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Market Intel Archives

Oil prices rose after earthquake hit Cushing, Oklahoma on Sunday evening

November 08, 2016

Recap: Oil prices rose higher after a 5.0 earthquake hit Cushing, OK on Sunday evening and caused supply concerns at the NYMEX delivery point. In overnight trading, December WTI peaked at $44.90, as gains were limited by strength in the dollar. Prices continued to gain in post settlement trading, as the latest polls showed Hillary Clinton gaining momentum in the race. This spot contract settled at $44.89, for a gain of 82 cents, or 1.9%. January Brent added 52 cents, or 1.3%, to settle at $46.15.

Oil found support ahead of the U.S. Presidential election, with most traders likely sitting on the sidelines. Trading should remain unstable over the next few days and possibly until the OPEC meeting takes place at the end of the month.

December RBOB fell less than a cent to $1.371 a gallon while December heating oil tacked on penny, or 0.7%, to end at $1.441 a gallon.

Fundamental News:  Genscape reported that crude stocks held in Cushing, Oklahoma in the week ending November 4th fell by 442,000 barrels on the week. 

OPEC's Secretary General, Mohammed Barkindo, said the group was committed to a deal reached in Algiers in September to cut output.  He said OPEC 14 remains committed to the implementation.  He also added that Russia is on board with the OPEC agreement to limit oil production.

Goldman Sachs said that oil could fall to the low $40s, if no OPEC production deal is reached.

The UAE's Energy Minister, Suhail bin Mohammed el-Mazrouei said the global oil supply glut was almost gone. 

Oman said the petroleum market remained oversupplied. 

Colonial Pipeline Co is allocating space for Cycle 62 shipments on Line 1, its main gasoline line, and Cycle 63 shipments on its main distillate line, Line 2.  Colonial Pipeline said Line 1 began shipping gasoline between Houston, Texas and Linden, New Jersey, on Sunday morning for the first time since the explosion and fire on October 31st. 

US retail gasoline prices remained elevated in some states on Monday following the restart of Colonial Pipeline's main gasoline line early on Sunday following a fatal explosion last week.  Prices could remain elevated for several days as flows on the pipeline normalize after the nearly week-long outage.  The US EPA has issued waivers to allow Colonial to mix different grades of gasoline once shipments resume.  Governors of some Southeast states have issued executive orders to lift a federal government limitation on the hours a driver can transport gasoline to ensure adequate supply. 

The US Geological Survey said a magnitude 5.3 quake struck near Cushing, Oklahoma, on Sunday.   

Magellan said it safely resumed normal operations of its assets in Cushing late Sunday night following the earthquake. 

Baker Hughes reported that the international rig count in October was 920, down 14 from 934 counted in September.  The international offshore rig count for October was 200, down 21 on the month.  The average US rig count for October was 544, up 35 on the month.

IIR reported that US oil refiners are expected to shut in 527,000 bpd of capacity in the week ending November 11th, decreasing available refining capacity by 327,000 bpd in the previous week.  IIR expects offline capacity to fall to 400,000 bpd in the week ending November 18th. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $44.49 down 40 cents

RBOB - Dec $1.3525 down 1.85 cents

HO - Dec $1.4283 down 1.23 cents

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Oil futures experienced largest weekly loss since January

November 07, 2016

Recap: Oil futures experienced their largest weekly loss since mid-January, as it became evident that OPEC members were still grappling with an agreement on output cuts and/or freezes. WTI for December delivery slipped 59 cents, or 1.3% to settle at $44.07. This marked a 9.5% drop on the week. January Brent fell 77 cents, or 1.7%, settling at $45.58, for an almost 8% drop on the week.

Early sideways activity in December WTI was met by a bounce off of $44.29, as a lack of follow-through on the break below Thursday's low sparked light short covering. This spot month recovered 1.2%, making an intraday retracement to $44.84, before heading back to the downside. Helped by belief that an agreement among OPEC members would be difficult to reach, December WTI dipped below $44 a barrel for the first time since Sept 20th. Without an agreement by major oil producers, focus will be on U.S. production, particularly the lower 48 states, which is currently around 8 million barrels per day.

