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Market Intel Archives

Oil prices moved higher after greater than expected draws in US crude oil and gasoline inventories

July 07, 2017

Recap: Greater than expected draws in both U.S crude oil and gasoline inventories pushed prices higher on Thursday, reversing Wednesday’s losses. Both WTI and Brent shot back to over $46 a barrel, but were unable to sustain strength above it. Gains were pared as the session progressed, with August WTI settling at $45.52 a barrel, up 39 cents, or 0.86%, while Brent for September delivery tacked on 32 cents, up 0.67%, to settle at $48.11 a barrel.

Fundamental News Saudi Aramco said its recoverable crude oil and condensate reserves fell to 260.8 billion barrels at the end of 2016 from 261.1 billion a year earlier.  Its gas reserves increased to 298.7 trillion standard cubic feet from 297.6 trillion standard cubic feet.  Saudi Aramco said it discovered two new oil fields, Jubah and Sahaban, and one new gas field, Hadidah, all located in the Eastern Province.  The company’s daily oil production reached a new high of 10.5 million bpd in 2016, up from 10.2 million bpd in 2015.  Its oil exports increased to 7.6 million bpd in 2016 from 7.1 million bpd in 2015. 

Russia’s Energy Minister, Alexander Novak, said the agreement by OPEC, Russia and other producer to cut output had cut price volatility and was reducing inventories.  He said there was no immediate need for extra measures to support prices.  He said there was potential for an oil price rise from current levels and that $50 to $60/barrel was fair value.  He also said prices had room to rise from current levels and inventories in industrialized countries were expected to ease back to the five-year average thanks to the decision by OPEC and its allies to extend supply cuts from the first half of 2017 to the first quarter of 2018.  The Joint OPEC and non-OPEC Ministerial Monitoring Committee is scheduled to meet on July 24th.  Ministers from Russia, Oman, Algeria, Venezuela, Kuwait and Saudi Arabia and OPEC’s Secretary General, are scheduled to attend.  Russia’s Energy Minister said there were no proposals for more nations to be represented at the meeting. 

Kuwait Oil Company said an oil spill from the pipeline at Kuwait’s northern al-Ratqa field on Thursday was brought under control within two hours.   

According to the US Census Bureau, US crude oil exports reached 1.02 million bpd in May, up from 1 million bpd in April.  Exports to Canada totaled 372,000 bpd, while exports to China totaled 147,000 bpd and exports to Netherlands was 108,000 bpd. 

Morgan Stanley sees WTI below $50/barrel until mid-2018.  It cut its WTI estimate for the third and fourth quarter forecast to $48/barrel from $55/barrel, previously.  Morgan Stanley also sees WTI crude reaching $55/barrel by the end of 2018 and $60/barrel by 2020.  It cut its third quarter and fourth quarter Brent forecasts to $50.50/barrel from a previous estimate of $57.50/barrel.     

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp hub in the week ending July 6th fell by 4.52% on the week and by 25.79% on the year to 823,000 tons, while gasoil stocks fell by 1.49% on the week and by 10.6% on the year to 2.901 million tons and fuel oil stocks fell by 6.19% on the week but increased by 18.49% on the year to 955,000 tons. 

Permit approvals for drilling new wells across the US has been on an upward trend since April, but approvals are declining in the Permian Basin, suggesting that the active rig count increases may decline in the second half of the year. 

 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $44.76, down 76 cents

RBOB - Aug $1.5012, down 2.76 cents

HO -Aug $1.4532, down 2.86 cents


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U.S. oil futures fell for the first time in eight days

July 06, 2017

Recap:  U.S. oil futures plummeted more than 4% on Wednesday, reversing 8 days of gains, and putting an end to the longest gaining streak in 5 years. The dip in prices follows a rise in OPEC’s oil exports, which rose 450,000 barrels per day from May to June. This also reflects 1.9 million bpd more than a year ago. Strength in the dollar added to the pressure. August WTI settled at $45.13 a barrel, down $1.94, or 4.1%. September Brent fell $1.82, or 3.7%, to settle at $47.79 a barrel.

