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Market Intel Archives

Oil markets pop back up today after declining yesterday

July 16, 2014

Recap: Oil markets moved lower across the board following lower momentum upon initial comments from Fed Chair Janet Yellen during her semi-annual testimony before a Senate policy committee yesterday. Oil markets saw their lows on the day before noon during Yellen's prepared statement that outlined factors that would keep the Federal Reserve from committing to an interest rate increase too quickly: improvement in labor participation rate, housing market needing to show better improvement, and watching inflation closely as it has been up, but is under the 2% rate. However, during the Q&A section of the hearing, perhaps some of Yellen's comments stating that equity market valuations may be "stretched" for "smaller firms as well as social media and biotechnology firms" (Reuters 7-45-14), seemed to prompt equity markets lower. That equity market move then prompted oil markets to reverse back up, paring the losses and the lows on the day. The entire complex had moved down hard past 3 technical support levels (including various Fibonacci 50/62% retracements areas ) posting the following lows on the day: NYMEX (WTI) Crude $99.01, ICE Brent Crude $104.39, NYMEX ULSD (HO) $2.8258, and NYMEX RBOB (Gasoline) $2.8659. As the entire complex moved off their lows, they were able to hold onto prices under 2 supports resulting in the following settlements: NYMEX Crude down 95 cents to $99.96 (under $100!), August ICE Brent down 96 cents to $106.02 and the incoming September contract down 83 cents to $106.88, NYMEX ULSD down 1.74 cents to $2.8555 (under $2.86!), and NYMEX RBOB down 2.65 cents to $2.8986 (under $2.90). Analysts' warnings with yesterday's sell-off were echoed by Tim Evans of CitiFutures, "The petroleum markets are back on the defensive with Brent crude oil leading the way lower as 'supply risks abate' as one newswire headline put it. That may be the theme that's driving trade flow at the moment, but a closer reading of the news of the day suggests that plenty of risk remains." (7-15-14) 

Currently, oil markets are continuing the move back up started yesterday afternoon . Dow Jones reported this morning, "The global [Brent crude] benchmark fell sharply Tuesday, trading more than $2 lower at one stage before staging a partial recovery after U.S. oil industry data showed a decline in U.S. crude stockpiles. But strong economic growth data from China, the world's second-largest oil-consuming nation, coupled with fresh doubts about Libyan supply combined Wednesday to provide a bounce." (7-16-15) So we have a drop and pop situation going on here with NYMEX ULSD up 78 points to $2.8633, NYMEX RBOB up 1.58 cents to $2.9144, NYMEX Crude up 87 points to $100.83, and August ICE Brent up 26 cents to $106.28 (expiring today) and September ICE Brent up 61 cents to $107.49. Markets will be looking for fundamental data from the EIA's more definitive DOE Inventory Report this morning at 10:30am after having moved in a very technical way yesterday. 

DOE Inventory Estimates.  CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: 3 to 4 MMbs draw range for crude stocks. Bloomberg is expecting a 2.75 MMbs decline, and  the 5-year average is a 4.5 MMbs draw. For gasoline, CitiFuture's is expecting a build range of 1 to 2 MMbs, Bloomberg is expecting a .95 MMb build, and the 5-year average is a 1.6 MMb build. For distillates, CitiFutures is expecting a 1.5 to 2.5 MMbs build range, Bloomberg is expecting a 2 MMbs build, and the 5-year average is a 2.7 MMbs build. For refinery runs, CitiFutures is expecting a .5 percentage point increase in refinery % operable utilization to 92.1%,  and the 5-year average is 89.9%. The American Petroleum Institute (API) reported their results yesterday afternoon that has helped to move the market higher since their release: Crude stocks declined 4.8 MMbs, gasoline stocks declined 1.6 MMbs, but distillate stocks increased 1.3 MMbs.
Click here to view today's Refined Products MarketWatch.

Oil markets on the move lower this morning

July 15, 2014

Recap: Oil markets moved higher in Monday's trading  as NYMEX (WTI) Crude was lower in early trading before following ICE Brent higher with the rest of the complex by the end of the trading session. Analysts pointed to the increase in Brent on dashed hopes for increasing Libyan oil production as 1) the Libyan parliament has yet to meet to designate a new government, 2) a small export terminal was closed over the weekend, and  3) Reuters reported yesterday that the UN announced that it was removing its staff out of Libya due to security concerns. ICE Brent Crude closed up 32 cents to $106.98 and the incoming September Brent contract finished up higher, 45 cents to $107.71. Open interest for August has declined to 86,034 contracts versus September at 312,412 as the August ICE Brent contract will expire tomorrow providing another opportunity for some potential volatility.  NYMEX (WTI) Crude settled up only 8 cents to $100.91, and sits within a technical trading range where the psychological $100 point is still within reach. The Brent-WTI spread settled yesterday at $6.07. The NYMEX RBOB (Gasoline) moved higher closing up 1.66 cents to $2.9251, as did NYMEX ULSD (HO) closing up 1.2 cents to $2.8729. The ULSD technical sticking point in the $2.86-$2.87 range proved too tough once again to not only break down through, but to hold onto into the close, so today may be another attempt for bears to break the range and move lower. 

