forcados crude is expected to increase to about 256,000 bpd in October on 9 cargoes, up from 8 cargoes with a total of 249,000 bpd initially planned for September.  Nigeria's exports of Bonny Light crude in October is set at about 139,000 bpd on 5 cargoes. 

The EPA reported that US generation of renewable fuel blending credits increased in July to 1.27 billion, compared with 1.26 billion in June.  It also reported that the US generated 372 million biodiesel blending credits in July, down from 401 million in June. 

Colonial Pipeline Co is allocating space for Cycle 48 shipments on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina.

Citigroup said oil prices will struggle to rise above $60/barrel during the next five years because of supplies from both OPEC and US shale producers.  It estimated that oil will trade at $40 to $60/barrel through to 2022, lowering its previous forecast of a ceiling at $65/barrel.  It, however stated, that although prices will likely trade mainly within a range, they will still show some volatility.  Crude prices could increase to $70/barrel or fall to towards $30/barrel. 

Standard Chartered said Texas-focused companies accounted for 77% of all new 2018 hedges in the second quarter.  It stated that 47% of all incremental 2018 hedging was carried out by Permian producers, with a further 30% by Eagle Ford producers.   

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp hub in the week ending August 17th increased by 0.22% on the week but fell by 10.02% on the year to 898,000 tons.  Gasoil stocks increased by 10.91% on the week but fell by 9.33% on the year to 2.897 million tons while its fuel oil stocks increased by 6.01% on the week and by 0.12% on the year to 847,000 tons. 


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $47.24, up 15 cents

RBOB - Sep $1.5991, up 1.2 cents

HO -Sep $1.5851, up 33 points


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Oil futures fell despite EIA report which indicated decline in US crude oil inventories

August 17, 2017

Recap: Oil futures fell on Wednesday despite the EIA report indicating U.S. production rose to its highest level in two years and U.S. crude oil inventories drew 8.9 million barrels for the week ending Aug. 11th, the seventh straight week of declines. Unexpected increases in both gasoline and distillate inventories outweighed the significant draw in crude oil stockpiles, which then put pressure on the entire complex. September WTI fell 77 cents, or 1.62%, to settle at $46.78 a barrel, while Brent for October delivery fell 53 cents, or 1.04%, settling at $50.27 a barrel.

Fundamental News: Libya’s Sharara oil field is operating normally and the situation at the field is stable following security breaches last week.  Meanwhile, the Zueitina port is again allowing tankers to load.  A statement from the National Oil Corp gave no details on output from the field, which had been producing up to 280,000 bpd.  An engineer working at the oil field said the breaches had hampered operations, causing a decline in production of at least 130,000 bpd.

Ecuador’s Oil Minister, Carlos Perez, said the country will cap output at a more comfortable level than it had initially pledged.  He said the country will limit its production at its current 541,000 bpd to avoid undermining the group’s output cut agreement.  While that level breaches the 26,000 bpd cut to 522,000 bpd that Ecuador had committed to, it’s less than the country’s potential. 

Oil exports from Iraq’s southern terminals have declined so far this month, suggesting the country is trying to increase its compliance with OPEC output cuts.  Exports from southern Iraq in the first 14 days of August averaged 3.15 million bpd, down 80,000 bpd from July.  If sustained, this would mean exports are down for a second month, giving weight to Iraq’s insistence it is complying with OPEC’s cuts.  Iraq said it exported 3.23 million bpd in July and 3.25 million bpd in June. 

Iraq has formed a joint venture with a shipping company owned by Arab states to transfer, store and trade crude and oil products.  The venture, Al-Iraqia Shipping Services and Oil Trading will handle a range of activities from trading of petroleum products, ship chartering, oil terminals, various marine services and bunkering.   

Angola’s crude oil exports in October are expected to reach a 13 month high of 1.7 million bpd.  The planned exports include 55 cargoes, up from 50 in September. 

Crude storage in the Amsterdam-Rotterdam-Antwerp region fell by 1.6 million barrels to 57.31 million barrels in the week ending August 11th.

China National Petroleum Corp forecast that the country’s energy consumption will peak at 4.06 billion tons of oil equivalent by 2040.  It forecast oil demand in China will reach a ceiling at 690 million tons a year by 2030, compared with last year’s estimate of a peak of 670 million tons a year by 2027. 

