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Market Intel Archives

Oil prices tacked on gains on tensions of U.S. and North Korea

August 10, 2017

Recap: Oil futures bounced around unchanged in overnight trading, but by daybreak, they were trending toward the session highs. The surprise 3.4 million barrel build in U.S. gasoline stocks reported by the EIA offset the unexpected 6.5 million barrel draw in U.S. crude oil inventories, pushing prices back below unchanged. With tensions between the U.S. and North Korea heating up, prices recouped early losses, tacking on gains as the market reached its settlement phase. October Brent settled at $52.70 a barrel, up 56 cents, or 1.07%. WTI for September delivery gained 39 cents, or 0.79%, settling at $49.56.

September RBOB fell less than 0.1%, to settle at $1.620 a gallon, while September heating oil finished up .0241 cents, or 1.4% to settle at $1.6533 a gallon. 

Fundamental News: Euroilstock reported this morning that European refineries increased their crude oil intake in July to 10.62 million b/d up 2% from June, but down from July 2016 levels. European middle distillate stocks were estimated at 445.05 million barrels, up 0.7% from June and unchanged from a year ago. Gasoline stocks were pegged at 114.41 million barrels, down 1.3% from June and down 3.8% year on year. Total crude and product stocks in Europe were estimated at 1.146 billion barrels, up 0.5% from June and down 1.9% year on year.

IIR estimates that U.S. oil refineries had an estimated 105,000 b/d of refining capacity offline in the week ending August 11th, down from the 197,000 b/d of capacity they estimated was offline in the week ending August 4th.

Pemex reported that its Salina Cruz refinery has more than 90% of its units operating but the refinery is not yet producing finished fuels. The refinery has undergone major maintenance following its mid-June fire and flooding.

Reuters market analyst, John Kemp, noted this week that U.S. shale producers need WTI oil price around $50 per barrel to break even. He based his estimate on analysis of financial statements for the second quarter. Fifteen of the largest shale oil and gas producers reported total net losses of $470 million for the three months between April and June when WTI prices averaged $48.00 per barrel.

The Trump administration on Wednesday imposed sanctions on eight more Venezuelan officials, including the brother of the late socialist leader Hugo Chavez, to punish them for their role in President Maduro’s creation of a new legislative assembly. However, the U.S. stopped short of placing broader financial or “sectoral” sanctions on its vital oil industry. Sanctions on the oil sector reportedly are still being considered. Separately, the main business group in Venezuela said today it expects the county’s economy will contract between 7-10% this year.

Genscape reported that crude oil inventories in the ARA region rose by 4.7% during the week ending August 4th. This was the biggest weekly increase since April 7th according to its data.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $50.11, up 55 cents

RBOB - Sep $1.6433, up 2.34 cents

HO -Sep $1.6732, up 1.96 cents


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Oil futures traded higher on reports that Saudi Arabia may cut its exports to Asia

August 09, 2017

Recap:  Oil futures traded higher in overnight trading, gaining on reports that Saudi Arabia is planning to cut its September exports to Asia. September WTI rose to a high of $49.79 a barrel, while October Brent topped out at $50.24 a barrel. Gains were reversed with oil weakening as the dollar strengthened and as oversupply concerns remain an ever present cloud over the market.

Prices slowly slipped in what was a quietly traded market, with both blends finding their session lows just after daybreak. Prices fell just over 1% before paring losses. September WTI settled at $49.17 a barrel, down 22 cents, or 0.45%, while October Brent fell 23 cents, or 0.44%, to settle at $52.14 a barrel. 

September RBOB fell 0.6%, to settle at $1.6280 a gallon, while September heating oil declined .0106 cents, to settle at $1.6292 a gallon. 

Fundamental News Bloomberg reported that crude stocks held in Cushing, Oklahoma are expected to increase by 200,000 barrels to 56 million barrels in the week ending August 4th.

OPEC and non-OPEC officials held a second day of meetings in Abu Dhabi to discuss ways to increase compliance with their output cut agreement.  A source stated that a panel comprising of  representatives from Russia, Kuwait, Saudi Arabia and officials from OPEC’s Vienna headquarters, has met individually with officials from Iraq, the UAE, Kazakhstan and Malaysia.  They said talks were constructive and fruitful and were aimed at achieving full conformity in the months ahead.  OPEC said UAE, Iraq, Kazakhstan and Malaysia all expressed their full support for the existing monitoring mechanism. 