Currently, oil markets are lower across the board, with NYNEX Crude hitting a low in the overnight of $100.06, indicating perhaps bears are ready to try and move lower. NYMEX Crude is at $100.23, down 68 cents. Likewise, NYMEX ULSD hit a low in the overnight of $2.8574, and currently is at $2.8608, down 1.21 cents, followed by NYMEX RBOB down 60 points to $2.9191. August ICE Brent is down $1.03 to $105.97 as the liquidation in this contract continues (down to open interest of 59,596 contracts), but the incoming September ICE Brent is down less, 77 cents to $106.94.

Oil markets will continue to look for guidance, fundamentally with the release of the API's inventory data this afternoon and the more definitive EIA's weekly DOE Inventory Report tomorrow morning. CitiFutures is expecting a seasonal draw of crude in the 3 to 4 MMbs range and a seasonal build in distillate stocks of 1.5 to 2.5 MMbs, and a build in gasoline stocks in the 1 to 2 MMbs range. Markets will also be looking for statements from Federal Reserve Chair Janet Yellen today as she testifies in front of a Senate panel that the U.S. economy is showing positive signs.  Minutes from the Fed's June policy making meeting released last week suggested that the Fed would "end their bond buying program in October ... It was the first time the central bank had put an explicit end date on the purchases. The Fed didn't specify when it might begin raising interest rates." (Barrons, 7-14-14) Perhaps Yellen may clarify the minute meetings, including when the Fed may begin raising interest rates in efforts to ultimately strengthen the U.S. dollar and helping to move more investors back into the dollar and out of commodities, including oil.

Click here to view today's Refined Products MarketWatch.

Oil markets lower last week, but bulls are back

July 14, 2014

Recap: Oil markets moved solidly down across the board on Friday. A MarketWatch reader commented, "Although bulls may have horns, bears have sharp teeth!" We also want to see prices move lower, but cautioned readers Friday of prices potentially consolidating and/or moving back up on bullish geo-political news, including but not limited to, reports that the ISIS terrorist group had stolen 40 kilograms of nuclear material from Mosul University. (Reuters 7-9-14) ICE Brent Crude led the complex lower by $2.01 to settle at $106.66 having broken through 3 technical support levels that all held.  August ICE Brent Crude futures are expiring this Wednesday, and the incoming September ICE Brent contract settled down $1.75 to $107.26. In fact, NYMEX (WTI) Crude and NYMEX RBOB (Gasoline) futures contracts also broke all three technical support levels and held them into Friday's close. NYMEX Crude hit a low of $100.44 before ultimately closing at $100.83, down $2.10, with trading volume of 242,021 on open interest of 187,456 futures contracts. NYMEX RBOB hit a low of $2.9007 but settled down 4.91 cents to $2.9085 on less trading volume than WTI. Although NYMEX ULSD (HO) broke through 3 supports to a low on Friday of $2.8507, it was only able to hold onto 2 into the close, settling down 3.24 cents to $2.8609. Whether the enthusiasm of the bears to move the market lower was helped by traders on an extended 4th of July vacation, or office distractions of the World Cup, us physical petroleum marketers hope it continues. However, Northeast conservatism knows that there are plenty of bullish catalysts left. But again, breaking technical and psychological factors really help to create new lower trading ranges. This week we will look to see if NYMEX Crude will move below a $100 psychological level. 

Weekly, bears moved oil markets lower significantly: From July 3rd's settlements to last Friday's close, ICE Brent Crude posted the largest percentage move down, 3.9% or $4.34, followed next by NYMEX RBOB down 3.7%, or 11.13 cents. NYMEX Crude lost 3.1% or $3.23, and NYMEX ULSD lost 2.3% or 6.75 cents. 

Currently, oil markets are all up except NYMEX Crude that is down 11 cents to $100.72. NYMEX ULSD (HO) is up 1.96 cents to $2.8805, NYMEX RBOB is up 1.78 cents to $2.9263, and ICE Brent Crude is up 67 cents to $107.33. It looks like the bulls have returned. 

