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Market Intel Archives

OPEC members decided to extend their agreement to cut back on output

December 01, 2017

Recap: Oil prices hovered close to unchanged for most of the session, after posting overnight gains as OPEC members and other major producers agreed to extend their agreement to cut back on output. Bulls were kept at bay by Wednesday’s inventory report, which indicated continued growth in U.S. production. With U.S. production working to keep a lid on WTI, its discount to Brent widened by 49 cents on Thursday. January WTI settled at $57.40 a barrel, up 10 cents, or 0.2%, while Brent for January delivery tacked on 46 cents, or 0.7%, to settle at $63.57 a barrel. December RBOB fell 0.1% to $1.728 a gallon, with the contract falling about 0.2% for the month. December heating oil was down 1.5% to $1.893 a gallon, for a monthly gain of about 0.7%.

Fundamental News: On Thursday, OPEC and non-OPEC producers led by Russia agreed to extend oil production cuts by nine months until the end of 2018.  An OPEC delegate said OPEC also agreed to review the output agreement at its meeting on June 21st.  However, OPEC did not discuss an exit plan for the oil output cuts.  OPEC delegates stated that both Nigeria and Libya have been asked to cap their oil output at 2017 highs, with both nations agreeing to keep their output below 2017 highs.  Both countries have been previously exempt from the cuts due to unrest and lower than normal production.  Oman’s Oil Minister said Nigeria has agreed to cap its output at 1.8 million bpd.  Saudi Arabia’s Oil Minister, Khalid al-Falih, said OPEC will be agile given variables such as US shale oil output.  He expects inventories to fall to desired targets in the second half of 2018.  He added that the 2018 outlook for oil is extremely bullish.  Russia’s Energy Minister said the oil producers can adjust their agreements in June if the market situation changes.       

Petrologistics reported that OPEC and Russian crude oil exports increased in 2017 despite producers agreeing to cut their production starting in January 2017.  OPEC exported 24.24 million bpd on average in 2017 by October, compared with 23.91 million bpd between October 2015 and September 2016. 

The EIA reported that US oil production increased by 290,000 bpd to 9.48 million bpd in September.  US crude production for August was revised down by 12,000 bpd to 9.19 million bpd.  North Dakota’s oil production increased by 15,000 bpd in September, Texas’ production increased by 193,000 bpd on the month and production offshore in the Gulf of Mexico fell by 15,000 bpd on the month.  US total oil demand in September fell by 0.9% or 176,000 bpd on the year to 19.581 million bpd.  Its gasoline demand in September fell by 1.6% or 155,000 bpd on the year to 9.329 million bpd while its distillate demand increased by 0.3% or 10,000 bpd on the year to 3.922 million bpd. 

The US EPA will require fuel companies to blend 19.29 billion gallons of renewable fuels into the country’s fuel supply in 2018, up slightly from 19.28 billion gallons required for 2017.  That will include 15 billion gallons of conventional biofuels, such as corn-based ethanol, in line with 2017, and 4.29 billion gallons of so-called advanced biofuels, up from 4.28 billion in 2017.  For 2019, the EPA set a volume target for biodiesel at 2.1 billion gallons, unchanged from 2018. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp storage hub in the week ending November 30th fell by 4.44% on the week and by 8.13% on the year to 882,000 tons.  Gasoil stocks increased by 5.48% on the week but fell by 26.45% on the year to 2.06 million tons while fuel oil stocks fell by 8.77% on the week but increased by 53.12% on the year to 957,000 tons. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $58.29, up 89 cents

RBOB - Jan $1.7430, up 1.32 cents

HO -Jan $1.9291, up 3.12 cents


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Oil prices slipped for the third straight session

November 30, 2017

Recap: Oil prices slipped for the third straight session, while Russia contemplates extending existing production cuts, as such a move could cause U.S. shale producers to ramp up output. Trading was volatile, as traders reacted to contradictory statements from oil ministers tied to the Nov. 30th OPEC lead meeting of major global producers. For the first time in a week, WTI traded below $57 a barrel, and Brent dipped below $62 a barrel, as traders set their strategies for the aforementioned meeting. Losses were pared in pre-settlement trading and ahead of the meeting. January WTI fell 69 cents, or 1.19%, to settle at $57.30 a barrel, while January Brent slipped 50 cents, or 0.79%, to settle at $63.11 a barrel.