Saudi Arabia will cut crude oil allocations to its customers worldwide in September by at least 520,000 bpd. 

Iraq’s Oil Minister, Jabar al-Luaibi, departed for Saudi Arabia on Tuesday where he will meet his counterpart, Khalid al-Falih, to discuss oil market developments and OPEC’s efforts to stabilize the market. 

The EIA reported that total world consumption in 2017 is expected to increase by 1.42 million bpd to 98.41 million bpd and increase by 1.61 million bpd to 100.02 million bpd in 2018.  It reported that total world supply in 2017 is expected to increase by 1.27 million bpd to 98.42 million bpd and by 1.79 million bpd to 100.21 million bpd in 2018.  OPEC production is expected to increase by 200,000 bpd to 39.44 million bpd in 2017 and by 670,000 bpd to 40.11 million bpd in 2018.  US oil demand in 2017 is forecast to increase by 340,000 bpd to 19.97 million bpd and by 330,000 bpd to 20.3 million bpd in 2018.  The demand growth estimate for 2017 was revised up by 30,000 bpd while its demand growth estimate for 2018 was revised down by 30,000 bpd.  US gasoline demand is expected to remain unchanged at 9.33 million bpd in 2017 and increase by 30,000 bpd to 9.36 million bpd in 2018 while distillate demand is expected to increase by 100,000 bpd to 3.98 million bpd in 2017 and by 80,000 bpd to 4.06 million bpd in 2018.  US crude oil production is expected to increase by 50,000 bpd to 9.35 million bpd in 2017 and by 560,000 bpd to 9.91 million bpd in 2018.  In regards to prices, the EIA forecast Brent spot prices to average $51/barrel in 2017 and $52/barrel in 2018.  WTI prices are forecast to average $2/barrel less than Brent prices in both 2017 and 2018.  The US average retail price of gasoline is forecast to be $2.33/gallon in both 2017 and 2018.
 

Early Market Call - as of 9:10 AM EDT

WTI - Sep $49.54 up 37 cents

RBOB - Sep $1.6156 down 52 points

HO - Sep $1.6356 up 64 points


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Oil prices fell as Libya's largest oil fields hit pre-protest levels

August 08, 2017

Recap: WTI slipped to a near double bottom on Monday, pressured by uncertainty as to whether or not OPEC’s efforts to support prices are working, and on news that production at Libya’s largest oil field is reaching pre-protest levels. Despite a rebound off of the day’s lows, prices finished below unchanged. September WTI fell 19 cents, or 0.4%, to settle at $49.39 a barrel, while Brent for October delivery slipped 5 cents, or 0.1%, to settle at $52.37 a barrel.  

There appears to be underlying weakness in this market, as it continues to fail at $50 a barrel. Perhaps word out of the OPEC meeting, which is currently taking place, will provide an impetus for market direction.

September RBOB fell 1.64 cents, or 0.99%, to settle at $1.6450 a gallon, while September heating oil declined .0088 cents, or 0.53%, to settle at $1.6398 a gallon. 

Fundamental News Officials from a joint OPEC and non-OPEC technical committee are meeting in Abu Dhabi on Monday and Tuesday to discuss ways to increase compliance with the OPEC and non-OPEC output cut agreement.

Operations at Libya’s Sharara oil field returned to normal after a halt on August 6th due to armed protesters shutting down some facilities.  A pipeline , that the protesters closed, which supplied jet fuel and gasoline from Zawiya to Tripoli  was re-opened.  The National Oil Corp gave no reason for the protest in Zawiya, which started on Sunday, forcing oil workers to gradually reduce production from Sharara.  A local shipping source said loading operations in Zawiya had also been affected.

Nigeria’s Petroleum Ministry reported that the country’s average oil production including condensates, increased marginally to 2.06 million bpd in July from 2.05 million bpd in June.  It is a sharp increase over the 1.6 million bpd output from a year ago when production facilities were hit by attacks from Niger Delta militants. 

