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Market Intel Archives

WTI settled below $50/barrel after fears OPEC will not adhere to agreed output cuts

December 08, 2016

Recap: For the first time in 5 sessions, WTI settled below $50 a barrel on bearish U.S. inventory numbers and fading belief that OPEC will adhere to output cuts agreed upon by the group. Early in the session, January WTI traded above $51 a barrel, but slowly drifted lower as the release of the inventory numbers drew near. Despite total crude oil stocks decreasing by 2.4 million barrels, the report is being viewed as bearish. Stocks held at Cushing, OK, the NYMEX delivery point, increased 3.8 million barrels, while stockpiles for both gasoline and distillates increased. January WTI fell $1.16, or 2.28%, to settle at $49.77. Brent for February delivery settled at $53 a barrel, down 93 cents, or 1.72%.

January RBOB ended at $1.508 a gallon, down 2.8 cents, or 1.8%, while January heating oil fell 2 cents, or 1.2%, to $1.618 a gallon.

Fundamental News:  Saudi Arabia's Energy Minister, Khalid al-Falih said the country is committed to meeting global oil demand, including the US.

Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said OPEC's deal to cut output will proceed even if Russia becomes the only non-OPEC country to commit to reduce output at the meeting this week.  Meanwhile, Nigeria, which is exempt from the output cuts because of militant attacks on its oil infrastructure, hopes to increase its production to 2.1 million bpd next month from its current level of 1.9 million bpd.  Fourteen non-OPEC countries including Russia have been invited to meet with OPEC on Saturday.  The UAE's Energy Minister, Suhail bin Mohammed al-Mazroui, said he was optimistic that non-OPEC producers would pledge cuts.  He added that the oil market needs prices that provide an incentive to invest in production.  He said even at $50/barrel, there have been declines in investments.  Separately, Venezuela's Oil Minister, Eulogio Del Pino, said that the oil market would rebalance within six to nine months and that OPEC aimed for moderate prices within a range of $60-$70/barrel.  He said OPEC is aiming for a moderate but not too high oil price. 

Russia's Oil Ministry's representative, Olga Golant, said Russian oil producers have supported proposals by the ministry to cap oil output.  He said Russia's Oil Minister, Alexander Novak will provide details on the proposals at a meeting between OPEC and non-OPEC oil producers in Vienna on December 10th. The heads of Lukoil, Gazprom Neft, Tatneft, Novatek and Surgutneftegaz met Russia's Energy Minister for about an hour.  Lukoil's Chief Executive, Vagit Alekperov, said no decision has been made on how to reduce production.  He added that the ministry has not issued recommendations on quotas for the cut.  Meanwhile, the head of Surgut, Vladmir Bogdanov, said a production cut had been discussed at the meeting.    

Turkmenistan has received an invitation to take part in a meeting between OPEC and non-OPEC producers in Vienna on December 10th but does not plan to attend it.

Libya's National Oil Corporation evacuated non-essential staff from the Es Sider port after reports of military clashes nearby on Wednesday but was not suspending any loadings.  The NOC said it held emergency meetings with subsidiaries and had begun emergency measures near the fighting.  This came as East Libyan security forces said they had thwarted an attempted advance by a rival faction towards major oil ports including Es Sider while rival fighters withdrew from a nearby town. 

IIR reported that US oil refiners are expected to shut in 113,000 bpd of capacity in the week ending December 9th, increasing available refining capacity by 312,000 bpd in the previous week.  IIR expects offline capacity to fall to 61,000 bpd in the week ending December 16th. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $50.27, up 49 cents

RBOB - Jan $1.5114, up 26 points

HO - Jan $1.6211, up 27 points 


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Oil futures fell after Reuter's survey reported rise in OPEC's output

December 07, 2016

Recap: Oil futures fell for the first time in 5 sessions after a Reuter's survey reported OPEC's output rose to 34.19 million barrels per day. This is up from 33.82 million bpd in October. Oil prices rose by almost 15% after the announcement of the OPEC agreement to cut output. Since then, skepticism has been rising as to whether or not the proposed cuts will be enough and if OPEC members will adhere to such cuts. January WTI fell as much as 2.9% on Tuesday. Gains were pared, with this spot contract settling at $50.93 a barrel, down 86 cents, or 1.55%. February Brent fell $1.01, or 1.84%, to settle at $53.93 a barrel.

