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Market Intel Archives

Outage of Forties crude pipeline gave way to mid-session gains

December 15, 2017

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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There was a 5.1 million barrel draw in U.S. crude oil inventories

December 14, 2017

Recap: Oil prices fell for the second consecutive session as the 5.7 million barrel spike in U.S. gasoline stocks overshadowed the 5.1 million barrel draw in U.S. crude oil inventories. Prior to the report, prices were enjoying modest gains due to the expected shutdown of the North Sea’s Forties pipeline. Since the closure of the pipeline, WTI’s discount to Brent has narrowed, with the February spread tightening as much as 12% since Monday. This spread settled at -$5.85 on Wednesday. The narrowing of the discount is most likely due to profit taking from Monday’s peak over -$7.00. With no definitive return to operation date on the pipeline, a shortage of oil appears inevitable and therefore, we could very easily see WTI’s discount widen out again.

January WTI settled at $56.60 a barrel, down 54 cents, or 1%, its lowest settlement in a week. Brent for February delivery fell 90 cents, or 1.4%, to finish the session at $62.44 a barrel. Products also slipped on Wednesday, with January gasoline losing 5.05 cents, or 3%, to settle at $1.647 a gallon, with January heating oil settling at $1.904 a gallon, down 2.96 cents, or 1.5%. 

Fundamental News:  In its monthly report, OPEC stated that it expects the world oil market to be balanced by late 2018 as its deal with other producers to cut output reduces excess oil in storage.  OPEC cut its estimate of global demand for its crude in 2018 by 270,000 bpd to 33.15 million bpd, in part because of higher US supply.  It stated that global oil demand is expected to increase 1.51 million bpd next year, unchanged from a previous forecast.  OPEC, citing secondary sources, stated that its November oil output fell by about 133,000 bpd to 32.45 million bpd.  OPEC’s 11 members with supply targets produced 29.556 million bpd in November, amounting to 121% compliance with the supply cut agreement. 

Barclays said it attributes most of the recent strength in oil prices to temporary factors and expect the inventory drawdown to pause next year.  It stated that depending on the Forties Pipeline outage duration, inventories could draw even more quickly in Europe, keeping prices elevated in the $60/barrel range.  It raised its fourth quarter Brent price outlook to $62/barrel from $60/barrel and maintained its 2018 outlook of $55/barrel.  It sees the price of WTI averaging $51/barrel in 2018. 

OPEC’s Secretary General, Mohammad Barkindo, reported that OPEC and allied producers are looking at a continuity strategy for oil supply management, signaling plans for further cooperation beyond the end of 2018 expiry of a supply cut agreement. 

The UAE’s Energy Minister, Suhail al-Mazroui, said that it was premature to talk about an exit strategy form the current global supply cut agreement between OPEC and non-OPEC producers.  Meanwhile, Kuwait’s Oil Minister, Ali Khalifa al-Sabah, said an exit strategy from supply cuts would be gradually implemented and would not disrupt the market.  He said the oil market is expected to rebalance towards the end of 2018. 

IIR reported that US oil refiners are expected to shut in 315,000 bpd of capacity in the week ending December 15th, increasing available refining capacity by 158,000 bpd from the previous week. 

Ineos shut a 65,000 bpd crude unit at its 200,000 bpd Grangemouth refinery in Scotland.  Ineos stated earlier that it is considering bringing forward its early 2018 planned maintenance at the refinery due to the Forties pipeline outage.  Britain’s Forties crude pipeline remained closed on Wednesday and INEOS said it was considering several options to repair a crack that has stopped shipments of oil and gas.  It said any work would likely take several weeks.  INEOS previously told clients that it believed the work would take no less than two weeks to complete. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.30, down 30 cents

RBOB - Jan $1.6594, up 1.27 cents

HO - Jan $1.8924, down 1.17 cents


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Oil prices climbed higher in overnight trading due to the shutting of the Forties pipeline

December 13, 2017

Recap: In continued reaction to the shutting of the Forties pipeline, oil prices climbed higher in overnight trading, and by daybreak in the Northeastern part of the U.S, session highs were made. February Brent rose as much as 1.76%, reaching a high of $65.83, while January WTI peaked the session at $58.56, up 0.98% on the day. Prices reversed course, slipping below unchanged after the EIA raised its forecast for 2018 U.S. oil output. In its monthly short-term energy outlook, the EIA forecast U.S. output to rise by 780,000 barrels per day to 10.02 million, lower than the original forecast of 720,000 barrels per day. This pulled the rug out from under prices, sending January WTI below $57.00 a barrel and February Brent toward $63.00 a barrel. In the end, losses were slightly pared, with January WTI settling at $57.14, down 85 cents, or 1.47%, and February Brent falling $1.35.  