August gasoline fell 3.2 cents, or 2.1%, to $1.502 a gallon, while August heating oil lost 3.4 cents, or 2.3%, to $1.479 a gallon.

Fundamental News Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 400,000 barrels to 60.44 million barrels in the week ending June 30th. 

According to Bloomberg, OPEC’s crude production increased to the highest level this year in June as member nations exempt from output cuts produced more.  OPEC members increased their output by 260,000 bpd on the month to 32.29 million bpd.  Libya’s oil production increased by 80,000 bpd, while Nigeria’s output increased by 50,000 bpd.  Saudi Arabia increased its production by 90,000 bpd to 10.02 million bpd in June. 

Thomson Reuters reported that OPEC oil exports increased for the second consecutive month in June.  OPEC exported 25.92 million bpd in June, up 450,000 bpd on the month and up 1.9 million bpd on the year. 

Russian government officials stated that Russia opposes any proposal to deepen the production cuts at the OPEC ministerial meeting later this month.  An official said any further supply reduction so soon after the existing agreement was extended would send the wrong message to the oil market.  He said such a move would suggest that OPEC, Russia and their allies are nervous that their agreement to reduce output by 1.8 million bpd through March 2018 is not doing enough to support prices.  Russia plans to host a meeting of some OPEC ministers and several non-OPEC producers in St. Petersburg on July 24th. 

Russia’s Energy Minister, Alexander Novak, said he sees potential for an increase in the world oil prices in the second half of the year.  He also stated that he believes that demand on oil markets will increase in the third quarter of 2017. 

Qatar Petroleum is taking legal actions after Abu Dhabi National Oil Co. declared force majeure to halt shipments from Qatar of condensate.  An ADNOC official said currently there is no force majeure imposed on Qatari cargoes.  Qatar will continue to supply natural gas via pipeline to the UAE and Oman. 

According to Bloomberg, observed crude exports from Libya increased to the highest level in at least three years in June following the resumption of production from the Sharara oil field as well as those operated by Wintershall. 

The EIA was set to propose requiring fuel companies to blend 19.24 billion gallons of renewable fuels in the country’s fuel supply, down from 2017 levels.  It will propose keeping the 2018 target for conventional ethanol at 15 billion gallons, unchanged from 2017 levels, and set the requirement for advanced biofuels, including cellulosic ethanol, at 4.24 billion gallons. 

IIR reported that US oil refiners are estimated to shut in 170,000 bpd of capacity in the week ending July 7th, increasing available refining capacity by 90,000 bpd from the previous week.  IIR expects offline capacity to fall to 111,000 bpd in the week ending July 14th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $45.91, up 77 cents

RBOB - Aug $1.5234, up 2.09 cents

HO - Aug $1.4939, up 1.56 cents


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Oil prices closed higher for seventh day straight

July 03, 2017

Recap: Oil prices rose for the seventh straight day on Friday, though they suffered their worst half-year performance since 1998. The spot prices for WTI futures fell 12% during the first half of the year, while spot Brent posted a 16% loss. Volume was light due to the upcoming 4th of July U.S. holiday, as traders took to the road for a long weekend. August WTI tacked on $1.11, or 2.47%, to settle at $46.04 a barrel, while Brent for August delivery climbed 50 cents, or 1.05%, to settle at $47.92 a barrel.

July RBOB rose 3 cents, or 2%, to $1.515 a gallon, while July heating oil added 3 cents, or 2%, to $1.446 a gallon. The July contracts expired at the end of Friday's session.

Fundamental News:  Baker Hughes reported that the number of rigs searching for oil in the US fell by 2 to 756 in the week ending June 30th.  It fell for the first time in 24 weeks. 

A Reuters survey showed that OPEC’s oil output in June increased by 280,000 bpd to a 2017 high of 32.72 million bpd.  It said high compliance by Saudi Arabia and Kuwait helped keep OPEC’s adherence with its supply cuts at 92% in June, compared with 95% in May.  Saudi Arabia increased its production by 40,000 bpd, although its compliance remained above 100%. Even with the increase in its production, Saudi Arabia production cut was 564,000 bpd, well above its target cut of 486,000 bpd. 