Despite all the talk of producers selling the deferred months such as Dec18, an examination of open interest for that calendar year is not indicative of a significant amount of selling. We have been writing about the Dec17/Dec18 spread, which has moved into backwardation territory, increasing 94% since the OPEC agreement. Although open interest has increased, it is not much greater than the same period for calendar years 2016 and 2017. The open interest on the calendar strips for this spread during the same time frame indicates a similar jump, averaging 4.9%.

January RBOB fell 2.2 cents, or 1.4%, to $1.536 a gallon, while January heating oil slipped 1.9 cents, or 1.2%, to $1.638 a gallon.

Fundamental News:  In its Short Term Energy Outlook, the EIA reported that US oil production averaged 9.4 million bpd in 2015 and is forecast to average 8.9 million bpd in 2016 and 8.8 million bpd in 2017.  It reported that 2016 oil production is estimated to fall by 560,000 bpd to 8.86 million bpd.  Last month, it forecast a 580,000 bpd year on year decline.  Meanwhile, 2017 oil production is expected to fall by 80,000 bpd to 8.78 million bpd, compared with last month's forecast of a decline of 110,000 bpd.  OPEC production is forecast to increase by 780,000 bpd to 32.53 million bpd in 2016 and by 620,000 bpd to 33.15 million bpd in 2017.  World petroleum demand is expected to increase by 1.36 million bpd to 95.43 million bpd in 2016 and by 1.56 million bpd to 96.99 million bpd in 2017.  Meanwhile, total oil demand in the US is expected to increase by 130,000 bpd on the year to 19.66 million bpd in 2016 and by 240,000 bpd to 19.9 million bpd in 2017.  Gasoline demand is expected to increase by 130,000 bpd to 9.31 million bpd in 2016 and by 60,000 bpd to 9.37 million bpd in 2017.  Distillate demand is expected to fall by 120,000 bpd to 3.88 million bpd in 2016 and increase by 60,000 bpd to 3.94 million bpd in 2017.  The EIA forecast Brent crude prices to average $43/barrel in 2016 and $52/barrel in 2017.  WTI prices are forecast to average about $1/barrel less than Brent prices in 2017.

The IEA's chief, Fatih Birol, said the balance of supply and demand in global oil markets may soon change as a result of OPEC's decision to cut production. 

Kuwait's Oil Minister, Anas al-Saleh, said Kuwait will request that an OPEC committee responsible for monitoring compliance with a global oil output cut agreement meet in February or March next year. 

Russia's Energy Minister, Alexander Novak, plans to meet the country's key crude producers in Moscow on December 7th ahead of a meeting with OPEC representatives in Vienna on December 10th to finalize a global output cut agreement.  The meeting with oil companies is expected to determine the terms on which Russian firms should implement a cut in output that Russia has committed to carry out. 

According to an informal survey of energy professionals, OPEC will achieve some but not all of the production cuts OPEC agreed to last month.  Most energy professionals expect OPEC output will fall to about 33 million bpd in January 2017, down from 33.6 million bpd in October but well above the deal's target of 32.5 million bpd. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $50.45, down 47 cents

RBOB - Jan $1.5282, down 77 points

HO - Jan $1.6240, down 1.39 cents


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WTI and Brent hit highs after OPEC deal shows potential to stop global oil glut

December 06, 2016

Recap: WTI climbed to its highest level in 17-months, while Brent rose to a 16-month high, as the possibility the global oil glut would be eradicated by OPEC measures to cut output permeated the marketplace. January WTI traded above $52 a barrel for the first time since October, peaking at $52.42.  

Prices succumbed to a post settlement sell-off, as some reports began to circulate in the market that the OPEC deal was already beginning to show signs of fraying slightly. WTI fell from its $51.79 settlement, to a low of $51.01 a barrel. Monday's settlement was up 11 cents from Friday. February Brent, which settled at $54.94, up 48 cents, fell to a post settlement low of $54.29 a barrel. 

January RBOB fell 0.1% to $1.557 a gallon while January heating oil slipped less than 0.1% at $1.6571 a gallon.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending December 2nd increased by 3,347,963 barrels on the week and by 1,098,448 barrels from Tuesday, November 29th to 67,299,380 barrels.

Iran's Oil Minister, Bijan Namdar Zanganeh, will attend the meeting between OPEC and non-OPEC members on December 10th in Vienna.  Meanwhile, Russia's Energy Minister, Alexander Novak, plans to take part in talks between OPEC and non-OPEC countries in Vienna. Mexico's energy minister said on Monday that he would attend the meeting as well.  

Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said the country will maintain its oil output at 1.9 million bpd with all three of its main fields on line.

Saudi Aramco announced it will cut the January price for its Arab Light grade for Asian customers by $1.20 per barrel versus December's to a discount of $0.75 a barrel to the Oman/Dubai average. The company raised its Arab Light OSP to Northwest Europe by 30 cents a barrel for January from the previous month's discount of $4.20 to the Brent Weighted average (BWAVE). The Arab Light price for U.S. customers was set at a premium of 5 cents per barrel to the Argus Sour Crude Index for January, down 30 cents a barrel from the previous month.

Gradual increased unit heating and weak scrubber emissions were observed at Irving's 70,000 b/d FCC at its St. John refinery on Sunday.  The unit has been shut since November 19th. 

According to a Reuters survey, in November OPEC produced some 1.69 million b/d more than their planned quota for the first half of 2017. In November, Angola provided the largest supply boost as planned maintenance on the Dalia crude stream ended. While oil producers, Iraq, Iran, Indonesia, Gabon, Libya and Nigeria all increased production, only Saudi Arabia recorded a noticeable decline on the month due to reduced crude use by power plants and lower refiner processing.


Early Market Call - as of 9:25 AM EDT

WTI - Jan $50.44 down $1.35

RBOB - Jan $1.5337 down 2.38 cents

HO - Jan $1.6310 down 2.61 cents


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Brent experienced largest weekly gain since 2009

December 05, 2016

Recap: Brent rose to a 16 month high, as it experienced its largest weekly gain since 2009, while WTI rose to 6 week highs. Despite such gains, the buying frenzy, which began on Wednesday, was somewhat subdued on Friday. January WTI finished up 62 cents, or 1.21%, to settle at $51.68, while February Brent tacked on 52 cents, or 0.96%, to settle at $54.46.

As mentioned on Thursday, the belief that crude oil supplies will not begin to show signs of depletion until well into next year is evident in the Dec17/Dec18 crude oil spread. Since the report of the OPEC and Russian agreement to cut output, this spread as gone from contango market conditions to backwardation. It has risen by 270%, finishing the week at 18 cents per barrel. This marks the first time since 2014 that this spread traded in positive territory.

January heating oil settled at $1.658 a gallon, up 1 cent, or 0.6%, up 11.6% on the week. January RBOB added 1.2 cents, or 4.5%, to $1.549 a gallon.

Fundamental News:  Baker Hughes reported that drillers added three oil rigs in the week ending December 2nd, bringing the total count up to 477, the most since January. 

Two OPEC sources said OPEC will meet with non-OPEC countries to finalize a global oil limiting pact on December 10th in Moscow.  OPEC agreed this week to cut output by 1.2 million bpd beginning in January in a bid to reduce global oversupply and increase prices.  OPEC hopes non-OPEC countries will contribute another 600,000 bpd to the cut.

Russia's Deputy Energy Minister, Kirill Molodtsov said the country's implementation of a deal with OPEC to cut production will be based on Russian output in November.  He said Russian oil companies were actively working out details of how to enact the deal.  Russia's Energy Ministry data showed that the country's oil output stood at 11.21 million bpd in November, up from 11.2 million bpd in October.   

Russia's Lukoil said that the Russian part of the OPEC deal should be supported by all companies.  Separately, Lukoil said Russia's oil production will total 555 million tons in 2017 and 2018, slightly higher than the forecast for this year.  Russia's production for 2016 is forecast at 544 million tons.  Russia's crude oil production is expected to fall to 554 million tons in 2019 and 551 million tons in 2020.  

Iraq is producing 500,000 bpd more of crude on Thursday than the amount it will be required to produce next year under the OPEC quota agreed to on Wednesday.  The Director General of Iraq's State Oil Marketing Organization, Falah Alamri, said Iraq produced 4.852 million bpd on Thursday.  According to the deal, Iran must cut its production to 4.351 million bpd.  The discrepancy is because the OPEC cuts are based on secondary source data, which have Iraq's production from October at 4.561 million bpd.  This gives Iraq a 210,000 bpd target to cut for next year.  However, the Iraqi government, says those secondary sources are underestimating Iraq's output.  The government said Iraq produced 4.776 million bpd in October, a 215,000 bpd difference from the secondary sources and a 435,000 bpd difference between its claimed production and the OPEC quota.   

