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Market Intel Archives

Oil futures fell for sixth consecutive session

March 14, 2017

Recap:  Oil futures fell for the sixth consecutive session as hedge funds continue to unwind length. As of last Monday, prices had fallen over 8%, marking the largest week on week sell-off in four months. April WTI settled at $48.40 a barrel, down 9 cents, or 0.2%, while Brent for May delivery fell 2 cents, 0.04%, to settle at $51.35 a barrel.  

April RBOB settled down 1.9 cents, or 1.2%, at $1.581 a gallon and April heating oil fell less than half a cent, or 0.2%, to $1.501 a gallon.

Fundamental News:  According to Genscape, crude oil stored in Cushing, Oklahoma increased by 1.7 million barrels in the week ending March 10th to 68.5 million barrels.

Kuwait's Oil Minister, Essam Al-Marzouq, said the country wants to extend a global deal to cut oil supply beyond June to rebalance the market and bring crude prices to an acceptable level.  He said preliminary data was "very positive" and showed that compliance with the deal in February had increased to 95% from 91%.

Iranian Communications Minister, Mahmoud Vaezi said at the start of a meeting with Russia's Energy Minister, Alexander Novak, that they would discuss a deal to supply Russia with 100,000 bpd of Iranian crude oil.

Russia's Rosneft said that while the output cut deal showed its sustainability and was fulfilled by more than 90%, there was a risk that a global oil output cuts deal would not be extended because of a lack of will on the part of the main participants and due to shale production dynamics in the US.  It said a recovery in US oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and may lead to a new price war.

Libya's National Oil Corporation will likely declare force majeure at the terminals of Es Sider and Ras Lanuf if clashes continue.  Libya's eastern-based Libyan National Army lost control of Es Sider and Ras Lanuf to a rival faction 10 days ago.  Both sides have been mobilizing since then, and the LNA has been conducting daily air strikes in the area.  An NOC board member said Libya's oil output stood at just over 615,000 bpd, down from about 700,000 bpd before the conflict around the oil ports broke out.

Iran's Kharg oil terminal reached a record loading of 6.6 million bpd.

Iraq is in talks with US companies including ExxonMobil to develop oil infrastructure projects in the country.

Plains All American Pipeline returned its Wahsatch crude oil pipeline to service late Friday.  Plains shut down the pipeline on February 10th as a precautionary measure due to indications of soil movements in a mountainous area.

Reuters reported that a record 9.4 million barrels of US crude is scheduled to discharge in Asia in April.

Barclays analyst, Michael Cohen, said that with oil prices close to or below $50/barrel, OPEC's agreement to cut output has a higher probability of extension.  

IIR reported that US oil refiners are expected to shut in 1.58 million bpd of capacity in the week ending March 17th, raising available refining capacity by 299,000 bpd from the previous week.  IIR expects offline capacity to fall to 772,000 bpd in the week ending March 24th.   


Early Market Call - as of 9:00 AM EDT

WTI - Apr $47.62, down 79 cents

RBOB - Apr $1.5707, down 1.01 cents

HO - Apr $1.4865, down 1.35 cents 


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Global supply glut pushed oil futures lower for 5th straight day

March 13, 2017

Recap:  Oil futures fell for the 5th straight day on mounting concern that the global supply glut still persists despite efforts by some of the world's largest producers to reduce it. Adding pressure to this, the market had its 8th sequential week of increases in the U.S. oil rig count. According to Baker Hughes, the number of operating rigs rose by 8, to 617 rigs.       

April WTI fell 79 cents, or 1.60%, to settle at $48.49 a barrel. This marks a loss of 9.1% on the week. May Brent settled at $51.37 a barrel, down 82 cents, or 1.57%, for a weekly decline of 8.10%.

April RBOB fell 2.4 cents, or 1.5%, to $1.600 a gallon, for a weekly loss of 3.2%, while April heating oil fell 2.6 cents, or 1.7%, to $1.504 a gallon, ending down roughly 5.7% for the week.

Fundamental News:  Baker Hughes reported that the number of rigs drilling for oil in the US increased by eight in the past week to 617. 

The UAE's Energy Minister, Suhail al-Mazrouei said the UAE will comply fully with its OPEC commitment to reduce oil production by more than 139,000 bpd in March and April due to maintenance activities.