According to a source with knowledge of Iran’s tanker loading schedule, the country’s crude oil exports in July are expected to fall 7% from June’s three-month high, mainly due to a decline in exports to Europe.  Crude oil loadings from Iranian ports, excluding condensate from gas fields, will total 1.93 million bpd next month, with 2 million barrels of them being put into storage on tankers.  Total crude oil exports for July will be 1.86 million bpd, up 2% on the year, with 1.28 million bpd destined for Asia and 580,000 bpd bound for Europe.  This is compared with 1.3 million bpd shipped to Asia and 700,000 bpd to Europe in June. 

The Trump administration on Thursday said it was taking steps to expand oil drilling in the Arctic and Atlantic oceans as President Donald Trump continues to push for US energy dominance in the global market.  The Interior Department is rewriting a five-year drilling plan established by the Obama administration. 

According to Bloomberg, the number of tankers that are filling with Qatari crude along with that of Saudi Arabia or the UAE actually increased since tensions between the countries escalated on June 5th, when Saudi Arabia led three other countries in accusing Qatar of links to terror groups.  

Bank of America Merrill Lynch cut its crude oil price forecasts due to increasing supplies and a lower demand outlook.  The bank cut its average 2017 and 2018 WTI price outlook to $47/barrel and $50/barrel, from $52/barrel and $53/barrel, respectively.  It also lowered its Brent crude price forecast for this year and next by $4/barrel each to $50/barrel and $52/barrel, respectively. 

A Libyan oil industry source stated that the country’s oil production increased to 1.012 million bpd.  Libya’s National Oil Corp had targeted reaching 1 million bpd by the end of July. 

IIR reported that US oil refiners are expected to shut in 260,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 63,000 bpd from the previous week.  IIR expects offline capacity to fall to 170,000 bpd in the week ending July 7th and to 111,000 bpd in the subsequent week. 

Early Market Call - as of 9:00 AM EDT

WTI - Aug $46.52 +.047

RBOB - Aug $1.5240 +1.03

HO - Aug $1.5028 +0.98

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Oil prices rose for the sixth straight day

June 30, 2017

Recap:  Oil prices rose on Thursday, marking the sixth straight day of gains. This comes on the heels of falling 15% since the end of May. Prices began their ascent on fear that Tropical Storm Cindy, which hit the Gulf of Mexico last week, would shut in production in that region. Despite some shut-ins, U.S. output fell by only 100,000 barrels, much smaller than expected. Deeper draws in gasoline sparked this week’s rise, however, a further study of the numbers indicates demand for gasoline over the last four-week period fell by 2.7%. All this comes at a time when U.S. production is at its highest level since August of 2015.

Without a shift in the true underlying fundamentals, one can lean toward the extended gains being more technical in nature. With OPEC efforts failing to prop up prices, OPEC members must hope at this point, for lower prices to force weak producers out of the market. August WTI squeezed out a 19 cent gain, to settle at $44.39 a barrel. Brent for August delivery finished up 11 cents, to settle at $47.42 a barrel.

July gasoline rose less than half a cent to $1.486 a gallon, while July heating oil gained 1.3 cents, or 0.9%, to $1.446 a gallon. The July contracts expire at Friday’s settlement.

Fundamental News:  UAE Energy Minister, Suhail bin Mohammed al-Mazroui, said there is no talk of further oil output cuts by OPEC and non-OPEC producers, despite only a slow drawdown in inventories.  Separately, he said he does not foresee any shortage in fuel supply in the country due to the Gulf embargo on Qatar on fuel supplies to the UAE.  Qatar supplies natural gas to the UAE and Oman through the Dolphin pipeline. 

Libya’s oil production is fluctuating between 950,000 bpd and close to 1 million bpd, rising from about 935,000 bpd earlier this week.  Production has been fluctuating mainly due to technical and power generation problems. 