December gasoline fell by 2.3% to $1.731 a gallon. December heating oil ended down 1.5% at $1.922 a gallon. The December contract expires at Thursday’s settlement.

Fundamental News:  OPEC and its 10 non-OPEC allies appear to be debating between the two options for extending its 1.8 million bpd production cut agreement past its March expiry, as they prepare to meet on Thursday.  Kuwait’s Interim Oil Minister, Essam al-Marzouq, said they have not agreed on the time frame yet.  He said the Joint Ministerial Monitoring Committee is recommending a 9-month cut extension.  Saudi Arabia’s Energy Minister, Khalid al-Falih, who has been pushing for a nine-month extension of the cuts through the end of 2018, acknowledged that the producer coalition had yet to reach consensus on how soon the overhang of oil in storage will fall to normal levels.  He told the monitoring meeting on Wednesday that cuts needed to be extended as the rebalancing of oil markets was not yet complete.  Meanwhile, Russia’s Energy Minister, Alexander Novak, after meeting with his Saudi counterpart, believes the supply cut deal will be extended and added that all options are on the table.  He said there is consensus within the monitoring committee on extending oil cuts. 

According to sources, OPEC will debate an oil production cap for Nigeria at 1.8 million bpd and Libya at 1 million bpd as part of a planned nine-month extension to the OPEC and non-OPEC output cut agreement.  Meanwhile, reports suggest that an OPEC delegate noted that the Gulf Cooperation Council agree that a nine-month extension to the output policy agreement is needed. 

The EIA reported that crude inventories in Cushing, Oklahoma fell by 2.9 million barrels to 58.3 million barrels last week, its largest weekly draw since September 2009. 

Several tankers carrying diesel was heading for the NY Harbor trading hub on Wednesday following a sharp decline in East Coast stocks and winter’s approach.  The New York-bound cargoes include at least two 38,000 ton tankers from Brazil.  Tankers heading to New York also include a 60,000 ton tanker, which loaded its cargo from a 2 million ton tanker anchored off West Africa after loading in Asia last month.  Another 60,000 ton cargo is also heading to New York from Nigeria.  A third long-range tanker is en route from Saudi Arabia.  Some traders said the cargoes could be rerouted before landing in New York Harbor. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $57.65, up 35 cents

RBOB - Dec $1.7442, up 1.36 cents

HO -Dec $1.9342, up 1.18 cents


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Traders are waiting to hear if OPEC and other major producers will vote to extend output cuts

November 29, 2017

Recap: WTI continued its decline below $58 a barrel as traders await word as to whether or not OPEC and other major producers will vote to extend output cuts. After trading at or slightly above unchanged, neither WTI nor Brent was able to muster enough strength for a follow through to the upside. January WTI fell 12 cents, or 0.21%, to settle at $57.99 a barrel, while January Brent settled at $63.61 a barrel, down 23 cents, or 0.36%.December RBOB fell 1% to $1.772 a gallon and December heating oil added 0.2% to $1.951 a gallon.

Fundamental News:  Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 2 million barrels to 59.2 million barrels in the week ending November 24th.  Separately, PIRA Energy estimated that oil stocks in Cushing fell by 2.7 million barrels last week.   

OPEC is heading for tougher than expected policy talks this week as Saudi Arabia pushes to extend oil output cuts by nine months while Russia is hesitating on the cuts’ duration due to concerns that the market could overheat.  A joint OPEC and non-OPEC technical committee recommended extending the deal until the end of next year, with an option to review the deal in June.   

Goldman Sachs stated that the outcome of the meeting was uncertain as Brent prices have risen above $63/barrel.  It stated that it views risks to oil prices as skewed to the downside this week, as current prices, time spreads and positioning already reflect a high probability of a nine month extension.  Meanwhile, Citigroup’s head of commodity research, Ed Morse, said the world’s largest exporters of crude must agree to extend their existing agreement on cutting output to the end of next year in order to avoid a sell-off in the price of oil.  It stated that OPEC may, however, defer an oil output cut decision until the first quarter of 2018.  Societe Generale expects OPEC to maintain its current production targets steady through 2018. 