IIR reported that US oil refiners are expected to shut in 174,000 bpd of capacity in the week ending August 18th, increasing available refining capacity by 62,000 bpd from the previous week. 


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $46.52, down 25 cents

RBOB - Sep $1.5396, down 2.43 cents

HO -Sep $1.5520, down 2.25 cents


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Oil prices traded in a narrow range as traders wait for release of U.S. inventory numbers

August 16, 2017

Recap:  Market activity was tempered on Tuesday, with prices trading in a narrow range, as traders await U.S. inventory numbers. Strength in the dollar and less than stellar demand out of China worked to keep prices contained within the unchanged area. September WTI fell 4 cents, or 0.08%, to settle at $47.55 a barrel. October Brent squeezed out a 7 cent gain, settling at $50.80 a barrel.

September RBOB gained less than a half cent to $1.580 a gallon, while September heating fell under a penny, or 0.4%, to $1.600 a gallon.

Fundamental News Bloomberg estimated that crude stocks in Cushing, Oklahoma are estimated to have increased by 700,000 barrels to 57.1 million barrels in the week ending August 11th.

Production at Libya’s Sharara oilfield fell to between 130,000 and 150,000 bpd, from about 280,000 bpd due to recent security breaches.  Workers had difficulty accessing some of the field’s facilities after cars and mobile phones were stolen. 

Iran’s President, Hassan Rouhani, said the country could abandon its nuclear agreement with world powers within hours if the US imposes any more new sanctions.  Iran said the new sanctions that the US imposed on Iran breached the agreement it reached in 2015 with the US, Russia, China and three European powers in which it agreed to cut its nuclear work in return for the lifting of most sanctions. 

According to ship-tracking data, observed crude shipments from Iran increased to 1.9 million bpd in the first two weeks of August.  This is up 10,000 bpd from a revised 1.89 million bpd in the first half of July, as flows to European countries increased to their highest level since sanctions on Iran were eased in January 2016. 

Bloomberg reported that preliminary US waterborne crude imports fell by 81,800 bpd to 4.25 million bpd in the week ending August 10th.  The East Coast saw a decline of 330,400 barrels to 711,100 bpd, while the Gulf Coast and West Coast saw imports increase by 239,100 barrels and 9,400 barrels, respectively.  Total crude and product imports fell by 856,200 bpd to 5.9 million bpd. 

Genscape reported that monthly average crude-by-rail loadings in North Dakota is set to be at the lowest level in more than 6 years in August.  As of August 14th, the monthly average was 113,000 bpd for the 13 monitored terminals in the state.

Wood Mackenzie said US gasoline demand is peaking but electric vehicles will play a small role in a near-term demand shift.  It said the near-term demand slowdown is related to fuel efficiency, an ageing workforce and other factors.   

Asia is expected to be the largest beneficiary of any potential sanctions by the US on Venezuela’s oil sector, as exports from the South American country could be redirected to the region.  The US is considering sanctions on Venezuela’s oil industry in response to the ruling Socialist Party’s crackdown on officials and parties opposed to the government.  An embargo against Venezuelan crude could block imports of about 740,000 bpd to the US. 


Early Market Call - as of 9:10 AM EDT

WTI - Sep $47.75, up 20 cents

RBOB - Sep $1.5854, up 57 points

HO - Sep $1.6029, up 36 points


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Weak demand in China pushed oil prices to lowest level in 3 weeks

August 15, 2017

Recap: Oil prices fell to their lowest level in 3 weeks, pressured by weak demand in China. The selloff was preceded by modest gains made in early trading, with both blends overshadowing the previous day’s highs. The downturn was steady, and lasted throughout the session. As with the highs of the day, the lows extended beyond that of Friday’s trading. The Chinese news regarding weak demand in the country, followed reports that OPEC production rose in July, raising concern that its efforts to prop up prices is failing. The increase was said to be tied to higher output by Libya, Nigeria and Saudi Arabia, the group’s most outspoken member. Prices slipped by almost 3% before slightly paring losses. September WTI settled at $47.59 a barrel, down $1.23, or 2.52%, while October Brent fell $1.37, or 2.63%, to settle at $50.73 a barrel.

September RBOB fell 3.6 cents, or 2.3%, to $1.577 a gallon, while September heating oil slipped 2.9 cents, or 1.8%, to $1.606 a gallon.