Goldman Sachs analysts stated that OPEC may need to make deeper output cuts to rebalance the market as increasing output from Libya and Nigeria threatens to undercut the group’s efforts.  The analysts stated that unexpected increases in those countries’ output, which were exempt from OPEC's output cut agreement, could offset inventory declines expected in the third quarter.  They lowered their three-month forecast for WTI crude to $47.50/barrel from a previous estimate of $55/barrel.  Also, Goldman Sachs forecast 3, 6 and 12 month Brent crude prices at $50/barrel, $58/barrel and $58/barrel, respectively.

The Federal Reserve Bank of Dallas’ Second Quarter Energy Survey showed that executives at the largest oil and gas companies do not expect OPEC’s effort to rebalance the global oil market succeeding for at least another year.  It reported that 56% of the executives surveyed said the market will not rebalance until the second half of 2018 or beyond. 

Bloomberg reported that global crude oil in floating storage and transit has increased sharply in recent week, reaching 209 million barrels as of June 28th, up from 155 million barrels in April.   

Europe’s exports of gasoline to the US has slowed substantially this year as tanks reached capacity in the US and demand growth slowed.  The decline in gasoline shipments to the US East Coast is forcing European exporters to turn to less steady buyers in West Africa and compete with refineries elsewhere in the US to export to Latin America and Asia.  Deliveries to the US Atlantic Coast form Northwest Europe this month are set to fall 35% compared with the 400,000 bpd that sailed on the route in June 2016.  May imports, at 246,000 bpd, were down nearly 20% compared with a year ago levels.
 

Early Market Call - as of 9:00 AM EDT

WTI - Aug $45.27, up 34 cents

RBOB - July $1.4853, up 2 points

HO - July $1.4524, up 65 points
 

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A decrease in U.S. gasoline inventories helped push oil prices to highest level in a week

June 29, 2017

Recap: A greater than expected decrease in U.S. gasoline inventories offset the less than expected decrease in U.S. crude oil inventories, pushing oil prices to their highest level in a week. August WTI jumped 79 cents after the EIA reported a 900,000 barrel draw in gasoline inventories. Oil prices then whipsawed for the next half hour as traders tried to come to grips with the true impact of the overall EIA report. After falling back below $44 a barrel, August WTI worked its way back to a new high, topping the session at $44.84 before settling at $44.74, up 50 cents, or 1.13%. August Brent settled at $47.31, up 66 cents, or 1.41%.

July gasoline rose 2.4 cents, or 1.6%, to $1.483 a gallon, while July heating oil tacked on 1.9 cents, or 1.4%, to $1.433 a gallon.

Fundamental News:  Royal Dutch Shell lifted a force majeure on exports of Bonny Light crude following pipeline repairs.  It declared a force majeure in early June after a leak was found on the Trans Niger Pipeline.  Exports of the crude grade were continued during this period at a reduced rate.  The July export program was about 40,000 bpd less than June’s export program with 164,000 bpd.

Russia’s Energy Minister, Alexander Novak, said Russia is not discussing deeper cuts to oil production than those already agreed on with OPEC.  He said Russia’s average oil output in June fell by 305,000-308,000 bpd from its output level in October.    Separately, he stated that Russia plans to ship 4.5 million tons of oil to Belarus during the third quarter. 

Mexico’s Pemex has declared force majeure over at least two cargoes of Maya crude to be loaded at its Salina Cruz terminal on the Pacific Coast after a fire shut its refinery earlier this month.  One of the affected cargoes was scheduled to be delivered to the US West Coast and another cargo was bound for Japan. 

US pipeline operators are selling their underused space at steep discounts to keep crude flowing.  Pipeline firms such as Plains All American and TransCanada Corp move about 10 million barrels of crude around the US every day.  Some of the pipeline companies are offering prices as low as 25% of federally regulates rates, creating a secondary market that undercuts shippers with long-term contracts. 

The US and Middle East are set to increase their supply of fuels, such as diesel, to Europe to the highest level in at least six months, helping to offset reduced flows from Russia and India.  Bloomberg reported that total imports of so-called clean products, including diesel from the US, Middle East, plus India and East Asia are expected to increase to more than 1 million bpd in June for the first time this year. 

Colonial Pipeline Co is allocating space for Cycle 38 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee.