The UAE’s Energy Minister, Suhail bin Mohammed al-Mazroui, said a meeting of global oil producers in Vienna this week to discuss extending output cuts will not be easy.  However, he added that he was personally optimistic that producers would reach an agreement that served the market.  He said several options for extending the output cuts would be discussed. 

Iraq is in favor of OPEC’s oil output cut extension, with officials stating that they will go with whatever OPEC consensus is. 

TransCanada’s 590,000 bpd Keystone crude oil pipeline resumed operations on Tuesday but the company has no timetable on when US regulators will allow it to return to full capacity.  The pipeline, linking Canada’s oil sands to US refineries, was shut down nearly two weeks ago after a 5,000 barrel leak in South Dakota on November 16th. 

TransCanada Corp’s chief executive, Russ Girling, said the company’s talks with shippers for its Keystone XL pipeline have been encouraging in the last weeks, and the company expects to eventually rally enough commercial support.  The company is expected to make a final investment decision on the $8 billion Alberta-Nebraska pipeline by December. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $57.80, down 22 cents

RBOB - Dec $1.7686, down 43 points

HO - Dec $1.9426, down 83 points


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Keystone Pipeline was forced to close on Friday but will reopen this week

November 28, 2017

Recap: Oil prices were lower on Monday, with WTI getting hit harder than Brent. News that the Keystone Pipeline, which was forced to close on Friday, would reopen this week, put additional pressure on WTI. The disparity in the pressure between both blends forced a widening of the discount of WTI to Brent. This spread, which settled at -$4.91 on Friday, ended the Friday’s session at -$5.73. Doubt about an extension of the OPEC lead production-cut deal added to the pressure. January WTI fell 84 cents, or 1.47%, to settle at $58.11 a barrel, while January Brent slipped 2 cents, or 0.03%, to settle at $63.84 a barrel.

December RBOB finished up less than 0.1% at $1.789 a gallon and December heating oil fell 0.3% to $1.948 a gallon.

Fundamental News: TransCanada Corp’s Keystone Pipeline leaked substantially more oil, and more often, in the US than indicated in risk assessments the company provided to regulators before the project began operating in 2010.  The existing Keystone system from Hardisty, Alberta to the Texas Coast has had three significant leaks in the US since it began operations in 2010, including a 5,000 barrel spill this month in South Dakota and two others, each about 400 barrels in South Dakota in 2016 and North Dakota in 2011. 

Separately, TransCanada Corp said the Keystone Pipeline is expected to resume crude oil deliveries on Tuesday, November 28th.  The pipeline repair and restart plans have been reviewed by PHMSA with no objections.  As part of reviewed plans, TransCanada will operate pipeline at a reduced pressure starting on Tuesday, November 28th. 

OPEC’s Secretary General, Mohammad Barkindo, said the current market conditions, the returning level of confidence and optimism in the industry are all evidence of the outcome of the group’s efforts.  He said OECD commercial oil inventories have steadily fallen to stand 140 million barrels above the five-year average in October. 

Saudi Arabia has yet to convince Russia to commit to extending the OPEC/non-OPEC production cut agreement through the end of 2018, ahead of Thursday’s meeting in Vienna.  Russia’s Energy Minister, Alexander Novak, has stated that he would prefer to wait until closer to the deal’s March expiry to announce any decisions.  He has stated that he supports continuing the cuts but has repeatedly declined to say for how long exactly. 

OPEC sources stated that oil markets will rebalance after June 2018 at the earliest, signaling the need to extend existing production cuts well into next year.  The conclusion from OPEC’s national representatives and the group’s secretariat came after a meeting on Thursday and Friday. 