Russia's Energy Minister, Alexander Novak, said Russia has so far cut its oil output by 156,000 bpd as part of a deal between OPEC and non-OPEC countries to support oil prices.  He also said that Russia was ahead of schedule with its portion of the output cuts and that oil stocks on world markets would fall.  

Petrologistics reported an increase of 427,000 bpd in OPEC supply in February.  The group's 13 members supplied an average of 32.494 million bpd. 

Oil refiners paid a record of over $2 billion to meet US biofuels requirements in 2016, a 68% increase that helps fuel a debate over who should shoulder the costs for meeting environmental regulations.  According to a Reuters review of regulatory filings from ten refiners, including Valero Energy Corp and CVR Energy Inc showed that they paid $2.22 billion last year for compliance credits that companies use to prove they are meeting annual government requirements for volumes of biofuels to be blended with gasoline and diesel.

Royal Dutch Shell has bought only three cargoes of Iranian oil since sanctions were lifted a year ago, a small fraction of what it used to buy and an indication of the legal difficulties and high prices that still hamper the trade. 

The head of Vitol, Mike Loya, said oil production in the Permian shale will increase by 600,000 to 700,000 bpd in the year through December. 

Morgan Stanley forecast the average price of Brent at $57.20/barrel in 2017 and 2018.  It believes a drawdown of global inventories from the second quarter of 2017 onwards will likely drive Brent prices to rally to $62.50/barrel by the end of 2017.  Brent crude prices are seen reaching $70/barrel by the end of 2019 and to $75/barrel by the end of 2020. 

Citigroup analysts forecast that US oil production is seen rising by 1 million bpd by the fourth quarter.  The bank also raised its 2017 rig count forecast by 3% to 822 and said shale capex will increase by 80% in 2017. 

IIR reported that US oil refiners are expected to shut in 1.862 million bpd of capacity in the week ending March 10th, cutting available refining capacity by 237,000 bpd from the previous week.  IIR expects offline capacity to fall to 1.556 million bpd in the week ending March 17th and to 826,000 bpd in the following week. 


Early Market Call - as of 9:00 AM EDT

WTI - Apr $48.43, down 6 cents

RBOB - Apr $1.5850, down 1.51 cents

HO - Apr $1.5082, up 49 points


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Oil prices hit their lowest level in 14 weeks

March 10, 2017

Recap:  Oil futures experienced another meltdown on Thursday, as traders weighed in on the global supply surplus and the ability of recent output cuts to eat away at such superfluities. Prices fell 3%, hitting their lowest level in 14 weeks. For the first time since November, WTI settled below $50 a barrel, finishing the session at $49.28, down $1, or 2%. Brent for May delivery fell 92 cents, or 1.39%, to settle at $52.19 a barrel.

Thursday's sell-off confirmed Wednesday's breakout of the consolidation pattern for WTI. From a technical viewpoint, the beauty about today's trading activity, is that April WTI came back to test the bottom of the aforementioned pattern, only to come back off and make a new low, stopping just below the 200-day moving average. Worth noting, this is the first time since OPEC and non-OPEC producers agreed to make production cuts that WTI established a legitimate breakout of this period of consolidation and the first time that spot WTI retreated back to the 200-day moving average. Once again, technical indicators are in oversold territory; however ,they are pointing to the downside, indicating additional downside movement. With this in mind, we could see a retracement back to $45.20, the level in November where prices began their ascent.  

April RBOB fell 2.8 cents, or 1.7%, to $1.624 a gallon, while April heating oil fell 2.7 cents, or 1.8%, to $1.530 a gallon.

Fundamental News:  The US Energy Department awarded 10 million barrels of sour crude to BP Plc, Valero Marketing and Supply Co, among others, from the SPR. 

Saudi Arabia's Energy Minister, Khalid Al-Falih, warned that the decision by OPEC to temporarily cut output does not mean a free ride for anybody.  He said Saudi Arabia will not allow itself to be used by others.  He said the agreement, set to be reviewed in May, is by no means a permanent pullback nor a signal that US unconventional operators can increase their production.

The UAE's Energy Minister, Suhail bin Mohammed al-Mazrouei, said that the fall in oil prices was temporary and prices would rise as OPEC complies with output cuts. 