Fundamental News:  The EIA reported in its Short Term Energy Outlook that it raised its 2017 oil demand growth estimate by 80,000 bpd from its previous forecast to 1.39 million bpd.  It however cut its 2018 world oil demand growth forecast by 40,000 bpd to 1.62 million bpd.  It reported that world oil demand for 2017 is forecast at 98.34 million bpd and for 2018 at 99.96 million bpd.  It reported that OPEC production is expected to fall by 200,000 bpd to 32.48 million bpd in 2017 but increase by 230,000 bpd to 32.71 million bpd in 2018.  Total US petroleum demand in 2017 is estimated to increase by 160,000 bpd to 19.85 million bpd while demand in 2018 is forecast to increase by 410,000 bpd to 20.26 million bpd.  US oil production in 2017 is estimated to increase by 380,000 bpd to 9.24 million bpd and increase by 780,000 bpd to 10.02 million bpd in 2018.  In regards to prices, the EIA forecast Brent spot prices at $57/barrel in 2018, up from an average of $54/barrel in 2017.  WTI prices are forecast to average $4/barrel lower than Brent prices in 2018. 

Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 2.5 million barrels in the week ending December 8th to 53.1 million barrels.  

The IEA said it is monitoring the closure of the Forties crude pipeline that sent prices to 2-1/2 year highs but said it saw no immediate need to act as the market remains well supplied.  The pipeline was shut down on Monday and may remain shut for a number of weeks after its operator Ineos detected a minor leak last week. 

Goldman Sachs stated that on a long term basis, it expects commodities to outperform other asset classes even as policy makers are forced to increase rates.  In regards to the oil market, it stated that it does not see the oil market shifting back into contango in 2018.  It said that for energy, it expects returns of 15% in 2018, due almost entirely to positive roll returns.  It raised its 2018 Brent and WTI spot forecasts to $62/barrel and $57.50/barrel due to lower inventories.  It forecast a wider WTI-Brent differential of $4.50/barrel in 2018.

OPEC Secretary General, Mohammad Barkindo, said the oil market rebalancing process is well under way and commercial oil stocks in the OECD fell further in November.  The surplus of OECD oil stocks to the latest five-year average has been reduced by about 200 million barrels since the beginning of the year. 

The UK’s Buzzard oilfield was shut down due to the Forties Pipeline outage, according to two industry sources.  There was no immediate comment from the Buzzard oilfield operator, Nexen. 

Lundin Petroleum said production at the Edvard Grieg field off Norway had to be temporarily reduced following the Forties pipeline shutdown, due to a lack of capability at the St. Fergus terminal to process its produced gas. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $57.55, up 41 cents

RBOB - Jan $1.6980, up 4 points

HO - Jan $1.9309, down 27 points


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Unplanned maintenance on the Forties pipeline in the U.K’s North Sea pushed Brent to its highest level in 2.5 years

December 12, 2017

Recap: Both Brent and WTI experienced an early morning jolt following a failed terrorist attack in New York’s highly traversed Times Square subway station. The higher move was accelerated by news of unplanned maintenance on the Forties pipeline in the U.K’s North Sea, which pushed Brent to its highest level in 2 ½ years. February Brent climbed steadily to a high of $54.85 a barrel, its highest level since January of 2015. This helped to widen Brent’s premium over WTI, pushing the spread between the February contracts to as wide as -$6.87, before settling at -$6.64. Brent for February delivery settled at $64.69 a barrel, up 1.29, or 2.03%, while January WTI tacked on $57.99 a barrel, up 63 cents, or 1.10%. 