Iran is pushing to retain customers for its oil in Asia, hoping that price reductions will increase the appeal of its crude compared with other Middle Eastern supply even as the potential threat of further US sanctions on the country looms.  The National Iranian Oil Co has in the last few weeks offered spot cargoes, ranging from light to heavy grades, to its term buyers in Asia, after setting December prices at the lowest in years against comparable Saudi grades. 

IIR reported that US oil refiners are expected to shut down 508,000 bpd of capacity in the week ending December 1st, increasing available refining capacity by 188,000 bpd from the previous week.  IIR expects offline capacity to fall to 229,000 bpd in the week ending December 8th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.85 down 25 cents

RBOB - Dec $1.7801 down 92 points

HO -Dec $1.8464 down 14 points


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Oil market hit highest level in two years after Keystone Pipeline cut Canadian crude flows to the US

November 27, 2017

Recap: On Wednesday, the oil market rallied to the highest level in more than two years.  The market opened 29 cents higher at $56.83 and posted a low of $57.03 before it extended its recent gains amid the news that the Keystone Pipeline cut Canadian crude flows to the US.  TransCanada announced that the Keystone Pipeline would cut deliveries by 85% or more through the end of November.  The oil market traded to $58.05 early in the morning but later briefly pared some of its gains following the release of the EIA report, which showed a draw of 1.86 million barrels on the week, compared with expectations of a 2 million barrel draw.  The market later posted its high of $58.09 ahead of the Thanksgiving holiday as it remained well supported by the Keystone pipeline news.  The January WTI contract settled at $58.02, up $1.19, while the January Brent contract settled at $63.32, up 75 cents.  Meanwhile, the heating oil market settled down 33 points at $1.9326 and the RBOB market settled down 52 points at $1.7679.

Fundamental NewsSaudi Arabia is lobbying oil ministers to agree next week on a nine-month extension to the OPEC-led supply cuts.  OPEC, non-member Russia and nine other producers are cutting output by about 1.8 million bpd until March 2018, and will discuss extending the deal at the November 30th meeting. 

Venezuela’s Oil Minister, Eulogio Del Pino, said the oil market has finally found balance as inventories are declining. 

According to a source, OPEC is seeking to add another 20 non-members to its efforts to rebalance world oil markets.  ING said the oil market may see a severe sell-off if OPEC disappoints. 

Chicago Board of Trade ethanol futures fell to a session low of $1.394/gallon on Wednesday after the US EIA reported record weekly production rates and higher stocks.  The EIA said US ethanol output in the week ending November 17th was 1.074 million bpd, up 20,000 bpd on the week and topped the previous record of 1.06 million bpd from the week ending September 3rd. 

Genscape reported that crude storage in the Amsterdam-Rotterdam-Antwerp hub fell by 4.7% in the week ending November 17th to 53.5 million barrels. 

IIR reported that US oil refiners are expected to shut in 535,000 bpd of capacity in the week ending November 24th, increasing available refining capacity by 272,000 bpd from the previous week.  IIR expects offline capacity to fall to 347,000 bpd in the week ending December 1st. 

TransCanada Corp told some customers that it will cut deliveries by 85% or more on its 590,000 bpd Keystone crude pipeline through the end of November.  The pipeline was shut last week after a 5,000 barrels spill in South Dakota.  Some customers have received higher cuts depending on commitment levels.  Separately, TransCanada Corp confirmed that the Nebraska Public Service Commission approved an alternative route for the proposed Keystone XL Pipeline project through the state.  It is cautiously optimistic about the Keystone pipeline.  TransCanada said it would conduct a review of the ruling while assessing how the decision would impact the cost and schedule of the project.     
 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $58.42, down 53 cents

RBOB - Dec $1.7861, down 19 points

HO -Dec $1.9493, down 63 points


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Oil prices bounced on Tuesday in anticipation of an extension of the OPEC lead agreement

November 22, 2017

Recap: Oil prices bounced on Tuesday in anticipation of an extension of the OPEC lead agreement to cut back on output by some of the world’s most powerful producers. WTI rose to its highest level in a week, while Brent peaked at $62.84 a barrel, just above yesterday’s high. The rise in prices was contained on signs of higher output in the U.S; and as traders await the release of U.S. inventory numbers. Gains were pared, with January WTI gaining 41 cents, or 0.7%, to settle at $56.83 a barrel, while Brent for January delivery settled at $52.57 a barrel, up 35 cents, or 0.6%.