EPA Administrator, Scott Pruitt, said he aims to reduce regulatory uncertainty for the industry and will put out an announcement on fuel efficiency standards very soon.  He said he did not agree that carbon dioxide was the primary contributor to global warming and that the landmark Paris climate agreement was a "bad deal" and should have gone through Congress as a treaty. 

Iraq's Oil Ministry reported that the country's oil exports fell to 3.269 million bpd in February from 3.32 million bpd in January.  The volumes are lower than record exports of over 4 million bpd achieved in November due to the OPEC output cut agreement. 

The militia, which seized control of two of Libya's largest eastern oil export terminals, called on National Oil Corp to resume control and operations at the ports.  The Benghazi Defense Brigades seized control of the 220,000 bpd Ras Lanuf and 447,000 bpd Es Sider oil export terminals on Saturday, ousting the Libyan National Army. 

Euroilstock reported that crude oil intake at Europe's refineries in February increased by 3.8% on the year to 10.54 million bpd.  Europe's stocks of crude and oil products stood at 1.137 billion barrels, down 3.3% on the year and down 0.1% from January.  Crude stocks in February fell by 1.1% on month and by 3.8% on the year to 474.72 million barrels.  European gasoline stocks increased by 0.3% on the month but fell by 5.8% on the year to 122.74 million barrels while distillate stocks increased by 1.2% on the month and by 0.3% on the year to 446.55 million barrels.  


Early Market Call - as of 9:10 AM EDT

WTI - Apr $49.68 up 40 cents

RBOB - Apr $1.6340 up 97 points

HO - Apr $1.5351 up 56 points


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Oil prices dropped on Wednesday after EIA reported 8.2 million barrel build in US crude oil inventories

March 09, 2017

Recap: Oil prices plunged on Wednesday after the EIA reported a build of 8.2 million barrels in U.S. crude oil inventories for the week ending March 3. Although not as large an increase as the 11.6 million barrel build in the API report, expectations were calling for a build of 2 million barrels. This week's release marks the 9th straight week of inventory builds.

For the first time since November, WTI traded close to $50 a barrel, as U.S. inventory numbers reached record levels. The April contract fell to a low of $50.05 before paring losses for a settlement at $50.28 a barrel, down $2.86, or 5.38%. May Brent slipped $2.81, or 5.03%, to settle at $53.11 a barrel.

April RBOB settled down 2.7 cents, or 1.6%, lower at $1.653 a gallon, while April heating oil lost 5.7 cents, or 3.5%, to $1.557 a gallon.

Fundamental NewsThe EIA reported US crude oil inventories increased by 8.2 million barrels in the week ending March 3rd to a record high of 528.4 million barrels.  Crude stocks at Cushing, Oklahoma increased by 867,000 barrels on the week.  It also reported that US gasoline stocks saw the largest weekly decline since 2011, with a draw of 6.6 million barrels.

Saudi Arabia's Oil Minister, Khalid Al-Falih, acknowledged that global crude oil inventories are not depleting as quickly as he expected, opening the door for an extension of the production cuts into the second half of the year.  The potential rollover is a subtle yet significant shift from six weeks ago, when the minister said that an extension probably would not be needed.  His concern about the slow pace of stockpile reductions was echoed by the UAE's Oil Minister, Suhail Al-Mazrouei.  During a news conference, Russia's Oil Minister, Alexander Novak, said compliance with the output cuts will improve in the next three months and promised that Russia will cut production further.

Kuwait's compliance with the OPEC agreement for January and February was 115%.  Kuwait's Oil Minister, Essam Al-Marzouq, said the country's compliance rate for February alone was 140%, while non-OPEC members' compliance was 50-60%.  The Managing Director of International Marketing at Kuwait Petroleum, Nabeel Bouristi, said Kuwait cut its production by 146,000 bpd from an output level of 2.95 million bpd before the agreement.

Enterprise Products Partners said its Seaway crude oil pipeline resumed service.  The 400,000 bpd pipeline from Cushing, Oklahoma to the US Gulf Coast was shut over the weekend following a possible leak.  Separately, Enterprise plans to bring four crude storage tanks in Houston online in early 2018.  The company has four 390,000 barrel crude tanks currently under construction at its Houston Ship Channel terminal for a first quarter 2018 in service date.  There is room for additional expansion of up to 3.1 million barrels of storage.