Fundamental News:  UAE Energy Minister, Suhail bin Mohammed al-Mazroui, said that OPEC and non-OPEC oil producers plan to announce in June an exit strategy from global supply cuts, but added that it does not mean the pact will end by then.  He said it was premature to talk about the form or shape of such an exit strategy before June, when OPEC and non-OPEC producers are due to meet again. 

Kuwait’s Oil Minister, Essam al-Marzouq, said OPEC and other oil producers would study before June the possibility of an exit strategy from the global agreement. 

Saudi Arabia’s Energy Ministry reported that Saudi Aramco plans to reduce its January crude shipments to Asia by more than 100,000 bpd from December, while keeping its exports to the US and Europe steady.  Saudi Arabia plans to maintain its crude shipments in January at 6.9 million bpd. 

Goldman Sachs said it expects strong compliance from OPEC and other producers to global oil cuts through the first half of 2018.  The bank, however, sees OPEC and Russia’s combined output to increase 515,000 bpd in the second half of 2018, with its above-consensus demand forecast normalizing inventory levels by next summer.  Separately, Goldman Sachs reported that lower 48 crude production is expected to increase by 280,000 bpd in the fourth quarter compared with the previous quarter.   

Iraq’s Oil Minister, Jabar al-Luaibi, said that a deal signed with Iran to swap up to 60,000 bpd of crude produced from the northern Iraqi Kirkuk oilfield for Iranian oil is for one year and subject to renewal.  The agreement signed on Friday by the two OPEC countries provides for Iran to deliver to Iraq’s southern ports on the Gulf.  The deal in effect allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurds in October. 

Euroilstock data reported that European refineries increased crude processing by 1.2% in November from the previous month but fell by 0.6% on the year to 10.575 million bpd.  European crude oil product stocks increased by 0.4% on the month but fell by 1.7% on the year to 1.114 billion barrels.  European crude stocks increased by 0.9% on the month but remained flat on the year at 479.9 million barrels, while gasoline stocks increased by 1% on the month but fell by 2.5% on the year to 113.56 million barrels and middle distillates stocks remained flat on the month but fell by 2.3% on the year to 429.08 million barrels. 

Crude oil running through the UK’s Forties Pipeline were still flowing at restricted rates on Monday following a leak detected last week.  The pipeline, which has an average daily

throughput of about 450,000 barrels of oil, had been operating at reduced capacity since December 7th.  Later, a spokesman said the pipeline is in the process of being shut down for repair work. The pipeline could shut down for weeks of unscheduled repair work.   

Early Market Call - as of 9:00 AM EDT

WTI - Jan $58.31, up 33 cents

RBOB - Jan $1.7511, up 2.48 cents

HO - Jan $1.9728, up 2.22 cents


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Crude oil imports to China rose to 9.01 million barrels per day

December 11, 2017

Recap: After a tumultuous week of trading, oil prices bounced for the second straight session after data released by China’s General Administration of Customs showed that crude oil imports to China rose to 9.01 million barrels per day, the second largest number on record. Looming strikes in Nigeria also added to the boost in prices. January WTI settled at $57.36 a barrel, up 67 cents, or 1.2%, however slipped 1.7% on the week. Brent for February delivery tacked on 1.20, or 1.9%, to settle at $63.40 a barrel, which was down 0.6% on the week.  

Thursday’s settlement above the ascending trend line on a daily bar chart for January heating oil was followed by additional strength above this line on Friday. Previous resistance provided by the 10-day moving average will now act as a level of support. This average is currently set at $1.9123. January RBOB rose 1% to $1.717 a gallon; however saw a weekly loss of about 1.4%. January heating oil added 1.7% to $1.929 a gallon, cutting its weekly loss to about 0.6%.

Fundamental News:   Custom officials in China reported Friday that Chinese crude oil imports in November reached 37.04 million tonnes, or 9.01 million b/d, the second highest monthly level on record. So far this year Chinese crude oil imports are up 12% from a year ago.

The CFTC reported this afternoon that money managers reduced their net long U.S. crude futures and options positions for the week ending December 5th by 9,135 contracts to 442,742.

Baker Hughes reported that for the week ending December 8th U.S. energy companies’ added oil drilling rigs for the third week in a row, the longest string of increases since the summer. Drillers added two rigs on the week, bringing the total count up to 751, the highest level since September. A year ago only 498 rigs were operating.