Iraq’s oil production in July fell by 150,000 bpd to 4.4 million bpd. 

Goldman Sachs analysts stated that US oil production may increase by 950,000 bpd between the fourth quarter of 2016 and fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays, assuming the oil rig count remains at the current level.  Separately, Goldman Sachs said data from the May-June period suggests that global demand for oil remains strong, driven by economic growth.  Demand for the May-June period increased by 1.81 million bpd in the second quarter of 2017, above its previous quarterly growth forecast of 1.55 million bpd.  Data in the US, Japan, India, China, Korea, Brazil, Mexico, Spain and France implies June global demand growth of 1.54 million bpd year on year.  Goldman Sachs forecast demand growth of 1.6 million bpd in the second half of the year.  It sees 2017 Brent prices at $52/barrel.   

A JPMorgan analyst stated that WTI at $42/barrel in 2018 may prove too optimistic.  The average stock draw has fallen from 750,000 bpd to 450,000 bpd in the second half, while the 2018 imbalance is at 1.3 million bpd from 1.1 million bpd, previously. 

Bloomberg reported that total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle fell by 45% to 647,581 bpd in the week ending August 3rd. 

IIR reported that US oil refiners are expected to shut in 97,000 bpd of capacity in the week ending August 11th, increasing available refining capacity by 112,000 bpd from the previous week.  IIR expects offline capacity to fall to 13,000 bpd in the week ending August 11th and to 13,000 bpd in the week ending August 18th. 

Early Market Call - as of 9:00 AM EDT

WTI - Sep  $49.06, down 33 cents

RBOB - Sep $1.6031, down 2.71 cents

HO -Sep $1.6204, down 1.95 cents


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Oil futures hit highest level in two months

August 07, 2017

Recap: This week, oil futures reached their highest level in two months, but were unable to sustain enough strength to hold at these highs. WTI broke above $50 a barrel, while Brent came within 7 cents of $53 a barrel. Trading had taken place under mixed emotions and confusion as to whether OPEC cuts are actually having an impact on the global supply glut, as producers in the U.S. continue to ramp up production. On Friday, a strong dollar kept a lid on prices. September WTI settled at $49.58 a barrel, up 55 cents, or 1.12%, but posted a modest loss of 13 cents on the week, while Brent for October delivery settled at $52.42 a barrel, up 41 cents, or 0.79%, down 10 cents on the week.

September RBOB rose 0.9% to $1.6463 a gallon, the contract added less than 0.1% on the week. September heating oil added almost a penny, or 0.6%, to close at $1.6486 a gallon, with a weekly climb of 0.5%.

Fundamental News Barclays said certain factors that supported oil prices in July are unlikely to last and expects a downward correction this quarter.  It, however, continues to see Brent prices moving higher to average $54/barrel in the fourth quarter on continued inventory draws, OPEC compliance and an ongoing decline in Venezuela’s output.

China is on pace to overtake the US as the world’s largest oil importer this year.  The EIA reported that China imported more crude than the US in the first half of the year.  China averaged 8.55 million bpd compared with 8.12 million bpd in the US, a trend that is expected to last.  China’s import surge is being driven by the expansion of its refinery capacity.  However, as the domestic demand has not materialized to offset the increase in fuel supply, China’s exports of gasoline and diesel have increased to record highs. 

Enbridge Inc stated that regulatory delays and route modifications will increase the cost of its Line 3 pipeline replacement project.  It said the project from Hardisty, Alberta to Superior, Wisconsin will cost C$8.2 billion or $6.52 billion, 9% more than a previous forecast.  The increased cost will be offset, however, by lower operating costs and a stronger US dollar, and the project remains on track for service in the second half of 2019.  Construction officially began in Canada on Thursday.  The Line 3 replacement project doubles the capacity of the existing line to 760,000 bpd.   

According to Bloomberg, Pioneer Natural Resources, Devon Energy and Antero Resources are among the shale drillers amassing hedges that protect their future proceeds as far out as 2023.  With US crude futures getting close to a new bull market, the pace of hedging by energy producers is expected to accelerate.  So far, about half of the oil Pioneer expected to produce next year is covered and Devon has about 55% of its 2017 output hedged and is looking ahead to next year.  Devon’s current year hedges locked in prices well above market levels.   