The Kurdish group that controls Iraq's Kirkuk oilfields has agreed with Baghdad to keep crude flowing from the region through a pipeline to a Turkish export terminal on the Mediterranean.  The deal was reached on Tuesday between the Patriotic Union of Kurdistan and Iraqi Prime Minister, Haider al-Abadi.  The PUK withdrew its threat to shut the pipeline after the Iraqi government decided to increase the capacity of the Kirkuk oil refinery.  Iraq's Oil Minister, Jabbar Al-Luaibi, said Kirkuk refinery capacity was increased by 10,000 bpd to 40,000 bpd.

North Dakota's Industrial Commission reported that oil production in the state increased 38,000 bpd to 980,000 bpd in January.  Bakken and Three Forks oil production stood at 933,000 bpd in the month. 


Early Market Call - as of 9:25 AM EDT

WTI - Apr $49.83, down 45 cents

RBOB - Apr $1.6326, down 2.01 cents

HO - Apr $1.5420, down 1.45 cents 


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Oil futures continue to hover close to 10 and 30-day moving averages

March 08, 2017

Recap:  It was another lackluster day in oil trading, with both blends finishing close to unchanged. Trading ranges were tight, with April WTI closing at $53.14 a barrel, down 6 cents, or 0.11%. Brent for May delivery slipped 9 cents, or 0.16%, to settle at $55.92 a barrel.

Oil futures remain range bound, hovering close to the 10 and 30-day moving averages, which are currently providing a ceiling for this market. Without any major shifts to shake things up, range trading will continue. Contango market conditions continue to widen, heightening the interest to store oil, lending pressure to this market. Support rests at $52.50, with resistance coming in at $53.70.  

April RBOB rose 1 cent, or 0.6%, to $1.682 a gallon and April heating oil added 1.1 cents, or 0.7%, to $1.615 a gallon.

Fundamental News:  In its latest Short-Term Energy Outlook, the EIA forecast Brent crude oil prices will average $55/barrel in 2017 and $57/barrel in 2018.  WTI prices are expected to average about $1/barrel less than Brent prices in the forecast.  The price of regular gasoline is forecast to average $2.40/gallon in 2017 and $2.44/gallon in 2018.  The EIA also forecast that total world petroleum demand is expected to increase by 1.51 million bpd to 98.15 million bpd in 2017 and by 1.59 million bpd to 99.74 million bpd in 2018.  It cut its 2017 growth forecast by 110,000 bpd but increased its 2018 growth estimate by 130,000 bpd.  OPEC production is estimated to increase by 180,000 bpd to 32.7 million bpd in 2017 and by 500,000 bpd to 33.2 million bpd in 2018.  Meanwhile, non-OPEC supply is expected to increase by 530,000 bpd to 58.71 million bpd in 2017 and by 990,000 bpd to 59.7 million bpd in 2018.  Total US oil production is expected to increase by 330,000 bpd to 9.21 million bpd in 2017 and by 520,000 bpd to 9.73 million bpd in 2018.  Total US petroleum demand is expected to increase by 210,000 bpd to 19.84 million bpd in 2017 and by 380,000 bpd to 20.22 million bpd in 2018.  Gasoline demand is estimated to fall by 40,000 bpd to 9.29 million bpd in 2017 but increase by 100,000 bpd to 9.39 million bpd while distillate demand is expected to increase by 50,000 bpd to 3.93 million bpd in 2017 and by 90,000 bpd to 4.02 million bpd in 2018.

Bloomberg reported that crude oil stocks held in Cushing, Oklahoma increased by 750,000 barrels to 64.28 million barrels in the week ending March 3rd. 

Saudi Arabia's Oil Minister, Khalid al-Falih, said oil market fundamentals were improving as an agreement to cut supply by OPEC and non-OPEC producers took effect.  However, he said OPEC would not rival producers take advantage of the cuts to underwrite their own production investments.  The group is expected to meet again in May, when it could consider extending the production cuts.  He said Saudi Arabia does not want OPEC to intervene in the oil market to address long-term structural shifts, but would support measures to address short-term aberrations.  Saudi Arabia's Oil Minister also stated that he is watching US producers closely.   Meanwhile, an executive at Saudi Aramco, Mohammed al-Qahtani, said he expects oil prices to stabilize by the end of the year.  