Fundamental News OPEC’s secondary sources data showed that the 12 members bound by the OPEC and non-OPEC output cut agreement produced 30.14 million bpd in July.  OPEC data showed that Saudi Arabia’s compliance was 99% and Iraq’s compliance was 43%. 

Libya’s Sharara field has cut its crude production by more than 30% in recent days and the Zueitina export terminal ceased loadings over the weekend.  Output at the Sharara field was down to 200,000 bpd on August 12th compared with 300,000 bpd at the start of August.  Workers were being kept from certain areas for their own safety after two company vehicles were stolen at gunpoint.  The Zueitina port ceased loading on August 12th after employees demanded better working conditions. 

Ecuador’s crude exports increased in June after the OPEC member announced it will increase output to meet its fiscal needs.  Its exports in June increased by 1% on the month to 380,300 bpd. 

Shell Petroleum Development Company of Nigeria lifted a force majeure declaration on exports of Bonny Light crude on Monday.  It made the declaration in mid-July after the closure of the Nembe Creek Trunk Line.  It extended the declaration to cover the outage of the Trans Niger Pipeline.   

Goldman Sachs reported that US oil production may increase by 950,000 bpd between the fourth quarter of 2016 and fourth quarter of 2017 across Permian, Eagle Ford, Bakken and Niobrara shale plays, assuming the oil rig count remains at current levels. 

Bloomberg reported that total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle in the week ending August 10th increased by 73.2% on the week to 1.12 million bpd. 

Fitch’s BMI Research stated that while the global oil market will continue to firm given improving fundamentals, continued uncertainties are likely to cap price gains. 

IIR reported that US oil refiners expected to shut in 101,000 bpd of capacity in the week ending August 18th, increasing available refining capacity by 121,000 bpd from the previous week.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $47.30, down 29 cents

RBOB - Sep $1.5766, down 1 point

HO -Sep $1.5903, down 1.54 cents


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Oil future fell after IEA reported OPEC's production hit new high for 2017

August 14, 2017

Recap: Oil futures fell for the first time in 3 weeks after the IEA reported that OPEC’s production rose 0.5% in July, reaching a new high for 2017. This put OPEC’s compliance rate to output cuts at 75%, down from 77% in June. Despite the lower weekly settlement, prices squeezed out daily gains after spending most of the session on the downside. September WTI settled at $48.82 a barrel, up 23 cents, or 0.47%, while Brent for October delivery closed up 20 cents, or 0.39%, to settle at $52.10 a barrel.

Fundamental News:  Baker Hughes reported that US energy companies added oil rigs for a second time in the last three weeks.  Drillers added 3 oil rigs in the week ending August 11th, bringing the total count up to 768, the most since April 2015. 

The IEA has reported that OPEC’s compliance with the cuts in July had fallen to 75 percent, the lowest since the cuts began in January. It cited weak compliance by Algeria, Iraq and the United Arab Emirates.  OPEC is cutting its production by about 1.2 million bpd, while Russia and other non-OPEC producers are cutting a further 600,000 bpd until March 2018 to help support oil prices.  As a result, the overall global oil supply increased by 520,000 bpd in July to 500,000 bpd above year-ago levels.  The IEA stated in its monthly report that global oil demand will grow more quickly than expected this year.  It revised its 2017 demand growth forecast to 1.5 million bpd compared with 1.4 million bpd in its previous monthly report.  It kept its forecast for non-OPEC supply growth for 2017 and 2018 largely unchanged, increasing by 700,000 bpd and 1.4 million bpd, respectively.  The IEA said OECD stocks fell in June by 19.3 million barrels to 3.021 billion barrels on strong refinery runs and oil product exports.

Separately, the IEA stated that sanctions , including the banning of U.S. exports of around 100,000 bpd of light crude oil and refined products are being considered by Washington against Venezuela, which could force Venezuela to look toward Nigeria or Algeria for substitute barrels. It could also lead to the erosion of output from the Orinoco Belt, as it would cut a major source of lighter barrels used to dilute the region’s extra heavy crude.  

Khalid al-Falih, the Saudi Energy Minister, has stated that his country is not ruling out another oil production cut, adding that Saudi Arabia will not take any unilateral action. He also said that the possibility of additional cuts is still on the table, and if an extension or change in production levels is needed, they will be considered.