Refining industry sources stated that Asia’s spot market demand for Middle East and Russian crude oil could increase this month as a regional price shift pares shipments from the Atlantic Basin and the US back from record highs. 

IIR reported that US oil refiners are expected to shut in 196,000 bpd of capacity in the week ending August 4th, increasing available refining capacity by 52,000 bpd from the previous week.  IIR expects offline capacity to fall to 60,000 bpd in the week ending August 11th and 13,000 bpd in the week ending August 18th. 
 

Early Market Call - as of 9:00 AM EDT

WTI - Sep  $48.99, down 60 cents

RBOB - Sep $1.6198, down 2.66 cents

HO -Sep $1.6292, down 1.96 cents


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Oil futures moved lower on concerns that OPEC effort to prop up oil prices is failing

August 04, 2017

Recap: After posting early gains, oil futures turned lower on Thursday amidst broadening concern that OPEC’s efforts to prop up prices is failing.  This comes as the group prepares for its upcoming meeting planned for next week. September WTI peaked at $49.96, the bottom of a previous area of consolidation. Gains were pared as concern mounted over discord within OPEC due to Iraq’s and the UAE’s inability to show how they will meet their prescribed targets. Prices fell below unchanged, falling into a steady decline for most of the day. Slight losses were recaptured, with September WTI settling at $49.03 a barrel, down 56 cents, or 1.13%. October Brent fell 35 cents, or 0.67%, to settle at $52.01 a barrel.  

September gasoline lost 1.29 cents, or 0.8%, at $1.6319 a gallon, while September heating oil ended off by about 2 cents, or 1.2% at 1.6389 a gallon.

Fundamental News:  According to Thomson Reuters, OPEC’s crude oil exports increased by 370,000 bpd to a record high in July of 26.11 million bpd, most of which came from Nigeria.  Nigeria’s crude exports increased by 260,000 bpd to 2.19 million bpd.  Libya’s oil exports increased by 120,000 bpd on the month to 880,000 bpd, almost double its exports in April.  Shipments from the Middle East fell to 18.14 million bpd in July from 18.53 million bpd.  The largest decline came from Saudi Arabia, which loaded an average of 7.1 million bpd, down 360,000 bpd on the month. 

An official at Kuwait Petroleum Corp said Kuwait is committed to keeping its production at 2.7 million bpd as part of the OPEC cut agreement. 

Officials from a joint OPEC and non-OPEC technical committee will meet in Abu Dhabi on August 7-8 to discuss ways to increase compliance with their supply cut agreement.  Saudi Arabia’s Energy Minister, Khalid al-Falih, said the Joint Technical Committee would also study export data.  OPEC’s compliance with the output cut agreement has been at record highs so far in 2017, however, Iraq and the UAE have shown relatively low compliance.  Both countries stress their commitment to the deal but complain that the secondary sources’ assessment of their production before the agreement took effect in January was too low.  As a result, in their opinion, the two countries have the task of making an even larger cut to fully comply with the agreement. 

Enterprise Products Partners said it executed additional long-term contracts for the Midland-to-ECHO crude pipeline.  Total commitments are at 83% of the pipeline’s 405,000 bpd allotment of committed capacity. 

The Nigerian National Petroleum Corp signed agreements with Chevron and Shell to increase its crude production and reserves.  It said its joint venture agreement with Chevron Nigeria Limited would see the development of proven and probable reserves of 211 million barrels.  It also stated that a joint venture with Shell Petroleum Development Co would lead to the development of a project comprising of 156 development activities across 12 oil mining licenses in the Niger Delta. 