December RBOB rose 1.7% to $1.773 a gallon, while December heating oil added 0.2% to $1.936 a gallon.

Fundamental News:  TASS news agency reported that Russia’s oil producers and energy ministry have discussed a six-month extension to global oil output cuts, which is shorter than a 9-month extension suggested by Russia’s President Vladimir Putin.  Energy Minister, Alexander Novak and domestic oil producers held a meeting last week to discuss the deal, which is scheduled to expire on March 31, 2018. 

Three OPEC sources stated that commodities fund manager, Andy Hall, will participate in an OPEC shale oil workshop, as the group seeks a wider range of views on the market outlook ahead of its November 30th meeting.  The fund manager is among the speakers scheduled to attend the workshop at OPEC’s Vienna headquarters on Wednesday, which will gather a number of OPEC officials, including Secretary General, Mohammad Barkindo. 

Westwood Global Energy Group said US output is expected to increase faster than implied by the rising rig count, which has increased from 316 rigs in mid-2016 to 738 last week, as producers become more productive per well.  It forecasts an 18% increase in active rigs in 2018.   

FGE warned that though supply disruptions could lead to increases in the oil price next year, the market could increase again towards 2019 if US production continued to increase.  It sees production growth of about 1-1.5 million bpd in 2018 and 2019. 

The National Bureau of Statistics reported that Nigeria’s oil production increased to 2.03 million bpd in the third quarter of the year, the highest since the first quarter of 2016.  It was up 160,000 bpd from the previous quarter and up 420,000 bpd on the year. 

Colonial Pipeline Co is allocating space for Cycle 67 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee. 

Euroilstock reported that Europe’s refinery output in October fell by 2.4% on the month but increased by 0.3% on the year to 10.957 million bpd.  European gasoline output in October fell by 1.6% on the month but was unchanged on the year at 2.528 million bpd while middle distillates output fell by 3.5% on the month but increased by 2.6% on the year to 5.702 million bpd and fuel oil output increased by 8% on the month and by 3.3% on the year to 1.226 million bpd.  European refinery crude intake in October fell by 2.7% on the month but increased by 0.7% on the year to 10.484 million bpd. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $57.83, up $1.00

RBOB - Dec $1.7715, down 21 points

HO - Dec $1.9459, up 98 points


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A final decision will be made about extending output cuts at the Nov. 30th OPEC meeting

November 21, 2017

Recap: Oil prices began the session trading to the upside, however those holding record long positions ahead of the pending OPEC meeting appear to be developing a wait and see attitude ahead of the Nov. 30th OPEC meeting and decided to lighten up on length. Adding to the slippage was strength in the dollar and the expiration of the December WTI contract. January WTI, the new spot month, briefly fell below $56 a barrel, but losses were pared due to jitteriness by traders. January WTI fell 29 cents, or 0.5%, to settle at $56.42 a barrel, while January Brent settled at $62.22 a barrel, down 50 cents, or 0.80%.

December RBOB fell less than 0.1% to $1.734 a gallon, while December heating oil lost 0.7% to $1.932 a gallon.

Fundamental News: Iran’s Oil Minister, Bijan Zanganeh, said that a majority of OPEC members support extending output cuts but a final decision will be taken at their next meeting on November 30th.  He said if the production cut is extended, the exemption for Iran will also be extended.  OPEC allowed Iran to increase its output slightly to help it recover market share lost while under Western sanctions. 

The UAE’s Oil Minister, Suhail Al Mazrouei, said OPEC needs to extend limits on output to rein in the remaining excess in global supply, but added that it is not considering making deeper cuts.  He said about 158 million barrels in surplus inventories still need to be cleared. 

Russian Energy Minister, Alexander Novak, said Russia would determine its position on the possible extension of a global deal to cut oil output later in November.  He said he would discuss the possible deal extension with Russian oil companies on Tuesday. 