December RBOB fell 4.6 cents, or 3.2%, to $1.379 a gallon, ending about 5.2% lower for the week, while December heating oil fell 2.8 cents, or 1.9%, to $1.430 a gallon, for a loss of about 8.2% for the week.

Fundamental News:  Colonial Pipeline Co said the EPA has granted a waiver of certain sections of the Clean Air Act for states that are serviced by Colonial.  The waiver will allow Colonial and others to commingle RBOB with CBOB.  It will also allow the commingling of 13.5 and 11.5 rvp grades based on the state waivers.  Colonial delayed the restart of its main gasoline pipeline, Line1, to Sunday afternoon from Saturday.  The company said it made substantial progress in removing fuel from the section of Line 1 that was damaged by the explosion.  Colonial plans to remove the damaged section of the pipeline and install a new segment as a permanent fix.

According to Oil Movements, OPEC cargoes will increase by 350,000 bpd to 24.16 million bpd in the four weeks ending November 19th. 

OPEC sources stated that oil disputes between Saudi Arabia and Iran resurfaced at a meeting of OPEC experts last week, with Saudi Arabia threatening to raise oil output to bring prices down if Iran refused to limit its supply.  One OPEC source said Saudi Arabia threatened to raise its production to 11 million and to even 12 million bpd and to withdraw from the meeting. 

Former Saudi Oil Minister, Ali Al-Naimi, said OPEC cannot cut output by itself. 

The head of commodity research at Citigroup, Ed Morse, said OPEC and Russia will likely reach an agreement to reduce crude oil production and support prices.  He said Saudi Arabia and Russia are "hungry for an agreement." 

Iraqi Kurds reported that their oil production in September was 290,000 bpd lower than the federal government's figures for the semi-autonomous region.  Iraq's central government said its crude oil output is several hundred thousand bpd higher than market analysts and OPEC acknowledge. 

The Movement for the Emancipation of the Niger Delta takes full responsibility for the Trans-Forcados crude export pipeline attack in the Batan area of the Delta State on Wednesday.  However, the group said the attack was unauthorized by its high command. 

IIR reported that US oil refiners are expected to shut in 854,000 bpd of capacity in the week ending November 4th, increasing available refining capacity by 275,000 bpd from the previous week.  IIR expects offline capacity to fall to 527,000 bpd in the week ending November 11thand to 400,000 bpd in the subsequent week. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $44.57, up 49 cents

RBOB - Dec $1.4148, down 43 points

HO - Dec $1.4422, up 1.19 cents 

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Oil market slid downward after release of DOE inventory report

November 04, 2016

Recap: The oil market continued its downward slide on Thursday following Wednesday's release of the DOE inventory report, which showed a large build of over 14 million barrels in crude stocks.  The market traded mostly sideways in overnight trading and posted a high of $45.90 in early morning trading.  The market's gains were limited in light of a Genscape report showing that crude oil stocks held in Cushing, Oklahoma built by 1.2 million barrels in the week ending November 1st.  The oil market was also pressured as US equities fell on government data showing that US unemployment claims increased last week.  The market breached its support line at $45.13 and sold off to a low of $44.37 in afternoon trading.  The December crude contract later retraced some of its losses ahead of the close and settled down 68 cents at $44.66.  The January Brent contract settled down 51 cents at $46.35.  Meanwhile, the product markets also remained pressured, with the heating oil market settling down 83 points at $1.4582 and the RBOB market settling down 2.34 cents at $1.4245. 

Fundamental News: 
Genscape reported a build of 1.2 million barrels of crude in Cushing, Oklahoma in the week ending November 1st.  

Nigeria's oil production has declined by at least 200,000 bpd since a militant attack forced the closure of the major Trans Forcados Pipeline on Wednesday.  Force majeure on Forcados exports was still in place despite the recent resumption of loadings following a shutdown due to an attack in February.  The news of the bombing came a few hours after Nigeria's President, Muhammadu Buhari, met with senior Niger Delta leaders to end the militancy.  Nigerian special military unit in the Niger Delta, the Joint Task Force, said it was investigating an explosion on a section of the pipeline.