The Islamic Republic News Agency reported that Iran's crude oil export reached a record 3 million bpd in the Iranian month of Esfand, from late February to late March.  Iran's Oil Minister, Bijan Namdar Zanganeh, credited Iran's nuclear agreement with western powers in 2015, which removed a number of sanctions in exchange for cuts on the country's nuclear program, for the increase in exports.  He said Iran's oil exports have, on average, more than doubled since that time. 

Iraq and Angola signaled a willingness to extend the group's production cuts into the second half of the year as the global rally in prices shows signs of stalling. 


Early Market Call - as of 9:00 AM EDT

WTI - Apr $52.38, down 76  cents

RBOB - Apr $1.6858, up 60 points 

HO - Apr $1.6104, down 33 points  


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Oil prices continue to be pressured by expected growth in US shale production

March 07, 2017

Recap:  Oil prices continue to bounce within the 4 month old sideways trading pattern, pressured by expected growth in U.S. shale production and on expectations that China's economy will grow at a slower pace. April WTI slipped 13 cents, or .024%, to settle at $53.20, while Brent for May delivery fell 11 cents, or 0.20%, to settle at $56.01.

WTI remains below resistance set at the 10 and 30-day moving averages, which are respectively $53.74 and $53.71. As with the current sideways pattern that has been in effect since December, traders are looking for a breakout on either side of this pattern. With the latest Commitment of Traders report indicating that hedge funds have cut long positions, while adding shorts, a breakout to the upside could be exaggerated as these new shorts look to cover. Resistance rests at the aforementioned averages and with a break above these levels; we could see prices advance toward $54.50.   April RBOB gained 1.9 cents, or 1.2%, to settle at $1.672 a gallon, while April heating oil tacked on 1.1 cents, or 0.7%, to settle at $1.605 a gallon.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma increased by 1,170,955 barrels in the week ending Friday, February 24th but fell by 116,575 barrels in the week ending Tuesday, February 28th to 66,781,790 barrels.

The IEA also stated that global oil supply may struggle to match demand after 2020.  Investors generally are not betting on a sharp increase in the price of crude oil any time soon but the contraction in global spending in 2015 and 2016 and growing global demand means the world could face a supply crunch if new projects are not approved soon.  Most supply growth is expected to come from the US, where shale or light tight output will increase by 1.4 million bpd by 2022,  even if prices remain close to current levels of $60/barrel.  Global oil production capacity is expected to increase by 5.6 million bpd by 2022.  OPEC is expected to increase production capacity to 37.85 million bpd in 2022 from 35.9 million bpd in 2016 while demand for the group's crude is expected to increase to 35.8 million bpd in 2022 from 32.2 million bpd last year. Led by the U.S., non-OPEC supply is expected to increase by 3.3 million bpd to 60.9 million bpd by 2022,  accelerating sharply in 2018 and 2019 before slowing thereafter.   It reported that US gasoline demand will peak this year at about 9.3 million bpd before beginning a steady decline to 2022.  Gasoline demand in the US will begin a net decline of 465,000 bpd in the five years to 2022. 

OPEC's Secretary General, Mohammad Barkindo, said oil inventories onshore and offshore are responding to production cuts implemented by OPEC. 

Saudi Aramco said an overhang in supply is expected to fall in the first half of the year. 

Fitch said a shale recovery will keep oil prices under pressure in 2017. 

Goldman Sachs said the inventory normalization phase of the oil market rebalancing seems off to an uninspiring start with range bound prices, rising inventories and a sharp rebound in US drilling activity.  It stated that the slightly larger than expected OECD production cuts  the higher 2016 realized demand level, led to its expectation of a slightly faster normalization in OECD inventories through 2017 than previously expected.  It stated that while the prospect for greater production levels into 2018 will likely continue to exert downward pressure on long-term oil prices, it expects the strength in demand to continue to absorb excess inventories and rotate the front-end of the forward curve into backwardation.  It added that long-dated oil prices could decline towards its long term $50/barrel forecast faster than it expects, with high demand generating a stronger level of backwardation. 