According to Libya's National Oil Corp, the country plans to increase its oil production to 900,000 bpd in the near future from its current production level of 600,000 bpd. 

Kazakhstan said it will announce no details of a potential oil output cut before a meeting takes place between OPEC and producers outside the cartel.   

The IEA's Executive Director, Fatih Birol, said it sees the oil market rebalancing in early 2017 after the OPEC decision.  He said shale producers need some time to react to prices.  The IEA expects that the response may take about nine months to increase shale production in a significant way.


Early Market Call - as of 9:00 AM EDT

WTI - Jan $52.03 up 36 cents

RBOB - Jan $1.5560 down 31 points

HO - Jan $1.6774 up 69 points


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Oil futures gained more than 4% on Thursday

December 02, 2016

Recap: The buying frenzy sparked by OPEC and Russia's agreement to cut output continued, with oil futures gaining more than 4% on Thursday.  In addition to oil futures gaining, major oil exchange traded funds are on track for their largest weekly gain in more than a year. The VelocityShares 3x Long Crude ETN, a triple leveraged fund that offers 300% of the daily move of its underlying index, has skyrocketed about 32% so far this week. 

January WTI peaked the session at $51.80, the highest level a spot month contract traded in 5 months. This spot futures contract rose $1.62, or 3.28%, to settle at $51.06.  Meanwhile, February Brent traded as high as $54.53, the highest level for a spot month in almost a year. Settlement was $53.94, up $2.10, or 4.05%.

Separately, it appears traders are gearing up for prices to remain higher throughout 2017, as the Dec17/Dec18 fell into backwardation for the first time since 2014. After gaining 63% on Wednesday, this spread was pushed into backwardation on Thursday, as it widened from -0.46 to 0.41.

U.S. refined products also rose along with crude - ultra low sulfur diesel (ULSD) futures soared as much as 5.5 percent to its highest in more than a year while gasoline futures jumped as much as 6 percent. January heating oil settled at $1.645 a gallon, up 6.9 cents, or 4.4%. January RBOB added 6.7 cents, or 4.5%, to $1.549 a gallon.

Fundamental News:  Genscape reported a build in crude stocks held in Cushing, Oklahoma of 225,000 barrels in the week ending November 25th. 

Russia's Energy Minister, Alexander Novak, said the country plans to cut its oil production from November-December levels as a part of its agreement to stabilize the global oil market with OPEC.  He said a schedule for cuts to Russia's oil output will be ready before the next meeting of OPEC and non-OPEC countries.  He said it was important to monitor the implementation of the agreement with OPEC.  On Wednesday, he said Russia was ready to cut production by 300,000 bpd in the first half of 2017 as part of its agreement with OPEC.  Russia's oil production set a new post-Soviet high in October, rising by 0.1% on the month to 11.2 million bpd.  Meanwhile, Russia's Energy Minister and OPEC's Secretary General, Mohammed Barkindo, are consulting with 18 non-OPEC countries in regards to cutting production. 

Indonesia suspended its OPEC membership, less than a year after rejoining the group, as the net oil importer said it could not agree to the group's production cuts. 

The IEA's chief, Fatih Birol, said extra supply from the USA will put downward pressure on prices.  He said a substantial amount of oil in USA is ready for the market if prices rise to about $60/barrel.  He said it is impossible to know what will happen following OPEC's agreement to cut output.  He said the market is entering a period of greater volatility.       

WoodMackenzie said US oil output will not grow significantly until the end of 2017.  Material growth in oil output from the US will not be seen until the end of 2017 or 2018. 

Iraq's oil exports reached a record high of 4.051 million bpd in November.  Iraq's Oil Ministry reported that crude exports from southern oilfields totaled 3.407 million bpd while Kirkuk exports totaled 64,000 bpd, with 580,000 bpd exported from fields controlled by the Kurdish regional government. 

Gasoline stocks independently held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending December 1st increased by 7.02% on the week and by 26.65% on the year to 960,000 tons.  Gasoil stocks increased by 7.15% on the week but fell by 23.72% on the year to 2.801 million tons while fuel oil stocks fell by 4.29% on the week and by 43.85% on the year to 625,000 tons. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $51.18, up 12 cents

RBOB - Jan $1.5545, up 78 points

HO - Jan $1.6461, down 18 points


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Oil futures saw largest one day move in five years after OPEC agreed to cut output

December 01, 2016

Recap: Oil futures experienced its largest one day move in five years, after OPEC agreed to cut output. This is the first time since 2008 OPEC agreed to cut output. The expiring January Brent contract rose by as much as 8.8%, while January WTI gained as much as 10.3% prior to the NYMEX settlement. Spot Brent futures settled at $50.47, up $4.09, or 8.2%, with January WTI gaining $4.29, or 9.31%, to settle at $49.44.