On Thursday, OPEC expressed confidence that it would finalize an agreement to limit output later this month and dismissed critics who questioned its influence.  In the commentary section of the cartel's monthly magazine, OPEC Bulletin, it stated that the group remains optimistic about the possibility that the Algiers agreement will be complemented by precise, decisive action among all producers.

In a letter to Transportation Secretary, Anthony Foxx, the House Democrats requested a comprehensive examination of Colonial Pipeline Co, its liquid pipeline system and how the company manages the maintenance and integrity of the system.  The fire and explosion in Alabama was the third major incident on Colonial's system in about a year and the seventh incident in less than five years.  Colonial is projecting a restart this weekend of the gasoline line. Colonial said it made substantial progress as it continues repair work on Line 1.  It stated that a small fire that was still burning at the site will be put out once the process of removing product from the impacted section of the pipeline is complete.  A new segment will be tested and installed as a permanent fix.   

The US Coast Guard reported that a section of Houston Ship Channel was shut due to fog and low visibility. 

The EIA reported that US crude oil production in August increased to 8.74 million bpd from 8.69 million bpd in July. 

National Iranian Oil Co said that its average oil exports in October reached 2.44 million bpd, of which more than 700,000 bpd were shipped to Europe.  Iran exported 1.74 million bpd to key buyers in Asian countries in October. 

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp hub in the week ending November 3rd increased by 22.81% on the week but fell by 1.93% on the year to 813,000 tons.  Gasoil strdks increased by 1.71% on the week but fell by 15.66% on the year to 2.972 million tons. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $44.10, down 57 cents

RBOB - Dec $1.3921, down 3.20 cents

HO - Dec $1.4407, down 1.73 cents 

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Crude oil prices sank to 5 week lows on record builds in U.S. crude oil inventories

November 03, 2016

Recap: Crude oil prices sank to 5 week lows on record builds in U.S. crude oil inventories. According to the EIA report, stockpiles increased 14.4 million barrels, the largest increase since the agency has been keeping records.

Prior to the release of the report, December WTI was trading around $46.22 a barrel, but swiftly slipped 2.5%, stopping at $45.03. A slight rebound to $45.38 ensued before prices resumed their move to the downside, obtaining a new low of $44.96. Recapturing some of its losses, December WTI settled at $45.34, down $1.33, or 2.85%, while Brent for December delivery fell $1.28, or 2.66%, to settle at $46.86.

December WTI has retraced 13% of its higher move since prices climbed in response to the possibility of OPEC and non-OPEC producers cutting or freezing output. Last week's significant inventory build, combined with increasing doubt that there will be any cuts or freezes, has raised concern that little could be done to ease the global glut. Last week's build is the result of refiners cutting output and increasing U.S. crude imports, which rose last week by 1.99 million barrels per day. U.S. oil production also rose slightly to 8.522 million barrels a day.   

December RBOB fell 3.6 cents, or 2.4%, to $1.448 a gallon and December heating oil declined by 5 cents, or 3.3%, to $1.467 a gallon.

Fundamental News:  Gasoline prices at the pump increased on Wednesday in some southeastern US states, two days after a fatal blast in Alabama shut Colonial Pipeline Co's main gasoline line.  On Tuesday, Colonial said it aimed to reopen the supply artery by Saturday but said the timetable may change as it gets updated information from the site of the accident. 

Separately, Colonial Pipeline Co is allocating space for Cycle 61 shipments on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina.

Major airlines, including Delta, United and American could face higher fuel costs if US regulators allow Colonial Pipeline to stop shipping a dirtier blend of jet fuel by 2018.  The Colonial system carries most of the jet fuel that is delivered via pipeline to the East Coast and used by busy airports serving New York, Washington D.C. and Atlanta, along with US military bases.  The pipeline company said earlier this month it would ask the Federal Energy Regulatory Commission for permission to halt shipments of high-sulfur jet fuel and diesel.  According to industry trade group, Airlines for America, preliminary estimates indicate that jet fuel prices could rise significantly if Colonial receives approval. 

Vitol will lift the first cargo of Libya's Es Sider crude oil since the end of 2014 in November.  The 600,000 barrel shipment is expected to load mid-month from the Ras Lanuf terminal instead of its Es Sider port.  Waha Oil Co resumed production of the oil grade in early October.  