Speculator "Spec" Watch:  According to the CFTC's Commitments of Traders Report released on Friday for reporting through Tuesday, July 8th, the Money Manager (Speculative) category revealed that net speculative length decreased for NYMEX (WTI) Crude,  NYMEX ULSD (HO), and NYMEX RBOB (Gasoline). For NYMEX (WTI) Crude, net speculative length (combined futures and options contracts), decreased 7.8% from the previous week of 330,148 to 304,363 contracts.  Net speculative length for NYMEX ULSD (HO) decreased 41% from 38,488 to 22,634 contracts.  NYMEX RBOB net speculative length decreased 2.7% from 66,982 futures and options contracts to 65,190. As net speculators reduced their long positions, we saw prices move lower last week. It will be interesting to see if net speculators continue to reduce their long positions.
Click here to view today's Refined Products MarketWatch.

Oil markets up yesterday, down this morning. Plus: 4 Reasons why the East Coast (PADD 1) is waiting for the U.S. Oil Revolution to reach its shores

July 11, 2014

Recap: Oil markets settled higher across the board yesterday, having started in negative territory earlier during the trading session. NYMEX ULSD (HO) bears were not able to hold onto a technical break down through the first price support level, falling short to what became the low on the day of $2.862. So ULSD bulls took over and proceeded to climb through 2 technical resistance levels and almost reached a third before settling at $2.8933, up 2.22 cents on the day. It seemed as though ULSD bulls prompted the rest of the complex higher as NYMEX RBOB (Gasoline) moved up 1.99 cents to $2.9576 after visiting a low on the day of $2.9273. Likewise, NYMEX Crude (WTI) advanced to $102.93, up 64 cents after hitting a low of $101.55. The WTI bulls created volume of 250,987 contracts on open interest of 208,280.  ICE Brent Crude was the weakest gainer on the day, up 39 cents to settle at  $108.67, and with WTI increasing more than Brent, the Brent-WTI spread narrowed to $5.71 upon settlement. As MarketWatch mentioned yesterday, "Although bearish features of the oil complex persist, potential bullish geo-political events could reverse this recent trend, including progressive tensions with Israel's battle with Hamas, and its regional political and military impact. Bulls have horns." Unfortunately, oil markets did reverse, and now the question will be are oil markets just consolidating a bit after a big move down, or have the bulls regained control? Clearly, on-going news headlines that 1) Israel was preparing to mount a ground war of 40,000 soldiers against Hamas, 2) Israeli targeted airstrikes have killed 80 Palestinians including civilians, and 3) Israel's Iron Dome missile defense system had intercepted most of the Hamas rockets fired upon Israel, has impacted markets. An Israel at war with a Palestinian Hamas terrorist organization, backed by Iran, is a convenient catalyst to oil market bulls, as a potential regional conflict could involve Middle Eastern OPEC nations. 

Currently,  oil  markets are down across the board with NYMEX ULSD down 38 points to $2.8895, NYMEX RBOB down 1.17 cents to $2.9459, NYMEX Crude down 60 cents to $102.33, and ICE Brent Crude down 70 cents to $107.98. The August ICE Brent futures contract expires next week on July 16th, and it will be interesting to see if recent long liquidation in this contract motivates the rest of the complex to move lower ahead of the weekend. All looks quiet in the Atlantic Basin as far as the potential of any tropical storm/hurricane this weekend.

Analysis: 4 Reasons why the East Coast (PADD 1) is waiting for the U.S. Oil Revolution to reach its shores:  

Background--- an oversimplification: If the basic equation of U.S. production was to supply only U.S. demand, then production would equal demand. When demand increases beyond US production, distillate imports are required. If production is in excess of demand, no imports are needed, and this excess gets sold in the export market and any remainder ends up in storage. For example,  current weekly US distillate production is now at 5.056 MMbpd and demand is at 3.966 MMbpd. Subtract demand from production and we have 1.09 MM left over every week. Add in nominal imports of .088 MM, and we are back up to 1.178 Million available for exports. US Distillate exports were 1.146 MMbpd, so subtract this from 1.178 and we are left with a measly .032 MMb left for inventory. (Actually the DOE total distillate increase was .2 MMb due to some rounding, timing, "lost gallons", etc.) It looks like the U.S. distillate picture is "in balance"; however, the PADD 1 (East Coast) distillate picture looks very different. Why?

 