Wednesday's rise in prices does not come without skepticism due to OPEC's history of not adhering to previous plans to cut output, and the fact that higher prices will prompt U.S. producers to start pumping more oil, enhancing an already saturated market. Also, gains will be limited by the fact that shorts will most likely cover their positions.  

As was the case on Tuesday, crude oil options were quite active, with the Jan17 $60 calls trading over 28,000 contracts and the $40 puts trading close to 25,000 contracts. The next active strike to these, was the Feb17 $50 call, which traded over 27,000 contracts.

December RBOB rose 11.4 cents, or 8.3%, to $1.491 a gallon. According to data from Dow Jones, spot RBOB futures gained 2.9%. December heating oil rose 10.8 cents, or 7.4%, to $1.571 a gallon. The December contracts expired at the settlement. Data from Dow Jones has spot heating oil futures up about 5% on the month.

Fundamental News:  OPEC agreed to its first oil output cut since 2008.  The agreement was in line with an agreement reached in Algiers in September. Kuwait's Oil Minister said OPEC agreed to cut production to 32.5 million bpd, with non-OPEC Russia joining in the output cuts for the first time in 15 years.  Saudi Arabia will cut its oil output by 500,000 bpd to 10.06 million bpd under the new OPEC production limiting deal.  The country's output stood at 10.54 million bpd in October.  An OPEC source stated that the UAE, Kuwait and Qatar are expected to cut oil output by a combined total of about 300,000 bpd.  Kuwait will cut its output by 130,000 bpd while Iraq agreed to cut its output by about 200,000 bpd to 4.351 million bpd starting in January.  Libya and Nigeria are exempt from the cut.  OPEC also agreed to allow Iran to set new production levels at 3.797 million bpd, slightly higher from its production level in October.   The source also stated that OPEC had agreed to suspend Indonesia from OPEC and distribute the country's oil output share among some OPEC countries.

Saudi Arabia's Oil Minister, Khalid al-Falih, said it is a good day for the market.  Meanwhile, Iran's Oil Minister, Bijan Zanganeh, said he was happy with the OPEC meeting and added that OPEC will likely meet with non-OPEC producers next week.  Libya said OPEC will meet non-OPEC producers on December 9th. 

A Russian Energy source said OPEC wants Russia to cut 400,000 bpd of oil production, which may be "a bit excessive."  The source said Russia is only considering a 200,000 bpd cut.  Separately, Russia's Energy Minister, Alexander Novak, said Russia is ready to gradually cut its oil production by up to 300,000 bpd in the first half of 2017.  He gave no indication what level Russia is ready to cut its oil output from.   

The EIA reported that US total oil demand increased in September for the second consecutive month by 2.3% or 446,000 bpd from a year ago to 19.86 million bpd.  Demand growth was led by gasoline, which increased by 2.2% or 203,000 bpd from a year ago to 9.49 million bpd in September.  Distillate demand fell by 3.2% or 131,000 bpd to 3.905 million bpd.  The EIA also reported that US crude oil production fell by 167,000 bpd to 8.58 million bpd. 

Kinder Morgan received approval from the Canadian government for the C$6.8 billion Trans Mountain expansion project. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $51.01, up $1.57

RBOB - Jan $1.5285, up 4.6 cents

HO - Jan $1.6256, up 4.91 cents 


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Oil prices fell as the possibility of OPEC reaching an agreement decreased

November 30, 2016

Recap: Oil prices fell as the possibility of OPEC reaching an agreement became less likely. Spot oil futures slipped as much as 4.8% in both Brent and WTI before recovering some of their losses. January WTI reached $44.82, a cent below the 200-day moving average on a spot continuation chart. A lack of follow through below this average prompted technical short covering.

The bounce off of the 200-day moving average helped to establish the trading range for the remainder of the session. January WTI held between $45 and $45.50 for several hours, with a failed late session attempt to break out of this range. This spot contract settled at $45.23 a barrel, down $1.85, or 3.93%. January Brent fell $1.86, 3.86% to settle at $46.38 a barrel. December RBOB fell 3.6 cents, or 2.6%, to $1.376 a gallon and December heating oil  lost 4.4 cents, or 2.9%, to $1.469 a gallon.