IIR reported that US oil refiners are expected to shut in 826,000 bpd of capacity in the week ending November 4th, increasing available capacity by 303,000 bpd on the week.  IIR expects offline capacity to fall to 498,000 bpd in the week ending November 11th. 

The Federal Reserve held short-term interest rates steady on Wednesday and signaled that it expects to raise rates in December at its final scheduled meeting of 2016.  The Fed's post-meeting policy statement pointed to signs that inflation is firming. It also included a subtle suggestion that the bar to raising rates for the first time in a year is low, saying it only needed some further evidence of economic progress before moving.  The Fed's policy committee voted 8-2 to leave rates unchanged. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $45.73, up 39 cents 

RBOB - Dec $1.4625, up 1.31 cents

HO - Dec $1.4746, up 80 points

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Colonial Pipeline explosion sends spot gasoline to 5 month high

November 02, 2016

Recap: Oil futures fell to their lowest level in a month, erasing early gains made on reports of an explosion on a portion of the Colonial Pipeline. The explosion took place along Line 1 of Colonial's gasoline pipeline, sending spot gasoline to a 5 month high. Gains were pared after Colonial reported that the pipeline would be up and running on Saturday and on renewed doubt that OPEC would reach an agreement to freeze or cut output.

December WTI extended Monday's losses as longs continue to shed length ahead of the EIA report. This spot contract slipped to a low of $46.20 a barrel during trading before trimming losses for a settlement at $46.67, down 19 cents a barrel. December Brent fell 47 cents or 0.97% on the day.

December RBOB tacked on 6.5 cents, or 4.6%, to settle at a one-week high of $1.484 a gallon. December heating oil gained 1.3 cents, or 0.9%, to $1.517 a gallon.

Fundamental News: Colonial Pipeline Co shut down its main gasoline and distillates pipelines on Monday following an explosion and fire in Shelby, Alabama, killing one worker and sending five to the hospital.  It is the second time in two months that Colonial shut in the pipeline.  Colonial said the explosion occurred when a contract crew hit the gasoline pipeline with a trackhoe, igniting gasoline.  The gasoline pipeline will be shut for several days and could resume operations as early as noon on Saturday.  The distillate line was reopened early Tuesday.  Colonial is responsible for supplying about one-third of the 3.2 million bpd of gasoline consumed on the East Coast.  US Customs and Border Protection said it has not received any requests to temporarily waive the Jones Act to allow wider shipping of fuel after the Colonial Pipeline was shut.  Meanwhile, European oil traders rushed to book vessels to carry gasoline to consumers on the US East Coast.  By noon on Tuesday, about 14 ships were provisionally booked to sail from Europe to the region, raising the cost of 37,000 ton vessels from $4.20/ton to more than $17/ton.   

Colonial Pipeline is allocating Cycle 62 shipments on Line 2, its main distillate line from Houston, Texas to Greensboro, North Carolina.

Crude oil stocks at the Cushing, Oklahoma storage terminal are expected to fall by 250,000 barrels in the week ending October 28th to 58.11 million barrels.

The 400,000 bpd Seaway Legacy Pipeline resumed service on Monday following a spill that knocked the pipeline offline for about a week.  The Legacy line and parallel 450,000 bpd twin line were shut following a spill from the Legacy line on October 23rd in Cushing.  The twin line resumed service the following day. 

Saudi Aramco expects oil prices to rebound in the first half of 2017 and for demand to remain healthy following two years of low prices.  The company's CEO, Amin Nasser, said the gap between supply and demand is closing.   

According to Kuwaiti Petroleum Company, Kuwait wants to increase its oil capacity to between 3.2-3.3 million bpd in 2017. 

Goldman Sachs stated that an OPEC deal to cut oil production at its meeting later this month is looking increasingly unlikely.  It said the lack of progress on implementing production quotas and the increasing discord between OPEC producers suggests a declining probability of reaching a deal on November 30th. 

A Kremlin spokesman, Dmitry Peskov, said the Kremlin hopes that a consensus between OPEC and non-OPEC oil producing nations on limiting oil output can be reached. 