Opponents of the Keystone XL pipeline vowed to block construction of the controversial project if Nebraska regulators approve the proposed route later this year.  On Thursday, the state's regulators ended a final public hearing on TransCanada’s proposed Keystone XL pipeline after four days of exchanges between lawyers.  Nebraska’s Public Service Commission will make its final decision by November 23rd. 

Hundreds of Nigerian protesters stormed a crude oil flow station owned by Shell in the Niger Delta on Friday, demanding jobs and infrastructure development. 

According to data from Research Company IIR, U.S. oil refiners had an estimated 222,000 bpd of capacity offline in the week ending August 1st, reducing capacity by 25,000 bpd from the previous week. The company estimates offline capacity to fall to 14,000 bpd in the week to August 18th.


Early Market Call - as of 9:41 AM EDT

WTI - Sep  $48.96 up 14 cents

RBOB - Sep $1.6091 down 39 points

HO -Sep $1.6428 up 82 points


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WTI continues to fall below $50 level amidst global supply glut

August 11, 2017

Recap: Once again WTI failed at the $50 level, as a falling stock market, amidst a global supply glut, and shook the nerve out of bulls, who have failed for the third time to hold ground above $50 a barrel. Not even geopolitical tensions between North Korea and the U.S. could support this market. After climbing more than 1%, oil prices turned lower, surpassing Wednesday’s low, resulting in an outside trade session. September WTI fell 97 cents, or 1.96%, to settle at $48.59 a barrel, while October Brent slipped 80 cents, or 1.52%, to settle at $51.90 a barrel.

September RBOB fell by 1.7 cents, or 1.1%, to $1.603 a gallon, while September heating oil finished at $1.631 a gallon, down 2.2 cents, or 1.3%.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, August 8th increased by 765,748 barrels on the week and by 612,594 barrels from Friday, August 4th to 59,474,695 barrels. 

In a monthly report, OPEC forecast higher demand for its crude oil in 2018 due to rising global consumption and slower supply growth from rivals.  OPEC said the world needs 32.42 million bpd of its crude next year, up 220,000 bpd from the previous forecast.  However, OPEC said its oil output in July came in above the demand forecast, led by gains in Libya and Nigeria, two members exempt from the OPEC-led cuts.  OPEC's output in July increased by 173,000 bpd to 32.87 million bpd, amounting to 86% compliance with its output cut agreement, down from 96% in June.  It reported that world oil demand growth in 2017 is now expected at 1.37 million bpd, following an upward revision of 100,000 bpd mainly to reflect better than expected data from OECD regions for the second quarter.    

Saudi Arabia told OPEC it produced 10.01 million bpd in July.  Separately, Saudi Arabia’s Energy Minister, Khalid al-Falih, said talks with Iraq’s Oil Minister stressed the need to urge all parties to strengthen their commitment to the supply cut agreement.  Meanwhile, Iraq’s Oil Minister said it is important for Iraq that its pipeline in Saudi Arabia is reopened to export Iraq crude.

According to International Enterprise Singapore, the country’s residual fuels stocks in the week ending August 9th increased by 521,000 barrels to 23.652 million barrels.  Singapore’s light distillates stocks increased by 2.398 million barrels to 15.213 million barrels on the week while its middle distillate stocks fell by 1.201 million barrels to 11.806 million barrels on the week. 

Middle East light crude traded at the highest premiums in more than a year on high demand from Japan.  Japan’s Fuji Oil has purchased four cargoes that will load in October.   

Glencore’s oil trading volumes increased by 39% in the first half after the company bought a stake in Russia’s Rosneft.  Glencore handled about 6.15 million bpd of oil and petroleum products in the first six months of the year, up from about 4.41 million bpd a year earlier. 

Gasoline stocks held at the Amsterdam-Rotterdam-Antwerp refining and storage hub in the week ending August 10th fell by 2.18% on the week and by 18.25% on the year to 896,000 tons.  Gasoil stocks fell by 3.79% on the week and by 18.96% on the year to 2.612 million tons while its fuel oil stocks fell by 19.54% on the week and by 11.91% on the year to 799,000 tons.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $48.29, down 31 cents

RBOB - Sep $1.6041, up 20 points

HO -Sep $1.6246, down 71 points


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Oil prices tacked on gains on tensions of U.S. and North Korea

August 10, 2017

Recap: Oil futures bounced around unchanged in overnight trading, but by daybreak, they were trending toward the session highs. The surprise 3.4 million barrel build in U.S. gasoline stocks reported by the EIA offset the unexpected 6.5 million barrel draw in U.S. crude oil inventories, pushing prices back below unchanged. With tensions between the U.S. and North Korea heating up, prices recouped early losses, tacking on gains as the market reached its settlement phase. October Brent settled at $52.70 a barrel, up 56 cents, or 1.07%. WTI for September delivery gained 39 cents, or 0.79%, settling at $49.56.