Oil Movements said in its weekly report that it sees OPEC oil shipments climbing by 430,000 b/d to 26.24 million b/d in the four week period ending December 23rd.

Philadelphia Energy Solutions reported Friday that its 85,000 b/d CDU and its 52,466 b/d VDU at its Girard Point refinery which had been offline since November 25th for planned repairs were restarted on Thursday.

Reuters reported this afternoon that Phillips 66 plans to shut down its FCC unit, as well as the alky and isomer units at its 150,000 b/d Bayway refinery on February 2nd for two months of maintenance. The work is expected to boost gasoline and diesel yields by about 4,000 b/d.

Early Market Call - as of 9:17 AM EDT

WTI - Jan $57.47 up 11 cents

RBOB - Jan $1.7185 up 19 points

HO - Jan $1.9381 up 93 points


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EIA reported larger than expected builds in U.S. inventories for gasoline and heating oil

December 08, 2017

Recap: RBOB futures performed an about-face on Thursday, after reaching a 7-week low on Wednesday. The threat of a strike in Nigeria lifted both products and oil as well, as traders scrambled to cover shorts put on after the EIA reported larger than expected builds in U.S. inventories for both gasoline and heating oil. January gasoline continues to hold above the long standing ascending trend line, but worked its way back above the 50-day moving average, which is currently set at $1.6808. Based upon this activity, we would look for January RBOB to work its way back toward resistance set at $1.7312. Support is set at $1.64.25, which is provided by the previously mentioned trend line.  

Oil prices also reversed course on short covering due to the possibility of a strike in Nigeria. Today’s correction keeps WTI within the upward channel that can be depicted on a daily spot continuation chart, which keeps the main trend to the upside. We would look for a run at $57.59, the 10-day moving average. Above this level, additional resistance is set at $58.90. To the downside, support rests at $55.38 and $54.53. 

Brent futures rose 98 cents, or 1.6 percent, to settle at $62.20 a barrel, while U.S. WTI gained 73 cents, or 1.3 percent, to settle at $56.69.

Fundamental News:  Kuwait’s Oil Minister, Essam al-Marzouq, said he expects oil markets to rebalance by the third quarter or early fourth quarter of next year. 

Qatar’s Energy Minister, Mohammed al-Sada, said oil is moving towards a fair price and the level of global stocks is declining and moving towards the level sought by OPEC.  He also said an agreement between OPEC and non-OPEC producers to reduce output to help balance the market had been successful. 

The White House said US President Donald Trump will meet with Republican senators on Thursday to discuss his commitment to the Renewable Fuel Standard.  The President and senators will discuss how to address Renewable Fuel Standard program’s impact on independent refiners.      

The Petroleum and Natural Gas Senior Staff Association of Nigeria, one of the country’s two main oil unions, threatened to launch a nationwide strike from December 18th over what it said was a mass sacking of workers that joined the union. 

Credit Suisse raised its 2018 oil price forecasts citing strong OPEC adherence to pledged output cuts, which the bank said could normalize OECD inventory levels next year.  Credit Suisse raised its 2018 Brent price forecast to $60/barrel from $53/barrel and its WTI forecast to $56/barrel from $50.50/barrel. 

Nigeria’s oil exports in January are expected to fall from a 21-month high reached in December.  Crude oil exports of 1.76 million bpd are scheduled for January on 62 cargoes, down from 1.94 million bpd in December. 

The Kurdish Regional Government resumed shipments of crude by pipeline from the Shaikan field in northern Iraq, increasing flow through the link.  Oil received at the Ceyhan terminal in Turkey from the Kurdish region increased to 300,000 bpd in the 24 hours to Monday morning and has remained at that level.  Separately, Iraqi forces and Kurdish Peshmerga fighters on Sunday started a second round of talks to resolve a conflict over control of the Kurdistan region’s border crossings. 

Iraq’s Oil Minister, Jabar al-Luaibi, said Iraq managed to increase its oil export capacity from its southern ports to 4.6 million bpd after adding a new floating terminal in the Gulf. 