Kazakh Energy Minister, Kanat Bozumbayev, said his country would not cut output, particularly as the Kashagan field ramps up to a target of 200,000 bpd by the end of the year. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $46.03, down 65 cents

RBOB - Dec $1.4789, down 52 points

HO - Dec $1.4830, down 3.41 cents 

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Colonial Pipeline blast triggered 11% gain in RBOB market overnight

November 01, 2016

Recap:  Oil prices slipped to their lowest level in a month after non-OPEC members refuse to commit to a cut or freeze in production without an agreement from OPEC. WTI for December delivery fell $1.84, or 3.8% to settle at $46.86, while December Brent lost $1.41, or 2.8%, to finish at $48.30 a barrel.

December WTI slipped below $46.90, the 50% retracement between $52.22 and the August low of $41.58. Today's move also pushed this spot contract below $48.30 and $48.29, the 100 and 50 day moving averages respectively. With a settlement below these technical numbers the opportunity for a run at $45.62, has opened up. This number represents the 62% retracement of the move from $41.58 and $52.22.

November RBOB fell 1.96 cents, or 1.3%, to $1.4495 a gallon, while November heating  slipped 4.67 cents, or 3%, to $1.4955 a gallon.  The RBOB market reversed its losses and rallied 11% higher overnight on news that the Colonial Pipeline was shut again on Monday after contractors in Alabama conducting maintenance caused a blast. 

Fundamental News: 
  Officials and experts from OPEC and non-OPEC countries including Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia met for consultations in Vienna on Saturday and only agreed to meet again in November before a scheduled regular OPEC meeting on November 30th. 

A Nigerian oil workers union confirmed an attack on a pipeline operated by NNPC in the Niger Delta.  The Greenland Justice Mandate group said it attacked the Efurun-Otor line operated by NPDC, a unit of NNPC. 

Separately, Nigerian communities affected by an oil spill in the Niger Delta hub threatened to block access to a pipeline unless NNPC provides a cleanup and compensation within one week.  A pipeline operated by NNPC that runs Escravos to the Warri refinery has been leaking crude since it broke on August 17th in Delta state. 

The Niger Delta Avengers, a Nigerian militant group, threatened on Monday to step up attacks on oil facilities in the Niger Delta if the president pursues a military campaign.  On Tuesday, Nigeria's President, Muhammadu Buhari, is due to meet with Niger Delta leaders and representatives of various militant groups in Abuja, the first time since the government began talks in June to end attacks on oil facilities. 

Venezuela's President, Nicolas Maduro, and opposition leaders in Venezuela agreed to continue a Vatican-backed dialogue following initial talks meant to ease an escalating political standoff.  The two sides, which over the years have held talks that generated few concrete results, will meet again on November 11th.  President Nicolas Maduro's adversaries accused him of creating a dictatorship by blocking a recall referendum on his rule and of illegally overriding the legislature.  The opposition insists that the government allow a recall referendum on Maduro's rule, release dozens of jailed opposition activists and respect Congressional decisions.  

The Seaway Crude Pipeline Co resumed operations of its 400,000 bpd Legacy, or S-1 pipeline, which runs between Oklahoma and the Gulf Coast.  It shut down the pipeline on October 23rd when a spill was discovered near the start of the line in Cushing, Oklahoma. 

Total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle increased by 11.6% in the week ending October 27th to 1.059 million bpd from 949,756 bpd. 

IIR reported that US oil refiners are expected to shut in 622,000 bpd of capacity in the week ending November 4th, increasing available refining capacity by 507,000 bpd from the previous week.  IIR expects offline capacity to fall to 393,000 bpd in the week ending November 11th. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $47.22, up 36 cents

RBOB - Nov $1.5626, up 14.35 cents

HO - Nov $1.5600, up 5.56 cents

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Oil prices fell for first time in six weeks over questions of OPEC's proposal to sever output

October 31, 2016

Recap:  Oil prices fell for the first time in six weeks, as traders began to query OPEC's proposal to sever output. Iran continues to oppose such a move, which sparked this week's sell-off. This week's sell-off came despite a drop in the number of operating U.S. oil rigs, which, according to Baker Hughes, fell by 2 to 441. WTI for December delivery fell $1.02, or 2.05%, to settle at $48.70 a barrel. This reflects a 4.22% drop on the week. December Brent fell 76 cents, or 1.5%, to settle at $49.71 a barrel. This is a drop of 4.05% on the week.