Natixis cut its 2017 Brent price forecast by $4/barrel to $53.50/barrel. 

IIR reported that US oil refiners are expected to shut in 75,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 93,000 bpd from the previous week. 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $45.20, up 47 cents

RBOB - July $1.5002, up 1.72 cents

HO - July $1.4562, up 2.33 cents


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Oil futures rose on an expected bullish EIA inventory report

June 28, 2017

Recap:  Oil futures rose on Tuesday, as traders covered shorts ahead of what is expected to be a bullish inventory report by the EIA. Mixed estimates are calling for a draw of between 2.6 and 3.25 million barrels in U.S. crude oil inventories. This, combined with sentiment that this market may have found a near-term bottom pushed August Brent above $47 a barrel and August WTI above $44 a barrel. Gains were pared, with Brent settling at $46.67 a barrel, up 84 cents, or 1.8% and WTI gaining 89 cents, or 2.1%, to settle at $44.27 a barrel.

July gasoline added 2.1 cents, or 1.5%, to $1.460 a gallon and July heating oil rose 3.4 cents, or 2.4%, to $1.414 a gallon.

Fundamental News:  Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 700,000 barrels to 60.4 million barrels in the week ending June 23rd. 

OPEC delegates stated that OPEC will not rush into making a further cut in oil output or end some countries’ exemptions to output limits.  An OPEC delegate said a larger cut could be an option, adding that further steps could be to place limits on further growth in Nigerian and Libyan output, rather than requiring them to cut back their supply.  Another source stated that removing more crude from the market was an option but said it was not being actively considered. 

Libya’s oil production increased to 935,000 bpd, up from 885,000 bpd last week.  The country is targeting a production level of 1 million bpd by the end of July.  A source stated that Libya’s NOC is repairing several pipelines that connect fields and the Es Sider and Zueitina export terminals. 

Russneft’s Chief Executive Officer, Yevgeny Tolochyok, said it will cut its oil output by about 200,000 tons this year under Russia’s deal with OPEC.  Mikhail Gutseriyev, a co-owner of Russneft, said the company would be able to restore its oil production very quickly after the OPEC and non-OPEC output cut agreement ends. 

Russia’s Rosneft said its servers had been hit by a large-scale cyber-attack but added that its oil production was unaffected. 

The head of Vitol, Ian Taylor, said Brent prices will remain in a range of $40-$55/barrel for the next few quarters. 

US Energy Secretary, Rick Perry, said the US has a unique opportunity to develop a North American energy strategy with Canada and Mexico.  

Based on US Customs data compiled by Bloomberg, the US imported 595,800 bpd of gasoline and gasoline blendstock, excluding naphtha and natural gasoline in the week ending June 22nd.  This is compared with 909,000 bpd in the previous week.   

IHS data reported that crude and refined product shipments from the US Gulf fell to 3.82 million metric tons on 92 ships in the week ending June 22nd.  It is down 12% from the previous week’s 4.32 million metric tons on 102 ships. 

According to Bloomberg, preliminary US waterborne crude imports increased by 102,000 barrels to 4.5 million bpd in the week ending June 22nd.  West Coast imports fell by 75,300 bpd to 757,700 bpd while East Coast and Gulf Coast imports increased by 136,000 bpd and 41,100 bpd, respectively.  Total crude and product imports increased by 8,600 bpd to 6 million bpd.   


Early Market Call - as of 9:00 AM EDT

WTI - Aug $44.11, down 12 cents

RBOB - July $1.4518, down 83 points

HO - July $1.4111, down 27 points


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Oil prices posted modest gains for second straight session

June 27, 2017

Recap:  After trading on both sides of unchanged on Monday, oil prices posted modest gains for the second straight session. Trading was quiet. August Brent settled at $45.83 a barrel, up 29 cents, or 0.64%, while August WTI finished up 37 cents, or 0.86%, to settle at $43.38 a barrel.