1) Distillate Production- Of the total 5.056 MMbpd US distillate production, PADD 1 production is .392MMb or only 7.75% !!  PADD 3 (U.S. Gulf Coast) produced 2.809 MMbpd for the week ended July 4, 2014, representing 55.6% of total US distillate production followed by PADD 2 (Mid West) at 1.129 MMbpd or 22.3%. However, PADD 1 production was not helped when, back in 2012, 3 Philadelphia refineries were on the chopping blocks because their cost of crude feedstock was based on the more expensive  international crude benchmark being imported, Brent crude versus the U.S. Gulf Coast refiners that were using a cheaper feedstock based on the US crude benchmark, WTI. East coast refiners were losing margin with no end in sight, and in need of a light sweet, more expensive crude feedstock for their simple refineries. Sunoco shuttered its Marcus Hook refinery, but sold its Philadelphia refinery (Philadelphia Energy Solutions)to the Carlyle Group while Conoco Phillips sold their Trainer refinery to Delta Airlines.  In the nick of time, North Dakota's Bakken light sweet crude production along with crude rail transportation, provided the right sweet feedstock at a cheaper price to these East Coast refineries allowing for positive refinery economics to keep them open. 2) Demand and Inventory.  Although the EIA does not segregate demand numbers for each of the five regional PADDs, we know that the bulk of US heating oil demand is in the Northeast, and that of the 5 PADD regions, PADD 1 distillate stocks are (and have been for the past 2 years) below the 5-year range (See EIA chart below). Currently, PADD 1 distillate stocks are 21.4% below the 5-year average, PADD 1A - New England is 50.5% below the 5-year average, PADD 1B (Central including NY) is 23.8% below the 5-year average. Yes, it is true that we have also seen the advent of backwardated NYMEX ULSD (HO) futures for the past 2 years -- again, another factor that does not incentivize suppliers to store product if current prices are more expensive than future prices (this is the opposite of a carry in the market). But, the other four PADDs are not below their five-year ranges like PADD 1.  3) Increasing Product Exports: We know from a previously robust Brent-WTI spread (exploding at the beginning of 2011 to hold over $10 to as high as $25 by the end of 2011, but staying in the $10-$15 range up until the beginning of 2014) that there was incentive for refiners to export their product barrels at a higher margin overseas.  Although the Brent-WTI spread is currently under $6, export agreements are not shut off overnight. So, from January 2010 to January 2014, we have seen U.S. distillate exports explode 198%  from .45 MMbpd to 1.3 MMbpd. 4) U.S. Distillate Imports have imploded from .297 MMbpd down to .088, or 238% from July 2010  to currently; however, even that smaller number, PADD 1 represents the bulk of these distillate imports at 84% !! What this means is that any excess U.S. domestic distillate production does not find an easy distribution channel to the East Coast (no help from the antiquated Jones Act), so the East Coast region is in the most need of foreign distillate imports. And which countries topped the latest EIA import data by country of origin (April 2014)? Not surprisingly, our friends to the north, Canada accounted for 50% of April's imports, followed by Russia at 16%, Colombia at 11%, and Venezuela at 5%. The Bottom Line, PADD 1 - East Coast distillate stocks are likely to stay constrained, particularly with specification changes to the new 500 ppm low sulfur heating oil requirement in 5 states. What can heating oil  and diesel fuel marketers do to minimize supply risks? They would be wise to consider some type of basis protection along with securing reliable supplier agreements as the delicate balance between what can be supplied into PADD 1 region versus the demand requirements could result in more basis blowouts as witnessed during this past heating season. From the region that produced the original 13 colonies for the American Revolution, the North American shale oil revolution will reach the East Coast eventually. But until then, do what the Minutemen did: prepare now for the winter season.

Click here to view today's Refined Products MarketWatch.

Oil markets lower yesterday, but can they stay lower?

July 10, 2014

Recap: Oil markets all finished lower yesterday, with NYMEX RBOB (Gasoline) and NYMEX (WTI) Crude leading the complex lower after the release of the EIA's weekly DOE Inventory Report. Expectations for a decline in commercial crude oil stocks were met with DOE data of a 2.4 MMb decline, including a .45 MMb increase in Cushing, OK. Similarly, market expectations of a .4 MMbs decline for gasoline stocks were met with a bearish increase of .6 MMbs. NYMEX RBOB broke down through 2 support levels and settled 3.52 cents lower to $2.9377. NYMEX Crude (WTI) broke down through 3 support levels with significant volume of 249,378 contracts on 226,944 contracts of open interest, and ultimately held onto 2 support levels closing down $1.11 to $102.29.  NYMEX ULSD (HO) actually broke the $2.87 and $2.86 support points, but moved back up after the meager .2MMb increase to distillate stocks on expectations of a much larger increase of 1.4MMb. Because of this slightly bullish feature, NYMEX ULSD (HO) rebounded back up, but still finished lower, although only 25 points,  to close at $2.8711. As mentioned in MarketWatch yesterday, this $2.87 point is proving to be a tough point to settle under, and we may continue to see some consolidation. So as the result of a fundamental trigger (DOE inventory report), a technical perspective to the market seemed to play out (support levels that held for WTI Crude and RBOB, but did not for ULSD (HO)). ICE Brent Crude moved down 66 cents to close at $108.28, and with WTI moving down more, the Brent-WTI spread increased to $5.99. 