November RBOB slipped 1.80 cent, or 1.21% to settle at 1.4691 a gallon, and 4.1% for the week. November heating oil fell 2.79 cents, or 1.8%, at $1.5422 a gallon, down 2% on the week.

Fundamental News:   OPEC countries gathered in Vienna on Friday for a two-day technical meeting to try and bridge gaps in their positions.  The meetings of the High Level Committee was comprised mainly of OPEC Governors and national representatives.  OPEC delegates said the experts' meeting will continue on Saturday with non-OPEC oil producers after they did not reach an agreement during Friday's meeting.  The experts will meet again on November 25th to discuss the countries' production allocations. 

Russia's Energy Ministry said that the effects of an oil output freeze could be short-lived due to a quick recovery in shale oil production in the US. 

Bakers Hughes reported that the number of rigs searching for oil in the US fell by 2 to 441 in the week ending October 28th. 

The Seaway Legacy crude oil pipeline is expected to resume service late next week after it was shut in due to a spill on October 23rd.  The restart of the 400,000 bpd line is contingent on "no unexpected delays," according to Seaway Crude Pipeline Co LLC.   

Phillips 66's chief executive, Greg Garland, said construction is continuing on the Dakota Access Pipeline even as a dispute with Native Americans has blocked work on a section of the project.  Separately, he stated that US refiners are looking at some run cuts for the fourth quarter of 2016 to reduce the oversupply in the refined product markets.  He said the company's refineries will run in the low 90% range of their combined throughput of 1.8 million bpd during the fourth quarter of the year.   

India's Oil and Natural Gas Corp said India will sign a deal with Venezuela to settle past dues of $530-$600 million payable for its oil equity in the Latin American country.  ONGC Videsh Limted has a 40% stake in the San Cristobal oil field in Venezuela.  Venezuela's PDVSA would give India crude oil every month. 

The UK's North Sea Buzzard oil field resumed production on Wednesday following a month-long maintenance and is currently producing about 140,000 bpd. 

The chairman of Facts Global Energy consultancy, Fereidun Fesharaki, said global gasoline demand will increase as long as crude remains below $60/barrel, and a shortage of Asian gasoline refining capacity will increase US exports higher.  He expects US net exports of refined products to continue rising. 

RBC Capital Markets stated that OPEC may be seen as defunct, if an oil output cut deal fails.  It stated that if OPEC fails to reach an agreement, it will push oil prices down to the low $40/barrel price range or lower. 

Fitch's BMI Research said OPEC will struggle to find a consensus on reaching the production target agreed in September.  It said the most likely outcome of the November 30th OPEC meeting will be a watered down agreement to intervene in the oil market.

Early Market Call - as of 9:00 AM EDT

WTI - Dec $48.06 down 64 cents

RBOB - Nov $1.4595 down 96 points

HO - Nov $1.5248 down 1.74 cents

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Oil prices gained as traders focused on Thursday's EIA report

October 28, 2016

Recap:  Oil detached from the dollar on Thursday, gaining for the first time in four sessions, as traders switched their focus back to yesterday's EIA report, and the possibility of output freezes by members of OPEC. Since last month's preliminary to hold back on output, some OPEC members are changing their tune. Libya, Nigeria and Iran, all which have been racked by war, have expressed belief they should be exempt from such an agreement. Such dissension has led to the recent sell-off, which took the price of oil back below $50 a barrel.

On Thursday, December WTI breached $50 a barrel but lacked the muster to move much beyond that point. This spot contract traded within a narrow range of just over a dollar, before slightly paring gains to settle at $49.72, up 54 cents or 1.1%. December Brent added 49 cents, or 1%, to settle at $50.47.

November RBOB tacked on less than half a cent to $1.487 a gallon, while November heating oil added 1.9 cents, or 1.2%, to $1.570 a gallon. 

Fundamental News:    Genscape reported that crude oil stocks held in Cushing, Oklahoma fell by 339,126 barrels in the latest week.