Focus once again will be on this week’s U.S. inventory numbers, with analysts estimating a 2.3 million barrel decline in crude oil stocks due to last week’s tropical storm in the Gulf of Mexico. The halt in production was temporary and U.S. producers have returned to production. This, combined with production increases from Libya and Nigeria are making it difficult for OPEC to prop up prices. However, if OPEC had not voted to decrease output, we might have been looking at even lower prices.

July gasoline rose half a cent to $1.439 a gallon, while July heating oil added less than a penny to settle at $1.380 a gallon.

Fundamental NewsIran’s Oil Minister, Bijan Zanganeh, said the country’s crude oil production surpassed 3.8 million bpd and added that Iran expects output to reach 4 million bpd by March 2018.

Libya’s Laheeb field resumed production after eight months.  The country’s production is now running at 950,000 bpd. 

Brazil’s increasing oil production combined with declining domestic demand has increased the country’s exports, undermining OPEC’s efforts to reverse falling prices through output cuts.  Brazil produced a record 1.5 million bpd earlier this year, 26% more than the previous record set in 2010.  Average exports increased by 39% in the first four months of 2017 from the previous year.

VLCC and Suezmax spot chartering in the Middle East increased last week to the highest level since early March.  According to Morgan Stanley, Mideast tanker charters have cast doubt on OPEC cuts.  Charters increased by 5 million bpd to 10.9 million bpd in the week ending June 23rd, up 85% week on week, with the four-week average levels also showing a gain. 

According to Bloomberg, more than nine million barrels of Brent, Forties, Oseberg and Ekofisk crude have accumulated in tankers in the North Sea.  Two VLCCs and nine Aframaxes have been floating off the coast of the UK for as long as three months. 

Mexico’s Pemex is looking for an extra 3.5 million barrels of gasoline to make up for the shut down of its Salina Cruz refinery due to a fire and flooding on June 15th.  Salina Cruz produced between 20-30% of total Pemex gasoline production over the past year. 

Colonial Pipeline Co. said shipping nominations on its main distillate pipeline have fallen below capacity.  It said it will not be calling allocation on Cycle 38 for Line 2, which runs from Houston, Texas to Greensboro, North Carolina. Colonial Pipeline Co said shipping demand on its main distillate line fell below capacity for the first time in nearly six years as the East Coast remained awash in fuel. 

Enterprise Products Partners LP said its Seaway crude pipeline resumed service on Sunday morning following a shutdown due to a leak last week.  The company reported a pipeline incident in Jones Creek, Texas through the National Response Center on Thursday.

IIR reported that US oil refiners are expected to shut in 75,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 93,000 bpd from the previous week. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $43.89, upo 51 cents

RBOB - July $1.4600 , up 2.13 cents

HO - July $1.4011, up 2.07 cents


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Oil futures fell for fifth straight week as U.S. production continues to grow

June 26, 2017

Recap:  Despite the second week of declines in U.S. production, oil futures fell for the fifth straight week as the global oversupply persists and U.S. production continues to grow. This is the longest streak of weekly losses since August of 2015, when prices fell for eight straight weeks.  Although prices fell on the week, Friday’s trading posted slight gains, lifted by weakness in the dollar.  August WTI settled at $43.01 a barrel, up 27 cents, or 0.63%. Brent for August delivery tacked on 32 cents, or 0.71%, to settle at $45.54 a barrel.

July RBOB finished nearly flat at $1.434 a gallon, for a weekly loss of 1.4%, while July heating oil finished unchanged at $1.372 a gallon, with a decline of 3.9% on the week.

Fundamental NewsBaker Hughes reported that US energy firms added oil rigs for a record 23rd consecutive week.  Drillers added 11 oil rigs in the week ending June 23rd, bringing the total count up to 758, the most since April 2015.  That is more than double a year ago at this time when there were only 330 active oil rigs.

Oil Movements reported that OPEC’s oil shipments are expected to fall by 300,000 bpd to 24.11 million bpd in the four weeks ending July 8th compared with the four weeks ending June 10th.

RBC Capital Markets stated that the sudden increase in floating crude storage, despite being uneconomical at present, suggests traders expect oil prices to rally. 