Currently, oil markets are mixed with NYMEX ULSD (HO) up 48 points to $2.8759, helping to confirm the difficulty of breaking below this $2.87 support level. NYMEX RBOB is slightly lower, 6 points to $2.9371 along with NYMEX Crude down 33 cents to $101.96, and ICE Brent Crude down 11 cents to $108.17. Although bearish features of the oil complex persist, potential bullish geo-political events could reverse this recent trend, including progressive tensions with Israel's battle with Hamas, and its regional political and military impact. Bulls have horns. 

DOE Inventory Highlights:  Thanks to the North American shale oil revolution, the EIA reported in its weekly DOE Inventory report yesterday that crude oil production in the lower 48 states hit a record 8.05 Million barrels per day for reporting through last Friday. However, commercial crude oil stocks decreased 2.4 MMbs to 382.6 MMbs, but Cushing, OK stocks increased .6 MMbs to 20.92 MMbs. Total distillate and gasoline stocks both increased, .2 MMbs and .6 MMbs, respectively. Total refiner operable capacity percentages increased across the country from 91.4%  to 91.6% versus 92.4% last year. This strong refining utilization was also still solid for PADD 1 (East Coast) refiner %'s at 89.7% versus 90.4% last year. So with refiners refining products at these seasonally higher levels, we should be seeing the distillate inventory deficits chipping away, correct? Unfortunately, no. PADD 1 (East Coast) distillate stocks are 11.7% lower than last year and 21.4% below the 5-year average (see EIA PADD 1 Distillate Inventory Chart below, showing the blue line at or below the 5 year range). PADD 1A (New England) distillate stocks are now 28.5% lower than last year, and 50.5% below the 5-year average. PADD 1B (Central including New York) was the only PADD 1 increase this week, and now stand 14% lower than last year and 24% below the five-year average. Luckily PADD 1 gasoline stocks are more stable, standing now 1% higher than last year and 5.3% above the 5 year average. Tomorrow we will look at why this shale revolution may be more muted for petroleum marketers on the East Coast (PADD 1).
Click here to view today's Refined Products MarketWatch.

Oil markets continue the downward trend

July 09, 2014

Recap:  Oil markets moved lower across the board yesterday, getting back to levels prior to the outbreak of Iraqi/ISIS violence in June. NYMEX ULSD (HO) lost 4.09 cents to settle at $2.8736, NYMEX RBOB (Gasoline) lost 1.61 cents to $2.9729, ICE Brent Crude lost $1.30 to settle at $108.94, and NYMEX (WTI) Crude lost the least amount of the complex finishing down 13 cents to $103.40. Yesterday's settlements put the Brent-WTI spread at a low $5.54. Last night, The American Petroleum Institute (API) reported their inventory data for last week coming in more bearishly relative to the expectations (see DOE Inventory Estimates below): Crude stocks declined 1.7 MMbs, but crude stocks in Cushing, OK increased .6 MMbs. Recall, that on-going declines at this location where the NYMEX Crude contract is priced has been viewed as bullish to WTI crude. However last week's decline did not translate into a higher NYMEX Crude price. Gasoline stocks increased .1 MMbs. However, distillate stocks had a surprising .5 MMbs draw. The more definitive DOE numbers will be reported this morning at 10:30am.  Currently, oil markets are again lower this morning with NYMEX ULSD down 55 points to $2.8681. We will be watching to see if this contract can close under the $2.87 mark as this level has been a tough technical point to break through and stay under (see NYMEX ULSD (HO) chart below). NYMEX RBOB is down 1.83 cents to $2.9546, NYMEX Crude is down 28 cents to $103.12, and ICE Brent Crude is down 23 cents to $108.71.

DOE Inventory Estimates.  CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: 3 MMbs draw to 4 MMbs draw range for crude stocks . Bloomberg is expecting a 2.5 MMbs decline, and  the 5-year average is a 4.6 MMbs draw. For gasoline, Citi Future's is expecting a range of no change to a 1 MMbs draw, Bloomberg is expecting a .4 MMbs draw, and the 5-year average is 0 MMbs, or no change. For distillates, Citi Futures is expecting a  1 MMbs to a 2 MMbs build range, Bloomberg is expecting a 1.4 MMbs build, and the 5-year average is a 1.2 MMbs build. For refinery runs, Citi Futures is expecting a .5 percentage point increase in refinery % operable utilization to 91.9%. Bloomberg expects a .15 percentage point increase, and the 5-year average is 89.9%.