It is also worth mentioning that speculators are apparently looking for cheap plays in the options to hold going into Wednesday's OPEC  meeting, as the January $31.50 puts traded close to 28,000 contracts, while the January 61 calls traded just under 24,000.

Fundamental News:  Iran and Iraq are resisting pressure from Saudi Arabia to cut their output, making it difficult for OPEC to reach a deal to limit output when it meets on Wednesday.  On Monday, OPEC officials failed to bridge their differences as Iran and Iraq continued to express objections.  A proposed deal would cut production by 1.2 million bpd from October levels.  The proposal also calls for Saudi Arabia to cut its production to 10.07 million bpd from 10.54 million bpd in October and for Iran freeze its output at 3.797 million bpd.  It was later reported that Iraq agreed to freeze its production.  According to a Wall Street Journal report, Iraq is not cutting production from 4.55 million bpd.

Russia's President, Vladimir Putin, and his Iranian counterpart, Hassan Rouhani, agreed to continue coordinating steps in global hydrocarbons markets during a phone conversation late Monday, ahead of OPEC's meeting on Wednesday.  They underlined the crucial nature of OPEC members to limit crude production as a key factor for stabilizing the oil market.  On Monday, Iran's Oil Minister, Bijan Zanganeh, reiterated his stance that OPEC members that increased their production and took Iran's market share should bear a greater responsibility for cutting output to rebalance the market.  He also stated that the country was prepared to leave its oil production at levels that OPEC had agreed at its September meeting in Algiers.  OPEC sources stated that Iran has written to OPEC saying Saudi Arabia needs to cut output to 9.5 million bpd.  Saudi Arabia has previously indicated that it was prepared to reduce its production by 500,000 bpd from current levels of 10.5 million bpd.  Russia's Energy Minister, Alexander Novak, is hosting last minute talks on Tuesday with Algeria's Energy Minister, Noureddine Bouterfa, and Venezuela's Oil  Minister, Eulogio del Pino.  Russia's Energy Minister does not plan to attend the OPEC meeting on Wednesday. 

The UAE's Oil Minister said all options are on the table and added that OPEC needs to align on a decision. 

Indonesia's Energy Minister, Ignasius Jonan, said he had mixed feelings as to whether OPEC would strike an output deal at its formal meeting in Vienna on Wednesday.  He said Indonesia was still undecided as to whether it will join in on any freeze or output cut, stressing the importance of a "fair deal" for all members. 

Goldman Sachs said it sees prices averaging $45/barrel until mid-2017 even without any OPEC deal and added the market was likely to move into a deficit in the second half of 2017.  It said if OPEC agrees on a proposed oil production cut to 32.5 million bpd, down from 33.82 million bpd in October, it expects crude prices to increase to the low $50s/barrel.


Early Market Call - as of 9:00 AM EDT

WTI - Jan $48.40, up $3.18

RBOB - Dec $1.4532, up 7.61 cents

HO - Dec $1.5502, up 8.75 cents 


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WTI settled higher in anticipation of OPEC's meeting scheduled this week

November 29, 2016

Recap: WTI settled higher for the first time in four sessions as traders tried to sort through reports on OPEC's meeting set this week in Vienna. Trading was choppy, with January futures beginning the session trading to the downside, as thoughts of a curtailment in output began to diminish. This spot contract traded as much as 1.9% lower on the day, bottoming the session at $45.14, after Saudi Arabia announced that it would not meet with non-cartel members, including Russia.

Prices gained ground on signs that other OPEC members were working hard at trying to salvage a deal. January WTI rose above $47, peaking the session at $47.65. Gains were trimmed prior to the close, with WTI settling at $47.08 a barrel, up $1.02, or 2.2%. Brent for January delivery tacked on $1, or 2.1%, to settle at $48.24 a barrel.

December RBOB gained 4 cents, or 2.9%, settling at $1.413 a gallon, while December heating oil finished at $1.513 a gallon, up 4.3 cents, or 2.9%. The December contracts expire at Wednesday's settlement.

Fundamental News:  Genscape reported that crude oil stocks in Cushing, Oklahoma in the week ending November 25th built by 1.83 million barrels. 