September RBOB fell less than 0.1%, to settle at $1.620 a gallon, while September heating oil finished up .0241 cents, or 1.4% to settle at $1.6533 a gallon. 

Fundamental News: Euroilstock reported this morning that European refineries increased their crude oil intake in July to 10.62 million b/d up 2% from June, but down from July 2016 levels. European middle distillate stocks were estimated at 445.05 million barrels, up 0.7% from June and unchanged from a year ago. Gasoline stocks were pegged at 114.41 million barrels, down 1.3% from June and down 3.8% year on year. Total crude and product stocks in Europe were estimated at 1.146 billion barrels, up 0.5% from June and down 1.9% year on year.

IIR estimates that U.S. oil refineries had an estimated 105,000 b/d of refining capacity offline in the week ending August 11th, down from the 197,000 b/d of capacity they estimated was offline in the week ending August 4th.

Pemex reported that its Salina Cruz refinery has more than 90% of its units operating but the refinery is not yet producing finished fuels. The refinery has undergone major maintenance following its mid-June fire and flooding.

Reuters market analyst, John Kemp, noted this week that U.S. shale producers need WTI oil price around $50 per barrel to break even. He based his estimate on analysis of financial statements for the second quarter. Fifteen of the largest shale oil and gas producers reported total net losses of $470 million for the three months between April and June when WTI prices averaged $48.00 per barrel.

The Trump administration on Wednesday imposed sanctions on eight more Venezuelan officials, including the brother of the late socialist leader Hugo Chavez, to punish them for their role in President Maduro’s creation of a new legislative assembly. However, the U.S. stopped short of placing broader financial or “sectoral” sanctions on its vital oil industry. Sanctions on the oil sector reportedly are still being considered. Separately, the main business group in Venezuela said today it expects the county’s economy will contract between 7-10% this year.

Genscape reported that crude oil inventories in the ARA region rose by 4.7% during the week ending August 4th. This was the biggest weekly increase since April 7th according to its data.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $50.11, up 55 cents

RBOB - Sep $1.6433, up 2.34 cents

HO -Sep $1.6732, up 1.96 cents


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Oil futures traded higher on reports that Saudi Arabia may cut its exports to Asia

August 09, 2017

Recap:  Oil futures traded higher in overnight trading, gaining on reports that Saudi Arabia is planning to cut its September exports to Asia. September WTI rose to a high of $49.79 a barrel, while October Brent topped out at $50.24 a barrel. Gains were reversed with oil weakening as the dollar strengthened and as oversupply concerns remain an ever present cloud over the market.

Prices slowly slipped in what was a quietly traded market, with both blends finding their session lows just after daybreak. Prices fell just over 1% before paring losses. September WTI settled at $49.17 a barrel, down 22 cents, or 0.45%, while October Brent fell 23 cents, or 0.44%, to settle at $52.14 a barrel. 

September RBOB fell 0.6%, to settle at $1.6280 a gallon, while September heating oil declined .0106 cents, to settle at $1.6292 a gallon. 

Fundamental News Bloomberg reported that crude stocks held in Cushing, Oklahoma are expected to increase by 200,000 barrels to 56 million barrels in the week ending August 4th.

OPEC and non-OPEC officials held a second day of meetings in Abu Dhabi to discuss ways to increase compliance with their output cut agreement.  A source stated that a panel comprising of  representatives from Russia, Kuwait, Saudi Arabia and officials from OPEC’s Vienna headquarters, has met individually with officials from Iraq, the UAE, Kazakhstan and Malaysia.  They said talks were constructive and fruitful and were aimed at achieving full conformity in the months ahead.  OPEC said UAE, Iraq, Kazakhstan and Malaysia all expressed their full support for the existing monitoring mechanism. 

Saudi Arabia will cut crude oil allocations to its customers worldwide in September by at least 520,000 bpd. 