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp hub in the week ending August 3rd increased by 6.02% on the week but fell by 20.97% on the year to 916,000 tons.  Gasoil stocks fell by 3.62% on the week and by 17.02% on the year to 2.715 million tons while fuel oil stocks fell by 15.2% on the week but increased by 19.35% on the year to 993,000 tons.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $49.06, up 4 cents 

RBOB - Sep $1.6422, up 1.02 cents

HO -Sep $1.6421, up 30 points


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EIA reported 1.5 million barrel decrease in US crude oil inventories

August 03, 2017

Recap: Trading was volatile on Wednesday, with oil prices trading lower overnight, as the east awoke and reacted to the 1.8 million barrel build in U.S. crude oil inventories reported by the API. In direct contrast, the EIA reported a decrease of 1.5 million barrels. Upon the release of the EIA report, September WTI dipped 40 cents, but was lifted by a strong appetite for products. According to the report, gasoline demand soared to 9.842 million barrels during the week ending July 28, the highest on record. With crude runs reaching 123,000 barrels per day, prices were lifted off the lows and continued to rise throughout the session. September WTI settled at $49.59 a barrel, up 43 cents or 0.87%, just off the day’s high of $49.65. Brent for October delivery gained 58 cents, or 1.12%, to settle at $52.36 a barrel.

Fundamental News:  The EIA reported that US gasoline demand increased to 9.842 million bpd in the week ending July 28th, the highest level since the agency began collecting data in 1991.

According to Bloomberg’s tanker-tracking data, observed crude exports from Saudi Arabia fell to an average 6.806 million bpd in July compared with a revised 6.989 million bpd in June.  The country’s shipments to the US fell 34% on the month to 548,000 bpd, the lowest level this year. 

Libya’s crude shipments increased to a new three year high in July.  The country shipped about 865,000 bpd of crude in July, up 11% on the month.  The recovery of crude production from Libya is undermining OPEC’s efforts to cut its output. 

Bloomberg reported that OPEC’s total crude production in July increased by 210,000 bpd on the month to 32.87 million bpd.  It reported that the 12 OPEC countries bound by the output cut agreement were 86% compliant with their pledges.

Venezuela’s PDVSA and its partners have quietly started to find markets for the country’s crude oil if the US imposes further sanctions and bans its imports.  About a third of all oil produced in Venezuela is processed at US refineries in the Gulf Coast.  Shipments to the US were worth about $12 billion last year. 

Goldman Sachs said the second quarter results from major oil companies suggest that the industry was adapting to a $50/barrel price environment.  It said oil majors were profiting more now than they did when oil prices stood at $100/barrel, as they adapted to lower prices by lowering costs and improving operations.   

PVM Oil Associates stated that oil producers have locked in their output hedges in the price rally.  It said the improving prices provided US producers with a timely opportunity to lock in selling prices for future production that will help safeguard the US shale boom. 

Magellan Midstream Partners LP reported that its BridgeTex expansion of capacity to 400,000 bpd from 300,000 bpd is complete.  It is currently holding an open season to expand its capacity to 440,000 bpd.  It also reported that its Cheyenne extension of the Saddlehorn pipeline is in the final stages of construction and is expected to start operations in the third quarter.   


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $49.81, up 22 cents

RBOB - Sep $1.6486, up 38 points

HO -Sep $1.6577, down 9 points


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Oil prices fell more than 2% after reaching a two-month high on Monday

August 02, 2017

Recap:  After reaching a two-month high on Monday, oil prices fell more than 2% during Tuesday’s session on growing skepticism that OPEC was incapable of cutting enough production to support prices. According to a Reuter’s survey, OPEC production climbed in July to its highest level since December 2016. A post settlement sell-off came after the release of the API numbers, which showed an unexpected build of 1.8 million barrels in U.S. crude oil inventories. 

Oil futures experienced an outside trading session, as it surpassed Monday’s high and low, before paring losses. September WTI settled at $49.16 a barrel, down $1.01, or 2.01%. Brent for October delivery fell 94 cents, or 1.78%, to settle at $51.78 a barrel.  

Fundamental News:  Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 700,000 barrels to 55.1 million barrels in the week ending July 28th.

Reuters reported that OPEC’s oil output in July increased by 90,000 bpd to a 2017 high, led by a further recovery in supply from Libya, one of the countries exempt from a production cutting deal.  A fall in Saudi Arabia’s supply and lower exports from Angola helped to increase OPEC’s adherence to its supply cuts to 84%. 

Russia’s Energy Ministry reported that the country reduced its oil output in July by 307,600 bpd from its production level in October 2016.