On Monday, OPEC was trying to rescue a deal to limit oil output as tensions grew among the group and non-OPEC member, Russia.  OPEC experts started a meeting in Vienna on Monday morning and were due to make recommendations to their ministers on how exactly OPEC should reduce production when it meets on November 30th.  However, OPEC experts did not resolve the disagreements over the production levels of Iran and Iraq following the meeting.  On Friday, OPEC cancelled an experts meeting with non-OPEC producers scheduled for November 28th after Saudi Arabia said OPEC needs to sort out its differences first.  Saudi Arabia pulled out of planned talks with non-OPEC countries, including Russia, due to disagreements about how to share the burden of supply cuts.  Meanwhile, Algeria's and Venezuela's Oil Ministers were traveling to Russia in a final attempt to persuade Russia to take part in cuts instead of merely freezing its output.  Algeria's Energy Minister, Nouredine Bouterfa, plans to meet with his Russian counterpart, Alexander Novak, on Tuesday. 

Saudi Arabia's Energy Minister, Khalid al-Falih, said that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.  Under a preliminary agreement reached in September in Algeria, OPEC would reduce its production to between 32.5 million and 33 million bpd.  He said Saudi Arabia was sticking to its position on the Algiers agreement that everyone should cooperate.   

Iraq's Oil Minister, Jabar Ali al-Luaibi, said it will cooperate with OPEC members to reach an agreement acceptable to all. 

Iran's semi-official news agency, MEHR, published an editorial on Sunday accusing Saudi Arabia of declaring a new "war on oil prices" and reneging on its promises to limit output.

The chairman of the National Oil Co. of Libya, Mustafa Sanalla, said Libya's economic situation prevents the country from participating in OPEC production cuts. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $45.33, down $1.75

RBOB - Dec $1.3712, down 4.15 cents

HO - Dec $1.4638, down 4.95 cents 


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Oil prices jumped higher after EIA report indicated drop in U.S. crude oil inventories

November 28, 2016

Recap: Oil jumped slightly higher after the release of the EIA report, which indicated U.S. crude oil inventories fell 1.3 million barrels. Strength in the dollar worked to keep a lid on prices, and as doubt that OPEC would reach an agreement began to settle in; oil futures reversed its course, and fell into a mostly sideways session. January WTI settled at $47.96, down 7 cents, or 0.15%. Brent for January delivery fell 17 cents, or 0.4%, to settle at $48.95 a barrel. Volume was light due to the U.S. Thanksgiving Holiday.

WTI continued to back away from the 4 month high set on Tuesday, with January gravitating to the upward trend line on a spot continuation chart. This line is formed off of the August low set at $39.19 and the low made in September at $42.74. This line is currently set at $48.18. A break below the 50-day moving average based upon a spot continuation chart opened up for a run to fill the gap between $46.46 and $45.77 made this week.

December gasoline RBOB gained 1.2 cents, or 0.8%, to $1.422 a gallon, while December heating oil slipped just under a cent, or 0.6%, at $1.517 a gallon.

Fundamental News:  Russia's Energy Minister, Alexander Novak, said Russia has not yet received an invitation to attend an OPEC meeting on November 30th, but will take part in expert level consultations with the organization on November 28th. 

Iraq's Prime Minister, Haidar Al-Abadi, said Iraq is willing to cut its crude oil output as part of OPEC's plan to reduce global supply and support prices. 

Libya's National Oil Corp said the country's oil production fell about 70,000 bpd to 523,000 bpd, mainly due to a power problem that is now fixed.  NOC chairman, Mustafa Sanalla, said about 60,000 bpd had been lost temporarily because of power faults in the Waha and Dafa fields. 

Separately, Wood Mackenzie reported that Libya's oil output has doubled since early September.  The country is producing close to 600,000 bpd compared with 300,000 bpd in early September and may be able to sustain recent gains. 

Baker Hughes reported that the number of rigs searching for oil increased by 3 to 474 in the week ending November 23rd. 

The US Environmental Protection Agency issued its final requirements for biofuel use for next year.  The EPA set the target for total renewable fuel use at 19.28 million gallons for 2017.  This includes 15 billion gallons for conventional biofuel and 4.28 billion gallons for the advanced biofuels mandate.  The final plan is up from 18.8 billion gallons the EPA proposed in May and marks a 6% increase from this year's 18.11 billion gallons. 