According to the Joint Organizations Data Initiative, Saudi Arabia’s oil output in September increased by 22,000 bpd on the month to 9.973 million bpd.  It reported that the country’s exports fell by 159,000 bpd to 6.549 million bpd in September compared with 6.71 million bpd in August.  Saudi Arabia’s crude stocks fell by 1.344 million barrels to 253.271 million barrels in September. 

According to OPEC and industry sources and US government data, Venezuela’s energy sector is struggling to pump enough crude oil to meet the country’s OPEC output target.  Venezuela’s oil output reached a 28 year low in October as PDVSA struggled to find the funds to drill wells, maintain oilfields and keep pipelines and ports working.  Venezuela’s oil production, which has declined by about 20,000 bpd per month since last year, is on track to fall by at least 250,000 bpd in 2017 as US sanctions and a lack of capital impacts operations.  Venezuela produced 1.863 million bpd in October, undershooting its OPEC target by 109,000 bpd.   

Oil exports from southern Iraq have increased by 150,000 bpd in November to 3.5 million bpd in the first 20 days of the month.  The increase follows a decline in output in northern Iraq since mid-October, when Iraqi forces took back control of fields from Kurdish fighters.  Northern oil exports averaged about 250,000 bpd so far in November, down from an estimated 450,000 bpd in October. 

Iraq’s Supreme Federal Court, which voided results of a Kurdish independence referendum on Monday, reached its ruling without input from representatives of the Kurdish autonomous region. 

IIR reported that US oil refiners are expected to shut in 411,000 bpd of capacity in the week ending November 24th, increasing available refining capacity by 325,000 bpd from the previous week.  IIR expects offline capacity to fall to 307,000 bpd in the week ending December 1st. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $56.46, up 4 cents

RBOB - Dec $1.7466, up 27 points

HO -Dec $1.9233, down 88 points


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Oil prices rose on Friday, propped up by shut-in at TransCanada Corp's Keystone Pipeline

November 20, 2017

Recap: Oil prices rose on Friday, ending five straight sessions of losses for Brent and three for WTI. Propping up prices was Saudi Arabia’s reiteration of its support for extending OPEC-led production cuts and the shut-in, due to a leak, at TransCanada Corp’s 590,000 barrel per day Keystone Pipeline located in South Dakota. December WTI settled at $56.44 a barrel, up $1.41 or 2.56%, while January Brent tacked on $1.36, or 2.22%, to settle at $62.72 a barrel.

December RBOB settled at $1.74447 a gallon, up 3.10 cents, while December heating oil tacked on 4.45 cents to settle at $1.9466 a gallon.

Fundamental NewsSaudi Arabia’s Energy Minister, Khalid al-Falih, said the world will still have a surplus of oil by the end of March next year, signaling a willingness to extend output cuts well into 2018 when OPEC meets at the end of November.  He also said he did not want oil prices to rise too fast and too soon to shock consumers, adding that the exit from production cuts would need to be gradual to make sure market reaction is smooth. 

Baker Hughes reported that the number of rigs searching for oil in the week ending November 17th was unchanged at 738. 

Iran’s oil production capacity is forecast at 5.4 million bpd by 2022-23, with crude capacity reaching 4.4 million bpd and condensate capacity reaching 1 million bpd. 

Iraqi crude exports fell to a 20-month low in the first half of November as the dispute between the federal government and the semi-autonomous Kurdish region halted exports from disputed areas of Kirkuk province.  Iraq’s total exports fell by about 1% to 3.67 million bpd in the first 15 days of November compared with 3.72 million bpd during the entire month of October. 

Bank of America Merrill Lynch sees the average WTI price at $49/barrel in 2017 and $50/barrel in 2018.  It forecast the price of Brent at $53/barrels for 2017 and $54/barrel for 2018. 

Energy Aspects stated that oil backwardation should steepen as supplies are absorbed.  It stated that a pullback in prices may be good for the market to ensure a smooth rollover of the current OPEC production deal. 