According to sources, OPEC's Gulf members are willing to cut their output by 4%.  They stated that Saudi Arabia and its Gulf OPEC allies are willing to make that reduction from their peak oil output.  The offer was made at a closed-door meeting in Riyadh, where the ministers met on Sunday.  However, Russian Energy Minister, Alexander Novak, told the officials that Russia would not cut output, but rather freeze it at current levels.  Tough negotiations await a group of OPEC experts as they meet with their counterparts from other oil producers such as Russia on October 28-29 to hammer out details of an output-capping agreement.  Cracks have surfaced in the Algiers agreement, which would reduce output to a range of 32.5-33 million bpd and Saudi Arabia may have to offer a major concession if it wants to cement the agreement.  

Algeria's Energy Minister, Noureddine Boutarfa, said there will be no turning back on OPEC's Algeria deal. 

Iraq's Foreign Minister, Ibrahim al-Jaafari, said Iraq believes there is a relative understanding within OPEC on its demand to be exempted from oil output cuts planned by the group to support prices. 

Iran's crude oil exports in November are set to fall 5% to a four month low of 1.89 million bpd, according to a preliminary tanker schedule.  Iran's crude exports, excluding condensate, to Asia next month are likely to total 1.46 million bpd, up 74,000 bpd from October, while exports to Europe look to fall to 433,000 bpd from 613,000 bpd in October.  

Protests are escalating in Venezuela against the rule of President Nicolas Maduro.  However, there was no sign of any impact on the OPEC member's oil production. 

Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said the country is producing about 1.8 million bpd of oil and stated that the country's output will increase to 2 million bpd.  He also stated that exports from Nigeria's Forcados terminal have started after the completion of repairs.  The force majeure on Forcados will likely be lifted in one week.  Separately, Nigeria's Oil Minister said ending insurgency that has impacted the country's oil production is the first goal of a seven point plan for the petroleum industry.  The government is launching a $10 billion infrastructure program in the Niger Delta and President Muhammadu Buhari will meet representatives of militant groups and community leaders from the Niger Delta next week in a bid to end attacks. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec $49.10 down 62 cents

RBOB - Nov $1.4703 down 1.68 cents

HO - Nov $1.5475 down 2.26 cents

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Doubts over an output freeze from OPEC pushed oil futures lower

October 27, 2016

Recap: Doubts over an output freeze from OPEC outweighed the 553,000 barrel draw in U.S. crude oil stocks, pushing oil futures lower for the third straight day. Today's EIA report was in marked contrast to the 4.8 million barrel build reported by the API on Tuesday, and contrary to the expected 1.7 million barrel build. December WTI settled at $49.18, down 78 cents or 1.56%. December Brent fell 81 cents, or 1.59%, to settle at $49.98.

November RBOB fell 1.7 cents, or 1.2%, to $1.483 a gallon, while November heating oil lost 1.2 cents, or 0.8%, to $1.551 a gallon.

Fundamental News:  Russia's Energy Minister, Alexander Novak, said a potential global deal to cap oil production is unlikely to fail because of Iraq's claims it would not cut its output.  Iraqi officials say the country should get the same exemptions as Iran, Nigeria and Libya, whose output has been hit by wars and sanctions.

While any cut agreed by OPEC at its November 30th meeting could take effect as soon as December 1st, traders say the largest price impact will be in contracts for delivery in early 2017, especially the February contract, rather than in the spot market.  Even January data will be less affected as it expires on the day of the meeting, leaving February as the first contract that covers the meeting itself.  Market data shows a steady inflow of new positions into the February contract, with the number of open positions in February futures up 48% since OPEC proposed an output cut on September 28th.  The options market has also recorded an increase in activity tied to February. 

According to the EIA, US Gulf Coast distillate inventories fell to 38.5 million barrels last week, their lowest level for this time of the year since 2014. 

Baker Hughes sees WTI oil prices in the mid-to-upper $50s/barrel as the catalyst for recovery in North America, including the Gulf of Mexico.  Its CEO, Martin Craighead, said the North American market had continued to "grind slowly upwards" as the rig count, particularly in the US, increases from troughs seen six months ago. 