Early Market Call - as of 9:20 AM EDT

WTI - Apr $53.70 up 50 cents

RBOB - Apr $1.7000 up 2.8 cents

HO - Apr $1.6312 up 2.67 cents


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Drop in dollar on Friday helped end three straight sessions of sell-offs

March 06, 2017

Recap:  Friday's drop in the dollar coupled with news of fighting near Libyan oil export ports sparked a fresh round of buying in oil, ending three straight sessions of sell-offs. The upside was capped by increasing U.S. production and concern over Russia's adherence to cuts. April WTI settled at $53.33 a barrel, up 72 cents, or 1.37%. Brent for May delivery gained 82 cents, or 1.49%, to settle at $55.90 a barrel. Despite settling higher on the day, oil futures slipped week to week. WTI fell 42 cents, or 0.78%, while Brent lost 15 cents, or 0.26% on the week.

April WTI continues to hold above $52.44, a 38% retracement between the January high of $56.92 and the November low of $45.18. Moving oscillators are trending sideways in the lower end of the neutral range. Given the lack of any new fundamentals and the technical setup for this market, we would look for continued sideways activity with a slight tilt to the upside. Near-term resistance sits at $53.79, the 10-day moving average, with support set at $52.54.

April RBOB finished up almost a cent at $1.653 a gallon, though it ended sharply lower for the week by 4.8%, April heating oil tacked on 1.5 cents, or 0.9%, to settle at $1.594 a gallon, however, this was a loss of about 3.3% on the week.

Fundamental News:  East Libyan forces reportedly were engaged in armed clashes with rival factions on Friday that led to unconfirmed reports that the rival Benghazi Defense Brigades captured the large Libyan oil export ports of Es Sider and Ras Lanuf. Other reports, however, noted that the Libyan Army were in control of these areas. Libya recently has been producing about 700,000 b/d of oil, more than double its output early this year.

The CME Group announced Friday afternoon that effective March 26th for trade date March 27th and pending regulatory approval, it would amend its NYH ULSD and RBOB futures contracts by inserting language into these contracts rules that would address the exchanges actions in the event the EPA issues a temporary waiver which would impact fuel standards at NYMEX approved delivery terminals in New York Harbor.

Baker Hughes reported that the number of drilling rigs operating in the United States increased by 7 rigs this week reaching a total of 609 rigs, 217 above year ago levels.

Oil Movements said in its recent report that OPEC shipments will increase to 23.97 million b/d in the four weeks ending March 18th, compared with the period ending February 18th.

Saudi Arabia reportedly has cut its April OSP for Arab Light it sells into the Asian market. This was the first time in three months that the kingdom has cut its price in what appears to be an attempt to shore up sales levels in an oversupplied market as it appears the Saudis are sensitive to maintaining market share.


Early Market Call - as of 10:40 AM EDT

WTI - Apr $53.39, up 6 cents

RBOB - Apr $1.6664, up 1.32 cents

HO - Apr $1.6074, up 1.39 cents 


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Oil futures fell to lowest level in 3 weeks

March 03, 2017

Recap:  Oil futures fell to their lowest level in 3 weeks on reports that Russia's proposed output cuts were falling short of the 300,000 barrels per day proposed levels. A strong dollar provided added pressure. April WTI fell as much as 2.1% on the day before paring losses. This spot contract settled at $52.61, down $1.22, or 2.27%. Brent for May delivery slipped to a fresh 3 week low of $55.19, prior to severing losses to settle at $55.08, down $1.28, or 2.27%.

April RBOB fell 2.7 cents, or 1.6%, to $1.651 a gallon and April heating oil declined by 3 cents, or 1.9%, to $1.594 a gallon.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma increased by 1.9 million barrels to 66.9 million barrels in the week ending February 28th.

Separately, Genscape reported that Europe's gasoline exports to West Africa increased by more than 60% month on month in February to a total of at least 1.78 million tons, up from 1.06 million tons in January.  More than 500,000 tons of gasoline left northwest Europe for West Africa in the week ending February 24th, up 16% on the week.

Russia's Energy Minister, Alexander Novak, said it is too soon to say if a global deal on oil output cuts will be extended later this year.  He said further action would depend on the size of stocks and how output in other producers, which did not join the pact, notably in the US, China and Norway,  would affect the global balance of supply and demand.   He said Russia was unlikely to cut more than it had already pledged if other non-OPEC producers failed to comply with their own promises.  He said if the output cut deal is not extended, overall Russian oil output for 2017 may increase to 548 million to 551 million tons or 11.01-11.07 million bpd from 547.5 million tons last year.