Iraq’s Oil Minister, Jabar al-Luaibi, departed for Saudi Arabia on Tuesday where he will meet his counterpart, Khalid al-Falih, to discuss oil market developments and OPEC’s efforts to stabilize the market. 

The EIA reported that total world consumption in 2017 is expected to increase by 1.42 million bpd to 98.41 million bpd and increase by 1.61 million bpd to 100.02 million bpd in 2018.  It reported that total world supply in 2017 is expected to increase by 1.27 million bpd to 98.42 million bpd and by 1.79 million bpd to 100.21 million bpd in 2018.  OPEC production is expected to increase by 200,000 bpd to 39.44 million bpd in 2017 and by 670,000 bpd to 40.11 million bpd in 2018.  US oil demand in 2017 is forecast to increase by 340,000 bpd to 19.97 million bpd and by 330,000 bpd to 20.3 million bpd in 2018.  The demand growth estimate for 2017 was revised up by 30,000 bpd while its demand growth estimate for 2018 was revised down by 30,000 bpd.  US gasoline demand is expected to remain unchanged at 9.33 million bpd in 2017 and increase by 30,000 bpd to 9.36 million bpd in 2018 while distillate demand is expected to increase by 100,000 bpd to 3.98 million bpd in 2017 and by 80,000 bpd to 4.06 million bpd in 2018.  US crude oil production is expected to increase by 50,000 bpd to 9.35 million bpd in 2017 and by 560,000 bpd to 9.91 million bpd in 2018.  In regards to prices, the EIA forecast Brent spot prices to average $51/barrel in 2017 and $52/barrel in 2018.  WTI prices are forecast to average $2/barrel less than Brent prices in both 2017 and 2018.  The US average retail price of gasoline is forecast to be $2.33/gallon in both 2017 and 2018.
 

Early Market Call - as of 9:10 AM EDT

WTI - Sep $49.54 up 37 cents

RBOB - Sep $1.6156 down 52 points

HO - Sep $1.6356 up 64 points


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Oil prices fell as Libya's largest oil fields hit pre-protest levels

August 08, 2017

Recap: WTI slipped to a near double bottom on Monday, pressured by uncertainty as to whether or not OPEC’s efforts to support prices are working, and on news that production at Libya’s largest oil field is reaching pre-protest levels. Despite a rebound off of the day’s lows, prices finished below unchanged. September WTI fell 19 cents, or 0.4%, to settle at $49.39 a barrel, while Brent for October delivery slipped 5 cents, or 0.1%, to settle at $52.37 a barrel.  

There appears to be underlying weakness in this market, as it continues to fail at $50 a barrel. Perhaps word out of the OPEC meeting, which is currently taking place, will provide an impetus for market direction.

September RBOB fell 1.64 cents, or 0.99%, to settle at $1.6450 a gallon, while September heating oil declined .0088 cents, or 0.53%, to settle at $1.6398 a gallon. 

Fundamental News Officials from a joint OPEC and non-OPEC technical committee are meeting in Abu Dhabi on Monday and Tuesday to discuss ways to increase compliance with the OPEC and non-OPEC output cut agreement.

Operations at Libya’s Sharara oil field returned to normal after a halt on August 6th due to armed protesters shutting down some facilities.  A pipeline , that the protesters closed, which supplied jet fuel and gasoline from Zawiya to Tripoli  was re-opened.  The National Oil Corp gave no reason for the protest in Zawiya, which started on Sunday, forcing oil workers to gradually reduce production from Sharara.  A local shipping source said loading operations in Zawiya had also been affected.

Nigeria’s Petroleum Ministry reported that the country’s average oil production including condensates, increased marginally to 2.06 million bpd in July from 2.05 million bpd in June.  It is a sharp increase over the 1.6 million bpd output from a year ago when production facilities were hit by attacks from Niger Delta militants. 

Iraq’s oil production in July fell by 150,000 bpd to 4.4 million bpd. 

Goldman Sachs analysts stated that US oil production may increase by 950,000 bpd between the fourth quarter of 2016 and fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays, assuming the oil rig count remains at the current level.  Separately, Goldman Sachs said data from the May-June period suggests that global demand for oil remains strong, driven by economic growth.  Demand for the May-June period increased by 1.81 million bpd in the second quarter of 2017, above its previous quarterly growth forecast of 1.55 million bpd.  Data in the US, Japan, India, China, Korea, Brazil, Mexico, Spain and France implies June global demand growth of 1.54 million bpd year on year.  Goldman Sachs forecast demand growth of 1.6 million bpd in the second half of the year.  It sees 2017 Brent prices at $52/barrel.   