Technically Speaking: Yesterday was one of those days in the office that we received a lot of inquiries as to why the oil markets were moving lower, even after a week of consecutive lower settlements across the oil complex. Invariably, we answered the question with both a fundamental perspective (supply and demand driven items like more available supply from Libya and easing fears of an Iraqi supply disruption) and a technical perspective. With the advent of electronic trading across all market types (equities, commodities, etc.), the "science" of technical analysis has emerged and with it some parameters involving why prices "on the chart" seem to move toward certain price points. For example, there are psychological price points like $3.00 for NYMEX ULSD, $100 for NYMEX Crude and $110 for Brent Crude. This would be a crude form (no pun intended!) of technical analysis. However, chart technicians use a variety of mathematical algorithms that create technical price points for not only daily trading, but weekly, monthly, and longer timeframes. These points can create entry and exit points for those investors, and knowing some of these points can sometimes explain why prices are moving up or down. One technical method is Fibonacci Retracements. These are ratios, with the most popular at the 62% (61.8%) and 38% (38.2%), help chartists to identify reversals in a commodity's price action. For example, yesterday, NYMEX Crude broke down below its 62% Fibonacci retracement price point at $103.44.  Similarly, ICE Brent Crude broke handily below its 62% Fibonacci retracement price point of $110.40. Why is this significant? There are times when price momentum can break down through (support) numbers or break up through (resistance) numbers, triggering buying or selling that can feed either a bearish or bullish market.  Sometimes having an idea of what to look for when some of these factors are in place can be important for those in the physical market needing to make an informed decision about purchasing without being caught up in the flurry an overly active market. 

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Oil markets lower since July 1st, today products lower

July 08, 2014

Weekly Recap: Since July 1st, oil markets have been moving down despite geo-political headlines in the Middle East that would be considered supportive to higher prices. Iraqi elections have been pushed out to August 12th, as the situation seems to move from bad to worse, and now Israel's military involvement with Hamas in avenging the murders of 3 Israeli teenagers. Despite these headlines, and DOE inventory data last week that showed crude stocks in Cushing, OK, where the NYMEX (WTI) Crude contract is priced, hit their lowest level since November 2008 to 20.5 Million barrels (MMbs), NYMEX Crude has lost $1.81 or 1.72% since July 1st, settling yesterday at $103.53, down 53 cents from the previous close. ICE Brent Crude has lost, as a percentage, more than WTI, down 1.83% or $2.05 since July 1st, settling yesterday at $110.24, or down 76 cents from the July 3rd settlement. NYMEX ULSD (HO) has lost the most in the complex percentage-wise since July 1st, down 2.14% or 6.37 cents, settling yesterday at $2.9145 and down 1.39 cents from the previous settlement. And thanks to Hurricane Arthur dampening the July 4th festivities and driving demand on the East Coast, NYMEX RBOB (Gasoline) lost 3.08 cents yesterday to settle under $3 at $2.9890. NYMEX RBOB has lost 4.76 cents, or 1.57% since the beginning of July.

Currently, oil markets are again, down across the board with NYMEX ULSD down 1.17 cents to $2.9028, NYMEX RBOB down 76 points to 2.9817, NYMEX (WTI) Crude down 8 cents to $103.45, and ICE Brent Crude down 65 cents to $109.60. Brent has now fallen below the psychological level of $110. Helping to move markets lower are the falling net speculative positions of money managers across the oil complex. (see Spec Watch below) As some analysts will be looking to fundamental data from the weekly DOE Inventory report tomorrow morning to see if seasonal crude stock draws (decreases) will be enough to garner price support up for WTI crude, or if seasonal builds (increases) in distillate stocks could help move the complex lower. Despite last week's 1 MMb increase in total distillate inventories to 121.5 MMbs, .6% higher than last year at this time, total distillate stocks are 8% lower than the 5 year average (see EIA's chart below),  PADD 1 (East Coast) inventories are 19% below the 5 year average, New England (PADD 1A) 39% below the 5 year average, and Central (PADD 1B) 25% below the 5 year average. So, we will need to expect some upward correction, but hope this lower trend continues.

Speculator "Spec" Watch:  According to the CFTC's Commitments of Traders Report released on Friday for reporting through Tuesday, July 1st, the Money Manager (Speculative) category revealed that net speculative length decreased for NYMEX (WTI) Crude and NYMEX ULSD (HO) but increased slightly for NYMEX RBOB (Gasoline). For NYMEX (WTI) Crude, net speculative length (combined futures and options contracts), decreased 4% from the previous week of 345,283 to 330,148 contracts.  Net speculative length for NYMEX ULSD (HO) decreased 4.75% from 40,381 to 38,488 contracts.  NYMEX RBOB net speculative length increased slightly, .6% from 66,588 to 66,982 futures and options contracts.