IIR reported that US oil refiners are expected to shut in 586,000 bpd of capacity in the week ending November 17th, increasing available refining capacity by 443,000 bpd from the previous week.  IIR expects offline capacity to fall to 321,000 bpd in the week ending November 24th and 307,000 bpd in the subsequent week.

Bloomberg reported that global refinery outages reached 1.57 million bpd in the week ending November 16th.  It was down from 2.65 million bpd during the previous week. 

US refineries are struggling to meet increasing demand for distillate fuel domestically and abroad, which is expected to tighten the distillate market in 2018.  Even if the northern hemisphere winter temperatures are average, the distillate market looks set to enter 2018 with lower than average stocks and increasing demand, which should keep prices and refining margins firm.  The gross refining margin for turning Brent into US heating oil has increased to almost $19/barrel from a recent low of less than $11/barrel in May, despite record US refinery production of distillate.  Distillate stocks have fallen by 38 million barrels since the start of the year compared with a seasonal decline of less than 10 million barrels in 2016 and a ten-year average of just 5 million barrels.  Stocks are now 24 million barrels below the previous year’s level and 9 million barrels below the decade average. 


Early Market Call - as of 9:00 AM EDT

WTI - Dec  $56.12, down 48 cents

RBOB - Dec $1.7298, down 1.49 cents

HO -Dec $1.9455, down 3.11 cents


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Oil prices continue their downward move

November 17, 2017

Recap: Oil prices continued their downward move, however, the sell-off appears to be tempering. Thursday’s session was the second in a row to post higher lows, indicating a slow-up by bears. The pullback from recent highs is not surprising given the downbeat forecast for demand growth and less than stellar data economic out of China. This took the wind out of the geopolitical rise that was attributed to conflicts in the Middle East. December WTI fell 19 cents, or 0.34%, to settle at $55.14 barrel, while Brent for January delivery settled at $61.36 a barrel, down 51 cents, or 0.82%.

December RBOB fell 1.4% to $1.714 a gallon and December heating oil shed 0.4% to $1.902 a gallon.

Fundamental News: The head of the IEA, Fatih Birol, said the US will, in the long term, become the leader of oil and gas production worldwide.  He said the IEA expects oil markets to rebalance next year if oil demand remains more or less as high as it is today and if OPEC and non-OPEC continue with their production cuts.

Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, November 14th fell by 2,904,546 barrels on the week and by 1,720,829 barrels from Friday, November 10th to 62,851,901 barrels. 

The AAA reported that about 50.9 million Americans will travel 50 miles or 80 km or more away from home on November 22-26, a 3.3% increase over last year and the most since 2005.  The largest share of travel, about 89%, will be on US roads. 

Iraq’s Oil Ministry reported that a Turkish energy delegation has met with Iraqi top oil officials in Iraq to discuss issues including the resumption of Kirkuk oil exports via the Turkish port of Ceyhan. 

Mexico is seeking to stock up on diesel fuel before market liberalization measures take effect.  Pemex has been on a buying spree of about a tanker load of diesel a day from the US and recently purchased diesel from as far as the UAE and China.  Mexico is set to increase price limits on the fuel, making 2018 prices uncertain. 

Saudi Arabia’s Energy Minister, Khalid al-Falih, said it was too early to make an assessment on a possible extension to global oil output cuts but that the market would still not be balanced by March.  He said a decision will be made in two weeks on a possible extension. 

Citigroup analysts stated that Russia would be able to quickly restart 95% or 285,000 bpd of the 300,000 bpd of production it shut in under the OPEC-led output cut agreement once the deal expires.  It said cutting back highly productive new wells was likely Russia’s primary strategy when the country agreed to the cuts. 

Ecuador’s Oil Minister, Carlos Perez, said the country has temporarily shelved a plan to ask OPEC for an exemption from its oil production cut as measures adopted by OPEC are working to support oil prices.  He said the country will follow OPEC’s decision on production. 

Anadarko Petroleum Corp forecast an 11% increase in sales volumes for 2018 as shale production increases oil output.  It expects to sell 245-255 million barrels of oil equivalent in 2018, higher than the 224-228 million bpd of oil equivalent for 2017.  The company expects to spend $4.2 billion to $4.4 billion for 2017 and $4.2 to $4.6 billion in 2018.