A JPMorgan analyst stated that WTI at $42/barrel in 2018 may prove too optimistic.  The average stock draw has fallen from 750,000 bpd to 450,000 bpd in the second half, while the 2018 imbalance is at 1.3 million bpd from 1.1 million bpd, previously. 

Bloomberg reported that total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle fell by 45% to 647,581 bpd in the week ending August 3rd. 

IIR reported that US oil refiners are expected to shut in 97,000 bpd of capacity in the week ending August 11th, increasing available refining capacity by 112,000 bpd from the previous week.  IIR expects offline capacity to fall to 13,000 bpd in the week ending August 11th and to 13,000 bpd in the week ending August 18th. 

Early Market Call - as of 9:00 AM EDT

WTI - Sep  $49.06, down 33 cents

RBOB - Sep $1.6031, down 2.71 cents

HO -Sep $1.6204, down 1.95 cents


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Oil futures hit highest level in two months

August 07, 2017

Recap: This week, oil futures reached their highest level in two months, but were unable to sustain enough strength to hold at these highs. WTI broke above $50 a barrel, while Brent came within 7 cents of $53 a barrel. Trading had taken place under mixed emotions and confusion as to whether OPEC cuts are actually having an impact on the global supply glut, as producers in the U.S. continue to ramp up production. On Friday, a strong dollar kept a lid on prices. September WTI settled at $49.58 a barrel, up 55 cents, or 1.12%, but posted a modest loss of 13 cents on the week, while Brent for October delivery settled at $52.42 a barrel, up 41 cents, or 0.79%, down 10 cents on the week.

September RBOB rose 0.9% to $1.6463 a gallon, the contract added less than 0.1% on the week. September heating oil added almost a penny, or 0.6%, to close at $1.6486 a gallon, with a weekly climb of 0.5%.

Fundamental News Barclays said certain factors that supported oil prices in July are unlikely to last and expects a downward correction this quarter.  It, however, continues to see Brent prices moving higher to average $54/barrel in the fourth quarter on continued inventory draws, OPEC compliance and an ongoing decline in Venezuela’s output.

China is on pace to overtake the US as the world’s largest oil importer this year.  The EIA reported that China imported more crude than the US in the first half of the year.  China averaged 8.55 million bpd compared with 8.12 million bpd in the US, a trend that is expected to last.  China’s import surge is being driven by the expansion of its refinery capacity.  However, as the domestic demand has not materialized to offset the increase in fuel supply, China’s exports of gasoline and diesel have increased to record highs. 

Enbridge Inc stated that regulatory delays and route modifications will increase the cost of its Line 3 pipeline replacement project.  It said the project from Hardisty, Alberta to Superior, Wisconsin will cost C$8.2 billion or $6.52 billion, 9% more than a previous forecast.  The increased cost will be offset, however, by lower operating costs and a stronger US dollar, and the project remains on track for service in the second half of 2019.  Construction officially began in Canada on Thursday.  The Line 3 replacement project doubles the capacity of the existing line to 760,000 bpd.   

According to Bloomberg, Pioneer Natural Resources, Devon Energy and Antero Resources are among the shale drillers amassing hedges that protect their future proceeds as far out as 2023.  With US crude futures getting close to a new bull market, the pace of hedging by energy producers is expected to accelerate.  So far, about half of the oil Pioneer expected to produce next year is covered and Devon has about 55% of its 2017 output hedged and is looking ahead to next year.  Devon’s current year hedges locked in prices well above market levels.   

Refining industry sources stated that Asia’s spot market demand for Middle East and Russian crude oil could increase this month as a regional price shift pares shipments from the Atlantic Basin and the US back from record highs. 

IIR reported that US oil refiners are expected to shut in 196,000 bpd of capacity in the week ending August 4th, increasing available refining capacity by 52,000 bpd from the previous week.  IIR expects offline capacity to fall to 60,000 bpd in the week ending August 11th and 13,000 bpd in the week ending August 18th. 
 

Early Market Call - as of 9:00 AM EDT

WTI - Sep  $48.99, down 60 cents

RBOB - Sep $1.6198, down 2.66 cents

HO -Sep $1.6292, down 1.96 cents


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