The White House is debating Carl Icahn's plan to revamp the ethanol rule.  

Kurdish official Aso Mamand said Kurdish forces have seized an oil facility in Kirkuk to send a message to the Iraqi government to build a refinery. An official at Iraq's North Oil Company said oil flows from the facility have resumed after being temporarily disrupted.  However, a Kurdish official said that Kurdish forces would shut down oil flows again unless their demands were met within a week.  

Kazakhstan's Energy Minister, Kanat Bozumbayev, said the country may have slightly increased its oil production in February, but it was still likely in line with the country's commitments under the global OPEC and non-OPEC output cut deal.

Wood Mackenzie said demand for gasoline in the US is expected to peak next year as engines become more efficient.  Global demand for gasoline is set to peak as early as 2021 even in the face of continued growth in the vehicle fleet.  A rise in the number of hybrid and electric cars and tighter fuel standards in Europe and the US will contribute to a historic shift in consumption.  At its peak, global gasoline demand is expected to reach 25.89 million bpd in 2021.

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp terminal in the week ending March 2nd fell by 2.84% on the week and by 4.08% on the year to 1.128 million tons.  Gasoil stocks fell by 2.94% on the week and by 14.98% on the year to 2.877 million tons while fuel oil stocks fell by 1.68% on the week and by 27.83% on the year to 817,000 tons. 

Early Market Call - as of 10:40 AM EDT

WTI - Apr $52.90 up 37 cents

RBOB - Apr $1.6471 up 38 points

HO - Apr $1.5843 up 52 points


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EIA reported seventh straight week of US crude oil inventory builds

March 02, 2017

Recap:  Oil futures oscillated on both sides of unchanged after the EIA reported the seventh straight week of U.S. crude oil inventory builds. According to the report, stockpiles grew 1.5 million barrels during the week of February 24. Expectations were calling for a build of 3.1 million. April WTI slipped 18 cents, or 0.33%, to settle at $53.83. May Brent fell 15 cents, or 0.27%, to settle at $56.36.

Contango market conditions in calendar spreads continue to widen on heightened concern that the global supply surplus will not dissipate as quickly as originally thought. The April17/June17 WTI spread as weakened another 15 cents since we last wrote about it on February 23rd. The Dec17/Dec18 WTI spread has narrowed by 30 cents and is currently holding above support set at 50 cents.

April RBOB slipped 5.1 cents, or 3%, to $1.678 a gallon and April heating oil fell 1.6 cents, or 1%, to $1.624 a gallon.

Fundamental News:  The EIA reported that total US and Gulf Coast crude stocks increased to the highest level on record last week.  US crude stocks increased by 1.5 million barrels to 520.2 million barrels and Gulf Coast inventories increased by 2.3 million barrels to 277.6 million barrels.  US crude exports last week fell to 721,000 bpd from 1.21 million bpd. 

Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said OPEC members must lower production costs to compete better with shale producers.  He said he was confident that an output reduction agreement agreed in November would see oil prices hold. 

Bloomberg reported that observed crude shipments from Iran in February stood at 2.35 million bpd, the highest level since October. 

Moody's maintained its medium term price band of $40-$60/barrel for both Brent and WTI crude.  It continues to assume a $19-$25 price band for natural gas liquids. 

The Louisiana Offshore Oil Port delivered over 200,000 barrels of LOOP sour crude from storage in February. 

Genscape reported that crude inventories in the Amsterdam-Rotterdam-Antwerp area fell by 3.4 million barrels in the week ending February 24th to 58.02 million barrels.

Energy Transfer Partners' 470,000 bpd Dakota Access Pipeline received an easement from the US Army Corps of Engineers on February 8th.  Construction and line fill of the pipeline has started and is expected to last about 83 days.  The pipeline will likely have crude flowing by April 1st.  Genscape reported that if the pipeline is completed, total pipeline and local refining capacity will be above current Bakken production levels of about 983,000 bpd, eliminating the need for most rail loadings in the region.  Rail loadings at Genscape-monitored terminals increased by 24,000 bpd to 282,000 bpd in the week ending February 17th.