Iraq’s Oil Ministry reported that the country’s crude oil exports fell to 3.23 million bpd in July from 3.273 million bpd in June as no shipments were made from the northern Kirkuk field.  Iraq generated $4.13 billion from oil sales in June and sold its crude for $42/barrel. 

Iran’s news agency SHANA reported that the country’s oil exports in July increased by 45,000 bpd on the month.  Iran exported 2.2 million bpd of oil in July to Asian and European markets, with exports to Asia increasing by 100,000 bpd. 

According to Bloomberg, observed crude exports from Libya increased by 11% on the month in July.  A total of 42 cargoes loaded from Libyan ports in July, totaling 26.8 million barrels or about 865,000 bpd.  This is compared with 781,000 bpd in June. 

JBC Energy reported that OPEC’s output in July increased by 210,000 bpd to 32.87 million bpd.  OPEC compliance with its target cuts fell to 93% in July from 94% in June. 

Cargo-tracking company, Kpler, said OPEC’s exports in July increased to a 2017 high of 26.68 million bpd.  The gains were led by Libya, Nigeria and the UAE. 

According to cFlow, Platts’ trade-flow software, expected arrivals of distillates into Europe and the Meditteranean from the US Gulf Coast in August to reach about 1 million metric tons.  About 340,000 metric tons of distillates left the US Gulf Coast for Europe and the Mediterranean in the past seven days, down from about 500,000 metric tons the previous week. 

BP expects global oil prices to hold within a range of $45-$55/barrel next year as US shale production increases.  Following a slow start to the year, global oil demand recovered in the second quarter of 2017 and was expected to grow by 1.4 to 1.5 million bpd. 

Bloomberg reported that preliminary US waterborne crude imports fell by 1.7 million bpd to 4.2 million bpd in the week ending July 27th.  The Gulf Coast saw the largest decline of 869,700 barrels to 2.48 million bpd, while imports to the West and East Coasts fell by 359,800 bpd and 472,000 bpd, respectively.  Total crude and product imports fell by 2.06 million barrels to 5.9 million bpd. 


Early Market Call - as of 9:00 AM EDT

WTI - Sep $49.25, up 8 cents

RBOB - Sep $1.6620, up 7 points

HO - Sep $1.6509, up 97 points


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Oil prices rose after OPEC announced meeting to discuss production cuts

August 01, 2017

Recap: WTI touched just above $50 a barrel in overnight trading amidst unrest in Venezuela and after OPEC announced it will meet in Abu Dhabi next week to discuss its member’s adherence to production cuts. September WTI reached a high of $50.06, before succumbing to new lows on light profit taking. A pre-settlement rally ensued as the dollar tanked on breaking news that the U.S. White House communications director, Anthony Scaramucci resigned, yet another sign of turmoil within the Trump administration.

Today’s market activity placed July as the strongest month so far this year. Brent futures finished the month up 8% from June, while tacking on 13 cents, or 0.25% on the day to settle at $52.65 a barrel. September WTI closed up 46 cents, or 0.9%, to settle at $50.17 a barrel.

August RBOB rose 2.97 cents, or 1.8%, to $1.7058 a gallon, the highest close since April 18. RBOB finished the month up 12.6%, the largest monthly rise since March 2016. August heating oil rose 1.22 cents, or 0.7%, to $1.6519 a gallon, its highest close since April 12. For the month, heating oil rose 12%.

Fundamental News:  Declining compliance with oil output cuts has moved the OPEC and non-OPEC producer coalition to call a meeting of technical experts next week in Abu Dhabi to discuss ways to increase their commitments.  The meeting, scheduled for August 7-8, follows pledges by the coalition’s monitoring committee to demand better compliance from members and another warning from Saudi Arabia that it would not tolerate any country to produce more.  Iraq’s Oil Minister, Jabbar al-Luaibi, will be meeting with Saudi Arabia’s Oil Minister, Khalid Al-Falih, in the coming days, as well as with Iran’s Oil Minister, Bijan Zanganeh.

According to Reuters, OPEC’s oil production in July increased by 90,000 bpd to 33 million bpd, a 2017 high, led by a further recovery in supply from Libya.  A decline in Saudi Arabia’s production and lower exports from Angola helped to increase OPEC’s adherence to its supply cuts to 84% from a revised 77% in June.  Saudi Arabia produced 50,000 bpd less, although output in June was revised higher to just above its OPEC quota.  The extra oil from Libya means supply from the 13 OPEC members originally part of the deal has increased far above their implied production target. 