Early Market Call - as of 9:17 AM EDT

WTI - Jan $57.72 up $1.03

RBOB - Jan $1.7223 up 2.23 cents

HO - Jan $1.9324 up 3.54 cents


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There was a 5.6 million barrel draw on U.S. crude oil inventories

December 07, 2017

Recap: WTI fell by almost 3% on Wednesday; despite the 5.6 million barrel draw on U.S. crude oil inventories. Prices were dragged lower by what appears to be sluggish demand for refined products. The 6.8 million barrel build in U.S. gasoline stocks made RBOB futures the hardest hit market on NYMEX. The January contract fell below its 50-day moving average for the first time since July, and continued to fall to a 7-week low of $1.6600 a gallon. A slight retracement took place prior to the close, with January RBOB settling at $1.661 a gallon, down 2.94%, the lowest settlement for spot futures since Oct. 19. Coming into tomorrow, technical traders will be eyeing $1.6598, support provided by an ascending trend line that dates back to June of 2017. A break below this line sets up for a run at the $1.5850 level. 

January heating oil settled at $1.861 a gallon, down 2.8%, January WTI fell $1.66, or 2.9%, to settle at $55.96 a barrel, its lowest settlement since Nov. 16. February Brent lost $1.64, or 2.6%, to $61.22 a barrel, its since level since Nov. 2.

Fundamental News: The arbitrage to send gasoline from Northwest Europe to the New York Harbor was described as shut on Tuesday by traders in both regions, despite US prices increasing.  However 918,808 barrels of trans-Atlantic gasoline were imported the first three days of December, an increase from no imports in November. 

According to the EIA, US ultra low sulfur diesel exports fell by 6.806 million barrels to 30.517 million barrels in September, driven by falling demand from Europe and Latin America as well as the impact to US refiners following Hurricane Harvey.  While it was the second largest monthly decline of the year, second to August, the decline from both months combined for the largest two-month decline in ULSD exports at 15.365 million barrels. 

The US Census Bureau reported that US crude exports increased to a record 1.73 million bpd in October.  It’s a record for the second consecutive month after reaching a previous high of 1.47 million bpd in September. 

Bloomberg New Energy Finance estimates that crude imports to the US Gulf Coast fell to 2.43 million bpd in the week ending December 1st.  The previous week’s estimate was 2.66 million bpd for the week ending November 24th. 

Genscape reported that crude oil inventories in the ARA region fell by 3.5 million barrels in the week ending December 1st to 52.7 million barrels. 

According to Bloomberg, an LR-2 tanker capable of hauling about 670,000 barrels of distillates, is bound for New York Harbor after loading in Yanbu, Saudi Arabia.  The US has not imported distillate from Saudi Arabia since February 2015. 

The Northwest European gasoline complex has come under pressure this week from a closed arbitrage to the US, a lack of significant West African demand and with the end of year approaching. 

Russia’s Energy Minister, Alexander Novak, said global oil prices are relatively stable and volatility is low.  He said it was too early to talk about a possible exit from the global deal to cut oil production, and the eventual withdrawal from the agreement should be gradual.

IIR reported that US oil refiners are expected to shut in 452,000 bpd of capacity in the week ending December 8th, increasing available refining capacity by 243,000 bpd from the previous week.  IIR expects offline capacity to fall to 266,000 bpd in the week ending December 15th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.20, up 24 cents

RBOB - Jan $1.6718, up 1.08 cents 

HO - Jan $1.8682, up 70 points 


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An anticipation of a draw down in U.S. crude oil inventories caused oil prices to rise

December 06, 2017

Recap: Oil prices rose on Tuesday in anticipation of a draw down in U.S. crude oil inventories, amid strong demand and OPEC lead efforts to sop up excess global supplies. January WTI gained as much as 0.78%, as it rose to a high of $57.92, while Brent for February delivery hit a high of $63.15, up 1.12%. Gains were pared ahead of the API report, with spot WTI finishing at $57.62 a barrel, up 15 cents, or 0.26% and spot Brent tacking on 41 cents, or 0.66%, to settle at $62.86 a barrel. 

January RBOB rose 1.6% at $1.718 a gallon, while heating oil for the same month ended at $1.914 a gallon, up 1.

Fundamental News: Crude oil stocks held in Cushing, Oklahoma fell by 2.4 million barrels to 55.9 million barrels in the week ending December 1st. 