The EIA reported that US exports of finished motor gasoline and liquefied petroleum gases set records in December.  US exports of petroleum products to Mexico set records for the second consecutive month as Pemex's crude production and refinery throughput fell to levels not seen in over a decade.  Total US exports of petroleum products to Mexico increased by 203,000 bpd.

IIR reported that US oil refiners are expected to shut in 1.484 million bpd of capacity in the week ending March 3rd, increasing available refining capacity by 25,000 bpd from the previous week.  IIR expects offline capacity to fall to 1.108 million bpd in the week ending March 10th. 


Early Market Call - as of 9:00 AM EDT

WTI - Apr $52.84, down 98 cents 

RBOB - Apr $1.6358, down 4.20 cents 

HO - Apr $1.5933, down 3.08 cents 

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Oil prices fell on expected increases in U.S. crude oil inventories

March 01, 2017

Recap:  Oil prices continue to be caught up in the tug of war between OPEC output cuts and rising U.S. production, with Tuesday's activity falling on pressure from expected increases in U.S. crude oil inventories. Brent succumbed to greater pressure than WTI, with April futures falling 34 cents, or 0.61%, to settle at $55.59 a barrel. April WTI settled at $54.01, down 4 cents, or 0.07%.

It appears market participants are rethinking short term market conditions, as is evident in calendar spreads. These spreads, which had been working their way out of contango, have begun to shift lower. The December 17/December 18 WTI spread, which had been trading at -$2.00 in November, worked its way up to $1.09 backwardation. It is now trading at 58 cents. This is a sign that optimism for increasing demand is waning.

The expiring March RBOB settled at $1.512 a gallon, down 2.1 cents, or 1.4%, which was down 0.9% for the month. March heating oil fell 1.9 cents, or 1.2%, to $1.621 a gallon, though prices ended the month about 0.6% higher.

Fundamental News:  Bloomberg reported that crude oil stocks held in Cushing, Oklahoma increased by 200,000 barrels in the week ending February 24th to 63.24 million barrels.

Iran's Oil Minister, Bijan Namdar Zanganeh, said it is too early to talk about renewing the oil output cut deal in the second half of the year.  He said OPEC members' compliance with the agreement to cut output was generally acceptable in January.

Reuters reported that OPEC cut its oil output for a second month in February to 29.87 million bpd.  OPEC members cut output by 1.098 million bpd of the pledged 1.164 million bpd, equating to 94% compliance. 

JBC Energy reported that OPEC's output increased by 55,000 bpd to 32.345 million bpd in February.  Saudi Arabia's output increased by 50,000 bpd to 9.8 million bpd.  Compliance among the ten members bound by the cuts increased from 88% to 89%.

The White House said there is no executive order on ethanol.  Earlier on Tuesday, the head of the Renewable Fuels Association, Bob Dinneen, said he was informed by President Donald Trump's administration that it would order a change to the Renewable Fuel Standard, lifting the responsibility for fuel blending from refiners to position holders at the terminals. 

A senior official from Iraq's semi-autonomous region of Kurdistan, Ashti Hawrami, said Iraq has cut exports of Kirkuk crude to better meet its supply reduction obligations with OPEC and deliver fuel for local needs.  He said that in recent weeks Iraq has taken 40,000-50,000 bpd of its Kirkuk oil share to a local refinery instead of exporting it. 

The EIA reported that US crude oil production in December fell by 91,000 bpd to 8.783 million bpd from a revised level of 8.874 million bpd in November.  US crude oil exports in December fell by 442,000 bpdcompared with 597,000 bpd in November while total refined oil product exports increased to 3.188 million bpd in December from 3.022 million bpd in November. 

About 900,000 metric tons of distillates, mostly ULSD, have arrived in Northwest Europe and the Mediterranean so far in February, about the same level as January.

Bloomberg reported that preliminary US waterborne crude imports fell by 788,300 bpd to 3.94 million bpd in the week ending February 23rd. 

Russia cut its oil production by about 124,000 bpd in February 1-27 compared with October.


Early Market Call - as of 9:00 AM EDT

WTI - Apr $54.29, up 28 cents

RBOB - Apr $1.7195, down 98 points

HO - Apr $1.6577, up 1.78 cents 


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