Saudi Arabia is considering a flexible tax system for Saudi Aramco that would increase royalty payments when crude prices increase.  It is considering a proposal from Saudi Aramco to replace the current fixed royalty on revenues.  Aramco has proposed to initially set the royalty at 20%, the same rate as today’s fixed rate and increase it automatically if oil prices rise significantly. 

The US vowed strong and swift actions against the architects of authoritarianism on Sunday in response to what it called a flawed election in Venezuela of a constitutional super-body under President Nicolas Maduro.  The Trump administration is considering imposing sanctions on Venezuela’s oil sector.   

Prominent community leaders in Nigeria’s Niger Delta threatened on Monday to pull out of peace talks with the government unless their demands are met by November 1st.  They said the federal government had failed to implement promises to drag the region out of poverty. 

TransCanada will make an investment decision this November or December on its proposed Keystone XL pipeline, which is expected to ship 830,000 bpd of crude from Hardisty, Alberta to Steele City in Nebraska. 

IIR reported that US oil refiners are expected to cut 101,000 bpd of capacity in the week ending August 4th, increasing available refining capacity by 147,000 bpd from the previous week.  IIR expects offline capacity to fall to 86,000 bpd in the week ending August 11th. 


Early Market Call - as of 10:00 AM EDT

WTI - Sep  $49.53, down 65 cents

RBOB - Sep $1.6619, down 1.51 cents

HO -Sep $1.6560, down 1.17 cents


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Oil prices posted largest weekly gain of 2017

July 31, 2017

Recap: Oil prices rose for the fifth straight day, posting their largest weekly gain of the year. WTI closed the week up $3.94 or 8.6%, while Brent gained $4.46, or 9.02%. September WTI settled at $49.71 a barrel on Friday, up 67 cents or 1.37% on the day. Brent for September delivery tacked on $1.03, or 2.00%, to settle at $52.52 a barrel.

The front end of the Brent curve traded in positive territory for the first time since April of 2016, an indication that investors are becoming more bullish. The September/October Brent spread strengthened 33 cents, settling at 30 cents premium with the September contract trading over the October contract. While still in negative territory, the front end WTI spread continues to strengthen, settling at -10 cents.

August RBOB added 3.2 cents, or 1.9%, to $1.676 a gallon, with the contract up 7.2% for the week, while August heating oil rose 3.7 cents, or 2.3%, to $1.640 a gallon to post a weekly rise of 8.2%. The August contracts expire at Monday’s settlement.

Fundamental News Three OPEC sources stated that officials from some OPEC and non-OPEC countries may hold a meeting in Abu Dhabi as soon as next week to discuss compliance with their supply agreement.  One of the sources said the talks were at a technical level and were related to the Joint Technical Committee, which is monitoring compliance with the agreement and that oil ministers would not attend.

Baker Hughes reported that US energy companies added 10 rigs in July, the fewest of any month since May 2016.  It also reported that drillers added two oil rigs in the week ending July 28th, bringing the total count up to 766, the most since April 2015.

Oil Movements reported that OPEC shipments are expected to increase to 24.14 million bpd in the four week period ending August 12th, compared with the previous four week period ending July 15th.

Crude oil produced in the Gulf of Mexico that is bound for Asia is proving to be a challenge for OPEC producers such as Saudi Arabia as they try to defend their market share in the Asian market.  Sour oil varieties such as Mars Blend and Poseidon from the waters off the US Gulf Coast are being bought by Asian refiners with increasing frequency as the global oversupply persists.  Those cargoes are similar in terms of quality with cargoes from Middle East producers that have been cut due to the OPEC and non-OPEC output cut agreement.   

Exxon Mobil Corp expects to add 3 drilling rigs in the Permian Basin by the end of August, bringing the rig count to 19. 