The IEA’s Head of the Oil Industry and Markets Division, Neil Atkinson, said oil prices may decline in the coming months. 

Bloomberg reported that preliminary US waterborne crude imports increased by 416,900 bpd to 4.7 million bpd.  Imports to the Gulf Coast increased by 326,100 bpd to 2.7 million bpd while imports to the East Coast and West Coasts increased by 40,600 bpd and 50,200 bpd, respectively. 

According to data from cFlow, S&P Global Platt’ trade flow software, distillates flows fixed to Northwest Europe and the Mediterranean from the US Gulf Coast for December are currently around 550,000 metric tons. 

According to Bloomberg, OPEC’s output in November fell by 80,000 bpd to 32.47 million bpd.  It is the lowest level in six months, led by declines from Angola and Kuwait.  OPEC’s compliance increased by 8% on the month to 118% in November. 

The UAE’s crude oil output in November fell to about 2.9 million bpd as the country looks to increase its compliance with a global pact to cut production.  The UAE reported output of 2.95 million bpd in October.  UAE shipments of crude and condensate fell to a seven month low in November as the country joined OPEC and other producers in extending restrictions.  The UAE’s shipments fell to 2.313 million bpd in November from a revised 2.531 million bpd in October.

Indonesia’s Deputy Energy Minister, Arcandra Tahar, said the country will keep a freeze on its membership of OPEC.  Indonesia’s OPEC membership was suspended in December 2016, less than a year after it rejoined the group. 

Goldman Sachs forecast that oil prices will retain their strength, at least through 2018.  It raised its forecast for WTI and Brent to $57.50/barrel and $62/barrel, respectively, saying OPEC and its allies showed a stronger commitment than expected to extending their output cuts.  It expects positive total returns of 9% from crude over the next 12 months.  Goldman Sachs, however, said that by 2019, it believes the response of shale and other producers to higher prices will incentivize OPEC and Russia to pare back their now greater spare capacity, leaving risks to prices skewed to the downside. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.85, down 76 cents

RBOB - Jan $1.7000, down 1.85 cents

HO - Jan $1.8936, down 2.01 cents


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Oil prices fell for the first time in 3 sessions

December 05, 2017

Recap: Oil prices fell for the first time in 3 sessions, as the capacity for U.S. drillers increased, overshadowing OPEC lead efforts to decrease supply overhangs. The rise in U.S. production prompted traders into taking profits. Despite the sell-off, prices remain close to 2 year highs. The recent spike in prices has helped to push speculators open interest to record highs. February Brent fell $1.28, or 2.01%, to settle at $62.45 a barrel, while WTI for January delivery slipped 89 cents, or 1.53%, to settle at $57.47 a barrel.

January RBOB lost 2.8% to $1.6922 a gallon, while January heating oil fell 2.4% to $1.8945 a gallon.

Fundamental News: Saudi Arabia’s Energy Minister, Khalid al-Falih, said OPEC is expected to maintain its current policy of output cuts in the second half of 2018, but added that oil producers have plenty of supply with which to respond to any sudden disruption.  He said OPEC will not flood the market.  He said no significant oil inventory draws are expected in the next four months.  He was speaking after meeting with US Energy Secretary, Rick Perry, who stated that OPEC would make its own decisions and that he was comfortable the US could work within those parameters. 

According to a Reuters survey, OPEC’s oil output fell in November by 300,000 bpd to 32.48 million bpd, its lowest level since May.  OPEC’s adherence to pledged supply cuts increased to 112% from October’s 92%.  The largest decline in output in November of 100,000 bpd, came from Angola where exports fell to a 13-month low.  The second largest came from Iraq.  Saudi Arabia cut its output by 30,000 bpd. 

Three of the largest independent US drillers said they are in no hurry to add rigs after OPEC and Russia agreed to extend their output cut deal.  According to Pioneer Natural Resource, Parsley Energy and Newfield Exploration, the emphasis will be on maintaining spending discipline and generating profits to return to investors. 

Citi stated that an increase in non-OPEC supply will meet almost all incremental demand by the end of 2018, leaving little room for a return to higher production by OPEC and Russia.  This may hurt prices into the second half of next year and 2019. 