ABN Amro forecast that the price of WTI is expected to reach $70/barrel and the price of Brent is expected to reach $75/barrel by the end of 2018.  It said the market will increasingly fear supply shortages, resulting in higher prices and changes in the curve. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $55.89, up 75 cents

RBOB - Dec $1.7236, up 1 cent

HO -Dec $1.9179, up 1.58 cents


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Oil prices fell on Wednesday marking the fourth straight session for falling prices

November 16, 2017

Recap: Pressured by the unexpected 1.9 million barrel build in U.S. crude oil inventories and the 894,000 barrel build in gasoline stocks, as reported by the EIA, oil prices fell on Wednesday. This marked the fourth straight session for falling prices, as they traded near two-week lows. Although prices fell in regard to the EIA report, the build was not as significant as the 6.5 million barrel build reported by The API, which sparked buying down around the session’s lows. December WTI crude fell 37 cents, or 0.7%, to settle at $55.33 a barrel, while January Brent settled at $61.87 a barrel, down 34 cents, or 0.55%.

Heating oil prices bounced after the EIA reported a small draw of 799 barrels in U.S. distillate stocks, as the report also showed distillate stocks in the U.S. Gulf Coast fell to a one-year low, despite a rise in refining rates, led by a leap in East Coast refining. The rise in PADD I distillate stocks tempered the rise in prices. Most likely, the drawdown in PADD III distillate stocks is due to a rise in exports. December heating oil rose less than 0.1% to $1.909 a gallon, while December gasoline lost 1.3% to $1.739 a gallon.

Fundamental News: Russia’s Rosneft sees the exit from the OPEC and non-OPEC production cut agreement as a serious challenge.  Russia’s Energy Minister, Alexander Novak, met Russian oil company executives on Wednesday ahead of the November 30th OPEC meeting.  The ministry said Russian domestic oil producers are committed to a global deal to cut oil output.  It said Russia’s Energy Minister and the companies would continue consultations on the global oil market situation.  The Russian oil companies and the Energy Ministry are scheduled to meet again next week to discuss OPEC and the oil pact. 

A combined 75,206 bpd of oil and 215,122 million cubic feet/day of natural gas production are shut in at four platforms in the wake of a November 8th fire at Royal Dutch Shell’s Enchilada platform. 

Oil drilling in the Alaskan wildlife refuge moved a step closer to reality on Wednesday as a Senate panel voted 13-10 to open part of the reserve.  The measure has been attached to budget legislation.  Senator Lisa Murkowski, an Alaskan Republican and head of the Senate Energy Committee, said drilling in the Arctic National Wildlife Refuge is needed to provide jobs and increase the country’s resource base. 

Russia and Venezuela signed a debt restricting deal on Wednesday allowing Venezuela to make minimal payments to Russia in the next six years to help it meet its obligations to other creditors.  The Russian Finance Ministry said under the deal, Venezuela will pay Russia back a total of $3.15 billion over a 10-year period.  Venezuela has public external debts of about $150 billion, including $45 billion in government debt and another $45 billion of PDVSA’s debt, according to the International Institute of Finance. 

Separately, Venezuela’s PDVSA will use existing crude oil customers or new Indian state buyers as intermediaries to settle $449 million owed to India’s ONGC Videsh Ltd.  India’s Oil and Natural Gas Corp has an investment in a Venezuelan energy project and has so far received only $88 million of a $534 million dividend payment. 

IIR reported that US oil refiners are expected to shut in 586,000 bpd of capacity in the week ending November 17th, increasing available refining capacity by 443,000 bpd from the previous week.  IIR expects offline capacity to fall to 321,000 bpd in the week ending November 24th. 

According to US Customs data, nearly 300,000 barrels of gasoline arrived in New Jersey and Rhode Island from the UK late last week, ending a two-week period in which the US Atlantic Coast did not receive any gasoline from Europe. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $55.13, down 21 cents

RBOB - Dec $1.7246, down 1.41 cents

HO -Dec $1.9029, down 58 points


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