Fitch Group’s BMI Research said Libya’s crude oil output is expected to average 826,000 bpd this year and 1.03 million bpd in 2018, after a continued improvement in its domestic political situation, leading to greater stability.  The revised production estimate is still short of the country’s output capacity of 1.25 million bpd.  BMI raised its average production forecasts for 2017 and 2018 from 703,000 bpd and 843,000 bpd, respectively. 

Energy Aspects reported that oil products have led draws in global inventories in July.  Global stocks have declined by 40-50 million barrels in July, with products accounting for two-thirds of the decline. 

According to Bloomberg, the number of VLCCs and ULCCs bound for the US in the next three months will increase by three to 21 ships. 

IIR reported that US oil refiners are expected to shut in 248,000 bpd of capacity in the week ending July 28th, reducing available refining capacity by 141,000 bpd in the previous week.  IIR expects offline capacity to fall to 101,000 bpd in the week ending August 4th and to 86,000 bpd in the following week.


Early Market Call - as of 9:00 AM EDT

WTI - Sep  $49.53, down 18 cents

RBOB - Aug $1.6884, up 84 points

HO -Aug $1.6455, up 33 points


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Oil prices continued to gain for third straight session

July 28, 2017

Recap: Gains in oil prices were extended for the third straight session, with oil futures trading close to a two-month high. Traders are beginning to broaden their focus, not only to encompass the U.S. stockpile situation and OPEC output cuts, but geopolitical risk as well. Coming into view are strikes in Venezuela  that are now into their second day, sanctions against Iran, and heightened tensions with North Korea. On the other side, is the U.S. rig count, which, if oil prices rise, so will the rig count.

September WTI settled up 29 cents, or 0.6% at $49.04 a barrel, while September Brent settled at $51.49, up 52 cents, or 1.02%.

RBOB was clearly the largest percentage gainer on the day, gaining 1.7%, finishing at their highest level since May 24. August RBOB rose 2.7 cents, or 1.7%, to $1.645 a gallon, while August heating oil added under a penny to $1.603 a gallon.

Fundamental News:  Kuwait joined the UAE in promising to produce less oil after Saudi Arabia called on fellow OPEC producers to cut more supply to help cut the global oversupply.  Kuwait Petroleum Corp has agreed with customers in the US to reduce contractual sales volumes of oil for 2017.  This came a day after UAE Minister of Energy, Suhail Al Mazrouei said Abu Dhabi National Oil Co would cut shipments of Murban, Das and Upper Zakum crudes by 10% starting in September.

Royal Dutch Shell Chief Executive, Ben van Beurden, said the company is preparing for “lower forever” oil prices.  He said that with oil prices around $50/barrel and forecasts of only a modest recovery by the end of the decade, Shell was not planning to stop its cost cutting drive.   He stated that the company was getting fit for oil prices of $40/barrel.  Shell oil and gas production in the second quarter fell to 3.495 million bpd of oil equivalent from 3.752 million bpd of oil equivalent in the first quarter.  Separately, he said the world’s oil consumption could peak as early as the end of the net decade as electric vehicles become more popular.  On Wednesday, Britain announced plans to ban diesel and gasoline vehicles by 2040, following a similar move by France.  He said under the company’s most aggressive scenario of battery-powered vehicles replacing traditional internal combustion engines, consumption of oil will peak in the early 2030s.  He added that with a high use of biofuels, demand could peak by the late 2020s.  However, he stated that oil will still be needed for decades to come as it is likely to remain the main fuel for planes, ships and heavy trucks.   

Goldman Sachs Equity Research said recent inventory draws have been favorable and suggest the market is beginning to rebalance.  It said $45-$50/barrel WTI price signal needed to effectively constrain shale and restrain OPEC production. 

US shale producers have started to cut their 2017 capital spending budgets.  Anadarko Petroleum Corp, ConocoPhillips, Whiting Petroleum Corp and Hess Corp cut a combined $750 million from their capex plans. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending July 27th increased by 6.93% on the week but fell by 32.71% on the year to 864,000 tons, while gasoil stocks fell by 0.49% on the week and by 12.95% on the year to 2.817 million tons.


Early Market Call - as of 9:00 AM EDT

WTI - Sep $ 49.24, up 20 cents

RBOB - Aug $1.6582, up 1.34 cents

HO - Aug $1.6149, up 1.09 cents


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