Hess Corp's Chief Executive, John Hess, said its 2016 exploration and production capex should be $2 billion or about $100 million below prior estimates.  He said the company is making preparations to increase Bakken activity in 2017.  Bakken production is estimated to average 105,000 bpd of oil equivalent. 

Enterprise said the Seaway Legacy pipeline was shut following a crude spill in Cushing, Oklahoma.  It stated that clean-up of the site is underway and the company is working with regulatory authorities to develop a repair plan. 

IIR reported that US oil refiners are expected to shut in 1,118,000 bpd of capacity in the week ending October 28th, increasing available refining capacity by 276,000 bpd from the previous week.  IIR expects offline capacity to fall to 610,000 bpd in the week ending November 4th.  

Early Market Call - as of 9:00 AM EDT

WTI - Dec $49.50 up 32 cents

RBOB - Nov $1.4864 up 33 points

HO - Nov $1.5679 up 1.68 cents

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December WTI fell below $50 a barrel for the first time since the beginning of October

October 26, 2016

Recap: December WTI settled below $50 a barrel for the first time since October 4th, as traders considered the possibility that OPEC may not come to an agreement to freeze output. Iraq's weekend comments about being exempt from any such agreement, continued to be at the forefront of trader's minds and this in conjunction with a stronger dollar, put pressure on prices. December WTI settled at $49.96 a barrel, down 56 cents, or 1.1%. Brent for December delivery slipped 67 cents, or 1.3% to settle at $50.79 a barrel.

Early morning gains evaporated throughout the session as traders weighed in on the Iraqi news and on expectations that U.S. oil stocks grew by as much as 1.7 million barrels last week. Oil prices have risen just over 16% since news began to circulate about a possible output freeze from within and outside OPEC. The rise in prices sparked U.S. producers into activating rigs, which has worked to keep the rally contained. We should expect to see more of this "push-me-pull-you" movement within the market as we move closer to the November 30th meeting.

November RBOB fell less than half a cent to $1.501 a gallon, while November heating oil fell by 1.7 cents, or 1.1%, to $1.563 a gallon. 

Fundamental News: The IEA said today it looks for global oil demand to rise by 1.2 million b/d in 2017, basically unchanged from demand growth recorded in 2016. The head of the IEA said he sees the global oil market rebalancing in the second half of 2017, unless there is a supply intervention that raises prices and draws suppliers back into production earlier than that.

Venezuelan Oil Minister Eulogio del Pino said Tuesday that his country has proposed that non-OPEC countries remove 400,000-500,000 b/d of crude oil production from the market to help support prices. He said any agreement needs to last for at least 6 months. The oil minister is visiting a number of oil producing countries this week, including Russia, in an attempt to drum up support for a production reduction agreement. He looks for any production deal to be finalized at the OPEC meeting scheduled for November 30th.

Iraq's Prime Minister, after meeting with the visiting OPEC Secretary General said today that Iraq was ready to cooperate with OPEC "on a correct basis". Iraq reportedly has hinted it may agree to a production cut, but from a higher baseline production level, which in effect would preserve current output levels. Iraq has said it produces more than OPEC estimates by nearly 300,000 b/d. Falah al-Amri, head of state oil marketer SOMO, said Iraq will not allow production to go back below 4.7 million b/d, "not for OPEC, not for anybody else." Meanwhile, Reuters reported that Iraqi oil exports are set to rise slightly In October up some 20,000 b/d to 3.39 million b/d.

OPEC formally invited non-member oil producers to attend a technical meeting this weekend to discuss a "road map" for production curbs. Mexico, Brazil, Kazakhstan, Russia and Norway were reported to have been formally invited. Mexico has confirmed it will attend, while Norway has said it will decline to participate.  The Russian energy minister said Tuesday that Russia would consider a production cut however, it would prefer an output freeze. Kazakhstan though said Tuesday it has received no invitation to either this weekend's meeting or next month's OPEC meeting.

Early Market Call - as of 9:40 AM EDT

WTI - Dec $49.11, down 87 cents

RBOB - Nov $1.4622, down 3.81

HO - Nov $1.5430, down 2.01 cents 

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