Floating storage in the North Sea remains elevated at over 10 million barrels of Brent, Forties, Oseberg and Ekofisk crude.  The crude is mainly on Aframaxes, with 14 of the 600,000 barrel vessels laden with BFOE sitting without discharge orders in the North Sea.  The crude is expected to shift onto larger vessels, though signs of rising Suezmax demurrage could challenge floating storage economics further. 

IIR reported that US oil refiners are expected to shut in 715,000 bpd of capacity in the week ending November 25th, reducing available refining capacity by 77,000 bpd from the previous week.  IIR expects offline capacity to fall to 309,000 bpd in the week ending December 2nd. 


Early Market Call - as of 9:00 AM EDT

WTI - Jan $46.99, up 91 cents 

RBOB - Dec $1.4060, up 3.23 cents

HO - Dec $1.5076, up 3.76 cents


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Oil futures fell to session lows on reports that Iraq, Iran and Indonesia were reluctant to freeze output

November 23, 2016

Recap: Oil prices moved higher in overnight trading, adding to Monday's gains. However, these gains did not last, as oil futures fell to session lows on reports that Iraq, Iran and Indonesia were reluctant to commit to output freezes. January WTI slipped 4.12% off the highs, stopping at a low of $47.17. The roller coaster ride continued, with this spot contract reversing losses, to trade back above $48 a barrel. January WTI settled at $48.03 a barrel, down 21 cents, or 0.44%. January Brent, however, finished up 22 cents, or 0.5%, to settle at $49.12 a barrel.

December RBOB rose 1.3 cents, or 1%, to $1.41 a gallon and December heating oil  added 0.2 cent to $1.526 a gallon.

Fundamental News:  Bloomberg reported that crude oil stocks at the Cushing, Oklahoma storage hub are expected to fall by 100,000 barrels in the week ending November 18th to 59.07 million barrels. 

A Libyan official stated that OPEC has a consensus on output action while a Nigerian OPEC delegate said Libya and Nigeria are exempt from an output cut.  Earlier, three OPEC sources said a gathering of OPEC experts had decided on Tuesday to recommend that the ministerial meeting on November 30th debate a proposal from Algeria to reduce output by 4-4.5%.  Such a cut would bring OPEC's current output down by more than 1.2 million bpd.  Sources stated that Saudi Arabia and its Gulf allies have signaled they were prepared to cut as much as 1 million bpd of their output.  Iraq's Foreign Minister, Ibrahim al-Jafari, said that OPEC should allow Iraq to continue raising its output with no restrictions.  Iraq was asked to cut about 200,000 bpd.  However, Iraq is also still debating whether it should cut from the levels of OPEC's estimates or its own, higher production figures.  Iran was asked to cut 4.5% from a higher ceiling of over 3.92 million bpd, bringing its production under the deal to 3.79 million bpd.  It is 90,000 bpd over its October output.  Meanwhile, a senior OPEC delegate said Russia was still not agreeing to cut production but favored a freeze in production. 

A Nigerian OPEC delegate said an OPEC technical committee is discussing a possible six-month duration for an oil output-limiting agreement. 

Non-OPEC nations, including Russia, will meet with OPEC members in Vienna on November 28th to discuss cooperation on oil supply cuts.  Russia's Energy Minister, Alexander Novak, has repeatedly said Russia would prefer to freeze output at the current record levels than make cuts. 

A total of about 1 million metric tons of US Gulf Coast distillates could land in Europe and North Africa in November, according to Platts trade flow software cFlow.  In total, 25 vessels were spotted on the US Gulf Coast-Europe route, including eight vessels heading towards the Mediterranean.  Of the 17 ships sailing towards Northwest Europe, nine are heading towards the Amsterdam-Rotterdam-Antwerp hub. 

According to Bloomberg, preliminary US waterborne crude imports fell by 2 million bpd to 3.88 million bpd in the week ending November 19th.  The Gulf Coast saw the largest decline of 1.06 million bpd to 2.65 million bpd, while the East and West Coasts saw imports fall by 195,600 bpd and 780,000 bpd, respectively.  Total crude and product imports fell by 2.53 million bpd to 5.67 million bpd. 

IHS data showed that crude and refined product shipments from the US Gulf fell to 3.98 million metric tons on 97 ships in the week ending November 17th.  It is down 19% from the previous week's 4.66 million metric tons on 107 ships. 


Early Market Call - as of 10:00 AM EDT

WTI - Jan $47.59, down 44 cents

RBOB - Dec $1.4004, down 94 points

HO - Dec $1.5215, down 48 points


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