According to Jeffries, as US oil output outpaces domestic refinery demand, US exports must increase by about 760,000 bpd annually through 2021 to about 3.1 million bpd for the market to rebalance. 

As the global oil market worries about an oversupply, declining demand growth in key Asian crude markets is further hampering efforts to restore market balance.  A fuel oversupply in China, a recent demonization in India that has impacted consumption, as well as an ageing and declining population in Japan are holding back crude oil demand growth in three of the world’s top four oil buyers.  The three countries make up 97 million bpd in global oil demand and any fall in demand among those countries will mean lower than expected oil demand growth in Asia, helping to undercut the OPEC-led effort to support prices.  In the latest indicator of a supply overhang, traders said that five very large crude carriers have been chartered in recent days to store unsold oil.  Each VLCC can hold about 2 million barrels of oil, and the five charted for storage add to about 25 supertankers already sitting in southern Malaysian waters. 

Platts reported that the amount of BFOE crude being stored on stationary tankers around the North Sea continues to increase.  S&P Global Platts trade flow software cFlow reported that there were about 9.7 million barrels of BFOE crude engaged in floating storage operations.  It is up from a previous estimate of 8.5 million barrels. 

IIR reported that US oil refiners are estimated to shut in 168,000 bpd of capacity in the week ending June 23rd, increasing available refining capacity by 26,000 bpd from the previous week.  IIR expects offline capacity to fall to 75,000 bpd in the week ending June 30th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $43.21,up 20 cents

RBOB - July $1.4358,, up 14 points

HO - July $1.3790, up 77 points


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Oil rig and platform closures due to Tropical Storm Cindy propped up oil prices

June 23, 2017

Recap:  Oil prices bounced on Thursday, after recent price declines had caused many technical indicators to reach oversold levels. This combined with oil rig and platform closures in the Gulf of Mexico, due to Tropical Storm Cindy, propped up prices. Oil prices have fallen over 16% since the end of May, as  production continues to rise  out of the U.S., and Nigeria and Libya counteracts OPEC and some non-OPEC output cuts.

Both WTI and Brent fell 0.64% on the day before rebounding, and settling into a sideways pattern during the AM session.  News reports of Saudi Arabia wanting to see $60 oil pushed prices out of this pattern to achieve new highs on the day. August Brent peaked at $45.79 a barrel before paring gains for a settlement of $45.22 a barrel, up 40 cents, or 0.89%, while August WTI tacked on 21 cents, or 0.49%, to settle at $42.74 a barrel.

July RBOB gained 2.4 cents, or 1.7%, to $1.435 a gallon, while July heating oil added under a cent, or 0.5%, to $1.372 a gallon.

Fundamental News Talks this week between OPEC and non-OPEC producers focused on how to deal with rising Libyan and Nigerian crude output, rather than deepening output cuts by other members.  Delegates said there was no serious discussion of making further production cuts at a meeting of the Joint Technical Committee, comprised of representatives from Algeria, Kuwait, Saudi Arabia, Venezuela, Russia and Oman.  Libya is producing the most since 2013, with output currently above 900,000 bpd.  The country was producing just 580,000 bpd in November, when OPEC agreed on its cuts.  In Nigeria, the Forcados export terminal restarted after a 15-month halt caused by sabotage and is scheduled to ship about 250,000 bpd this month.

Kuwait’s Oil Minister, Essam al-Marzouq, said he was optimistic that oil markets will gradually return to balance supported by the record compliance with the OPEC and non-OPEC output cut agreement.  He confirmed earlier reports suggesting that compliance with the output cut agreement was running at 106%. 

The US National Hurricane Center said Tropical Storm Cindy moved inland near the Louisiana-Texas border and weakened into a tropical depression later on Thursday morning.  The Louisiana Offshore Oil Port suspended vessel offloadings but expected no interruptions to deliveries from its hub in Clovelly, Louisiana.  Offloading operations are expected to resume on Friday evening.  Energy companies with operations in the Gulf of Mexico reported little impact on production.  Shell suspended some well operations and Anadarko Petroleum and Enbridge said they had evacuated non-essential personnel.   The US Bureau of Safety and Environmental Enforcement stated that energy companies had shut about 16% of US Gulf of Mexico oil output as of midday Thursday, representing 288,186 bpd of the region’s production.  A total of 39 or about 5% of platforms in the Gulf of Mexico were evacuated.     