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Oil markets down yesterday, products down today, WTI Crude up

July 01, 2014

Recap: Oil markets moved lower Monday, with products settling down more than the crudes. NYMEX ULSD (HO) moved down 2.68 cents to $2.9708 decisively breaking 2 technical support levels while NYMEX RBOB (Gasoline) moved down 2.18 cents to $3.0770, and finished just a point below its second technical support level. With July NYMEX ULSD and RBOB futures contracts expiring today, and a solid move down with the incoming August contracts (2.82 cents down to $2.9753 for HO and 3.09 cents down to $3.0433 for RBOB), one loyal Market Watch reader wanted to know the last time heating oil moved down 3 cents or more. Believe it or not, it was a month ago on May 30th when NYMEX ULSD (HO) settled at 2.8846, down 3.44 cents. Although it feels like it  has been longer (most likely because of oil markets having moved up since the spike on Iraq news on June 11, 2014), we hope this downward trend continues. Some analysts, like Stephen Schork of the Schork Report believe, in the short term, there may be forces holding NYMEX Crude prices down: "As we noted here last Monday, it goes without saying that any sign of a disruption in Iraqi oil shipments will be met with a swift release of oil from consuming nation's strategic reserves. It is also important to remember that crude oil demand for this year has already (and if not, it will soon) peaked. Thus, a hefty supply of strategic reserves, plus dwindling demand is helping to keep a lid on price." (The Schork Report 6-30-14) NYMEX (WTI) Crude closed down 37 points to $105.37 and ICE Brent Crude lost 94 cents to settle at $112.36.  

Currently, oil markets are slightly up across the board with NYMEX Crude up the most at 34 cents to $105.71, followed by ICE Brent Crude up 4 cents to $112.40, and the August contracts for NYMEX ULSD up 8 points to $2.9761 and for NYMEX RBOB up 52 points to $3.0458. Oil markets will be looking for fundamental guidance upon the release of the API's (American Petroleum Institute) this afternoon, and then the EIA's more definitive DOE Inventory Report tomorrow morning at 10:30 am. (see estimates below) 

Let's also keep these 3 developments in mind that oil markets still have a bit of fodder to quickly stoke prices higher. Here are a few new stories to add to the list of "Why oil prices could go up." 1) Israel is now on alert as three kidnapped teens were found dead on the West Bank. According to Fox News, Israeli Prime Minister Netanyahu "vowed revenge against Hamas after three teens kidnapped June 12 in the West Bank — including one with U.S. citizenship — were found dead Monday, just north of Hebron." They were kidnapped and murdered in cold blood by animals," Haaretz quoted Netanyahu saying at a hastily arranged security cabinet meeting. "In the name of the whole of Israel, I ask to tell the dear families - to the mothers, the fathers, the grandmothers and the grandfathers, the brothers and sisters - our hearts are bleeding, the whole nation is crying with them." (6-30-14) 2) The Associated Press reported that North Korean leader Kim Jong-un "guided the test launches of tactical ballistic rockets aimed at U.S. and South Korean forces, the second such launch drill reported in state media in three days." (6-29-14) 3) From Reuters, "About 100 workers from oil services firms could walk off the  job from July 5 if wage talks fail, the head of Norway's biggest oil sector union said on Friday, a move that would not have an immediate impact on oil output. However were such a strike to last for several weeks or longer, or if more workers were to join the action at a later stage, it could potentially affect production and even lead to shutdowns." (6-27-14) 

DOE Inventory Estimates.  The market will continue to look for guidance with the weekly release of the EIA's DOE Inventory Report. CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: 2 MMb draw to 3 MMb draw range for crude stocks , and  5-year average is a 4.1 MMb draw. For gasoline, CitiFuture's is expecting an unchanged to a 1 MMb build range, and the 5-year average is a .4 MMb build. For distillates, CitiFutures is expecting a  .5 MMb to a 1.5 MMb build range, and the 5-year average is a .2 MMb build. For refinery runs, CitiFutures is expecting a 1.5 percentage point increase in refinery % operable utilization to 90.0%,  and the 5-year average is 89.7%.

MarketWatch will be back in a week. Have a Safe and Happy 4th of July!
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Oil markets mixed on Friday, down across the board Monday morning

June 30, 2014

Recap: Oil markets settled mixed for the crudes, and mixed for the products on Friday. NYMEX ULSD (HO) closed down below $3 for the first time since Monday, June 16th, to $2.9976 a decline of 1.62 cents. NYMEX RBOB (Gasoline) increased 1.32 cents to $3.0988, most likely on seasonal anticipation of upcoming July 4th driving demand.  Crudes traded in a narrow range and ended mixed as well,  with NYMEX (WTI) Crude closing down 10 cents to $105.74 and ICE Brent Crude closing up almost the same amount as WTI: up 9 cents to $113.30. The Brent-WTI spread settled at $7.56. 

Currently, oil markets are down across the board as the July NYMEX ULSD (HO) and NYMEX RBOB (Gasoline) futures contracts expire today. Morning newswires are fluttering with titles like this Dow Jones one, "Oil Slides Again as Iraqi Production Remains Robust." However, the same reports are just as robust with warnings that additional Iraqi violence including stronger U.S. involvement or any disruption to the southern Iraqi export complex, could move markets back up. For those of us on the physical side, we will take these lower numbers.  NYMEX ULSD (HO) that is below the $3 mark to $2.9783, down 1.93 cents (the incoming August contract is down 1.82 cents but is at 2.9853), while NYMEX RBOB is down 1.31 cents to $3.0857 (the incoming August contract is down 1.42 cents to $3.0600). NYMEX Crude is down 44 cents to $105.30, while ICE Brent is down 78 cents to $112.52. 