Brazil’s oil regulator, ANP, said the country’s oil production in Brazil fell by 0.9% to 2.627 million bpd while its natural gas production increased 0.5% to 115 million cubic meters/day. 

Genel Energy Plc announced that the TT-29W well at the Taq Taq field has been completed.  It said the well’s production started from the Lower Shiranish reservoir at a rate of 3,200 bpd of dry oil.  Gross production from the Taq Taq field is currently 15,100 bpd.   

UBS raised its 2018 Brent price forecast to $60/barrel from $55/barrel.  The bank expects OECD inventories to fall to five-year averages in the third quarter when an informal tapering of cuts will begin.  The bank also increased its fourth quarter Brent forecast to $60/barrel from $54/barrel and its WTI forecast to $54/barrel from $51/barrel. 

IIR reported that US oil refiners are expected to shut in 401,000 bpd of capacity in the week ending December 8th, increasing available refining capacity by 294,000 bpd from the previous week.  IIR expects offline capacity to fall to 204,000 bpd in the week ending December 15th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.36, down 11 cents

RBOB - Jan $1.7095, up 1.77 cents

HO -Jan $1.8976, up 33 points


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OPEC and non-OPEC producers on Thursday agreed to extend their production cuts by a further nine months until the end of 2018

December 04, 2017

Recap: The crude market on Friday retraced some of its previous losses after the market posted an inside trading day on Thursday.  The market was supported after OPEC and non-OPEC producers on Thursday agreed to extend their production cuts by a further nine months until the end of 2018.  The market posted a low of $57.29 on the opening and bounced off that level as it rallied sharply higher to $58.88 by mid-morning.  The oil market, which failed to test its previous highs, gave up some of its gains ahead of the close as it traded back towards the $58 level.  The market pared its gains with a decline in US stock markets after former national security adviser, Michael Flynn, pleaded guilty to lying to the FBI.  The January WTI contract settled up 96 cents at $58.36, while the February Brent contract settled up $1.10 at $63.73.  Meanwhile, the heating oil market settled up 4.37 cents at $1.9413 while the RB market settled up 1.16 cents at $1.7416.

Fundamental News: Baker Hughes reported that the number of rigs searching for oil increased by 2 to 749 in the week ending December 1st. 

The head of Russia’s Lukoil, Vagit Alekperov, said the oil market will not overheat as it did during a price rally in the last decade as global demand is rising fast and an alliance between OPEC and non-OPEC producers is working well.  He said he expects global oil demand to increase by 1.8 million bpd next year.  In addition, the supply of crude from producers who are not participating in production cuts is estimated to increase by 800,000 bpd next year.  He stated that OPEC and non-OPEC producers will increase production if oil prices rally.  He added that oil prices should be between $60 and $65/barrel to avoid mistakes with the market overheating.   

Barclays reported that the OPEC/non-OPEC production cut extension may increase US output by another 1 million bpd before the end of 2018 with a clear upside risk if current oil prices persist. 

Goldman Sachs stated that while OPEC and its allies did not finalize details on how they would wind down their output cuts, they pledged to be agile and responsive and review their progress on shrinking inventories at a meeting in June.  It said this indicates a reduced risk of both unexpected increases in supply as well as excess draws in stocks. 

Oil Movements reported that OPEC shipments increased by 130,000 bpd to 25.96 million bpd in the four week period ending November 18th.  Middle East shipments, including from non-OPEC nations Oman and Yemen, will increase by 170,000 bpd to 16.8 million bpd. 

IIR reported that US oil refiners are expected to shut in 658,000 bpd of capacity in the week ending December 1st, increasing available refining capacity by 70,000 bpd from the previous week.  IIR expects offline capacity to fall to 345,000 bpd in the week ending December 8th and 204,000 bpd in the week ending December 15th. 

Bloomberg reported that global refinery outages reached 1.88 million bpd in the week ending November 30th.  It is down from 2.16 million bpd the previous week.  Russia’s offline refining capacity was unchanged at 266,000 bpd as of Wednesday. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.69, down 67 cents

RBOB - Jan $1.7097, down 3.21 cents

HO -Jan $1.9080, down 3.34 cents


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