Colonial Pipeline Co is allocating space for Cycle 37 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee.  Colonial Pipeline also stated that shipping nominations on its gasoline line had declined below capacity for the first time in nearly six years, driving Gulf Coast cash gasoline prices lower.  Colonial will not allocate space on Cycle 37 shipments on Line 1.

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending June 22nd fell by 2.36% on the week and by 14.72% on the year to 869,000 tons.  Gasoil stocks increased by 2.65% on the week but fell by 6.79% on the year to 2.867 million tons. 

Genscape reported that crude oil stocks in the Amsterdam-Rotterdam-Antwerp hub increased 3% to 64.2 million barrels in the week ending June 16th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $42.84, up 10 cents

RBOB - July $1.4384, up 46 points

HO - July $1.3682, down 35 points


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Oil prices fell to near 10-month lows after release of EIA report indicated continued increases in U.S. production

June 22, 2017

Recap: Trading in oil futures was extremely choppy on Wednesday, with prices coming under pressure in overnight trading, only to be driven higher after the release of the EIA report. Holding on to gains proved difficult, with prices falling to near 10-month lows on continued increases in U.S. production. August WTI fell as much as 3.3%, to a low of $42.05 before paring losses for a settlement at $42.53 a barrel, down 98 cents, or 2.25%. Brent for August delivery fell $1.20, or 2.61%, to settle at $44.82 a barrel.      

Brent’s premium over WTI continues to erode, falling 34 cents, to $2.29, from its June peak of $2.63.

July RBOB fell 1.4 cents, or 1%, to $1.411 a gallon, while July heating oil settled $1.365 a gallon, down 3 cents, or 2.2%.

Fundamental News Oil refining and production facilities and communities on the US Gulf Coast were bracing for potential disruptions as Tropical Storm Cindy strengthened of the US Gulf of Mexico.  On the forecast track, the center of Cindy will approach the coast of southwest Louisiana and southeast Texas late Wednesday, and move inland over southeastern Texas on Thursday.  Royal Dutch Shell suspended some offshore well operations but production was so far unaffected.  Anadarko Petroleum evacuated non-essential staff from its Gulf of Mexico facilities.  Exxon Mobil Corp, Phillips 66 and Motiva Enterprises said the storm had not affected their refining operations.  The Bureau of Safety and Environmental Enforcement reported that personnel have been evacuated from a total of 40 production platforms, 5.43% of the 737 manned platforms in the Gulf of Mexico.  It is estimated that 17.24% of the current oil production in the Gulf of Mexico has been shut in or 301,618 bpd.  It also estimated that 0.32% of natural gas production in the Gulf of Mexico was shut in or 10,089 mmcf/d.     

Iran’s Oil Minister, Bijan Zanganeh, said that OPEC members are considering further oil output cuts but should wait until the effect of the current cuts is made clear.  He  said OPEC members are in talks to prepare for a new decision.  He also said the reason for the discussions is an increase in the levels of US production which OPEC members had not predicted.

Lukoil’s chief executive, Vagit Alekperov, said the current decline in world oil prices is of speculative nature. 

Genscape reported that crude inventories in the ARA region increased by 2.05 million barrels in the week ending June 16th to 64.16 million barrels. 

Energy Aspects reported that OPEC’s failure to help the oil market rebalance ensures diesel supplies will be unchecked heading into summer.  It said barring major action by OPEC to tighten up crude markets, refining margins are likely to remain strong enough to ensure high refinery runs worldwide for the next few months.

IIR reported that US oil refiners are expected to shut in 266,000 bpd of capacity in the week ending June 23rd, cutting available refining capacity by 72,000 bpd from the previous week.  IIR expects offline capacity to fall to 122,000 bpd in the week ending June 30th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug  $42.72, up 18 cents

RBOB - July $1.4272, up 1.73 cents

HO - July $1.3718, up 71 points


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