Speculator "Spec" Watch:  According to the CFTC's Commitments of Traders Report released on Friday for reporting through Tuesday, June 24th, the Money Manager (Speculative) category revealed that net speculative length decreased for NYMEX (WTI) Crude, but increased for NYMEX ULSD (HO) and NYMEX RBOB (Gasoline). For NYMEX (WTI) Crude, net speculative length decreased 11,053 combined futures and options contracts, or 3.1% from the previous week of 356,336 to 345,283 contracts.  Net speculative length for NYMEX ULSD (HO) increased again, this time 49% (75% the previous reporting period) from 27,131 futures and options contracts to 40,381 contracts. What is interesting here is that after the reporting period of Tuesday, June 24th, the NYMEX ULSD (HO) contract increased 90 points on Tuesday, but then declined Wednesday through last Friday's close a total of 4.4 cents. Could this be indicative of HO speculators reversing their positions? If not, as the market moves lower, these net long speculators are losing money, and could hang around long enough to try and move this back up. NYMEX RBOB net speculative length increased 4,678 contracts, up 7.6%, from 61,910 to 66,588 contracts, representing a two-month high.  Since last Tuesday, the RBOB  contract alternated with settlements up, down, down, and up on Friday (when HO finished lower). With the 4th of July long weekend holiday coming up, perhaps, gasoline speculators are willing to hang in longer as we are at the peak demand of the summer driving season.

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Oil markets up after being down yesterday.

June 27, 2014

Recap: Oil markets finished lower across the board Thursday, as reports continue to show that Iraq's southern oil export facilities continue to operate normally despite ISIS militant violence to the north and west. ICE Brent Crude settled down a second day in a row, 79 cents to $113.21. Brent oil traders are also looking to news out of Libya for Wednesday's election results and indications that Libyan oil production was reported to have increased to 300,000 bpd according to a National Oil Corp. spokesperson.  NYMEX (WTI) Crude saw a pullback of 66 cents yesterday to settle at $105.84 after trading higher the previous day (on a bearish DOE inventory report) on news that the U.S. Commerce Department was allowing the first export licenses to Pioneer Natural Resources and Enterprise Products Partners for condensates, a form of crude oil. This news sent NYMEX Crude higher as some assumed that this was the first step in allowing outright crude export licenses that would bring US benchmark WTI crude prices higher to meet international benchmark Brent crude prices. It turns out that the Commerce Department has "clarified" the definition of condensate based on how it is processed. Now, if condensate is  processed through a simpler, cheaper stabilization unit, it can be categorized as "lease condensate" and that would change the crude into a "product" that can be exportable under a general license like gasoline, diesel, or heating oil. Many analysts expected that this clarification would take place some time at the end of 2014, so the earlier timing was the surprise to the oil markets. For now, it seems the oil markets have absorbed this exportable crude condensate news. Yesterday, the products dropped lower for a second day in a row reflecting  bearish DOE inventory builds for both distillates (up 1.2 MMbs) and gasoline (up .7 MMbs) NYMEX ULSD (HO) dropped lower 1.6 cents to $3.0138 and NYMEX RBOB (Gasoline) dropped 71 points to $3.0856. 

Currently, oil markets are higher this morning. NYMEX ULSD is up 28 points to $3.0166 and NYMEX RBOB is up 1.27 cents to $3.0983. Both of these July contracts will be expiring on Monday, and with expiration comes the potential for some additional volatility. NYMEX Crude is up 6 cents to $105.90, and ICE Brent is up 16 cents to $113.37. 

DOE Inventory Highlights: Commercial crude stocks increased 1.7 MMbs to 388.1 MMbs, and Cushing, OK stocks increased .4 MMbs to 21.8 MMbs. (A Cushing inventory of 20 MMbs (or less) has been supportive to WTI crude prices.) Total distillate and gasoline stocks both increased, 1.2 MMbs and .7 MMbs, respectively. Total refiner operable capacity percentages increased across the country from 87.1% to 88.5% while PADD 1 (East Coast) refiner %'s stayed strong at 92.7%, helping to provide weekly increases in PADD 1 (PADD 1A and 1B) distillates.  PADD 1 distillate stocks are still 4.7% lower than last year and 19.4% below the 5-year average. PADD 1A (New England) distillate stocks are 22.5% lower than last year, and 44% below the 5-year average. PADD 1 gasoline stocks are 2.8% lower than last year, but 5.1% above the 5-year average.


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