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Market Intel Archives

OIl markets mixed today, down yesterday except ULSD with new heating demand

February 04, 2014

Recap:  Oil markets were all down again yesterday, EXCEPT the front, March NYMEX ULSD (HO) contract, closing similarly like the previous session's close on January 31st. The only difference was less volatility on the NYMEX ULSD contract that closed up 1.04 cents to 3.0075 mostly on renewed heating demand for the Arctic temperatures and snowy weather that blanketed much of New York and southern New England yesterday. (Another storm is on the way.) Again, the backwardation increased, this time a penny, to 7.21 cents. Again, ULSD was blamed for keeping the rest of the oil complex from falling further as global stock markets continued their move down, but a more comprehensive reason as furnished by Elizabeth Dilts of Reuters, was that  "[o]il futures remained broadly pressured by worries over emerging markets, weak factory data from China and expectations for lower demand as U.S. refiners shift into maintenance season."  NYMEX Crude (WTI) declined $1.06 to 96.43 and ICE Brent closed down 36 cents to 106.40. NYMEX RBOB (Gasoline) declined 2.45 cents to 2.6069 to weather related weak travel demand. 

Currently, NYMEX ULSD is down 55 point to 3.0020, NYMEX RBOB is down 48 points to 2.6021, NYMEX Crude is down 25 cents to 96.68, and Brent ICE is down 43 cents to 105.61. Also, a winter weather advisory has been issued across the Northeast and parts of the Mid-Atlantic for large amounts of snow with areas of snow/ice/sleet today through tomorrow. See the storm forecast map in the attachment. 

Speculator Watch:  No surprise here - on NYMEX ULSD - Wall Street longs surged as of last Tuesday to 40,139 futures and options to double net length from the previous week (20,825). The paper to physical ratio in NY Harbor moved from 3:5 previous report to now 2:1 current report. NYMEX RBOB net length by Wall Street posted its lowest point in 7 months at 26,632 futures and options contracts. 

News Bits: >> Janet Yellen, 67, was sworn in today as the first woman to head the Fed in its 100 year history. She had served as Vice Chair under Ben Bernanke (who served for 8 years), and will continue in the bond-buying, tapering program.

>> The AP reported on Friday that the State Department "reported no major environmental objections to the proposed $7 Billion [Keystone XL] pipeline." On January 22nd, Nebraska Governor Dave Heineman approved the revised route of the Keystone XL Pipeline across his state. On Sunday in a Fox News "O'Reilly Factor" interview, President Obama said that Secretary of State will "give me a recommendation" regarding approval (or not) of the Keystone XL pipeline. 

Light Bites:
> Punxsutawney Phil, the western Pennsylvania groundhog, did see his shadow on Sunday and yes, we will have another 6 weeks of winter! (That was an easy call.)

> It turns out Martians have doughnuts, too. Mars rover, Opportunity, took photos of a white rock with a dark red spot in the middle that just "appeared." 

Click to view today's Refined Products MarketWatch.

Oil markets down, Feb NYMEX ULSD contract is finally gone!

February 03, 2014

Recap:  Oil markets all settled lower on Friday EXCEPT, specifically, the February NYMEX ULSD (all other ULSD contracts, including the incoming March contract traded lower).  It was this rare market action on the outgoing February ULSD contract that most likely kept the rest of the complex from moving down further, and per Jim Ritterbusch, president of Ritterbusch & Associates, "[oil futures] would otherwise have seen much larger declines in response to the weakness in global equities." NYMEX Crude (WTI) settled lower 74 cents to close at 97.49, along with ICE Brent moving down $1.55 to close lower at 106.40. The Brent-WTI spread continued to narrow down and settled at 8.91, the lowest level since last October (see chart below). February NYMEX RBOB (Gasoline) went off the board at 2.6272, down 3.54 cents. The current March RBOB contract represents the last contract of the winter spec gasoline, with the more expensive summer RVP material starting with the April contract. February NYMEX ULSD settled up 6.24 cents to 3.2794, whereas the March contract settled down 3.04 cents to 2.9971.  

Currently, NYMEX ULSD (HO) is down 1.78 cents to 2.9792(!!), NYMEX RBOB is down 28 points to 2.6286, NYMEX Crude is up 11 cents to 97.60, and ICE Brent is down 53 cents to 105.86. 

So what happened on Friday with that February ULSD (HO) contract? It literally went off the board with a bang (see yellow shaded chart below). Our traders had never seen this type of hyperbolic backwardation on the contract, where at one point between 1:13pm the backwardation had shot up to 24 cents and then in the next thirty minutes, raced up to 33.93 cents, but ultimately settled at 2:30pm at 28.23 cents (see the chart below)! One has got to think some Wall Streeter was being squeezed to the end of contract expiry in an extreme game of chicken. Be that as it may, those of us who take physical delivery of product were happy when that contract went off the board. In its place is a March contract that has yet another backwardation built into it at 6. 14 cents, a reminder that the market is continued about tight supplies. Even with the warm respite this past weekend (field temperature for Super Bowl kick-off, was a balmy 49 degrees), cold Canadian air is reloading to support colder than normal temperatures for February.  

And if there is anything that we can learn from the Super Bowl, a great defense (process, operations, planning supply)  is better than betting on a great offense-even with an experienced quarterback, because one distraction can affect the whole team (this backwardation situation). Plan, plan, plan. The winter is not over yet. 

Click here to view today's Refined Products MarketWatch.

Oil markets moderate on warmer weekend, February ULSD still strong

January 31, 2014

Recap:  NYMEX ULSD (HO) continued to lead the petroleum complex up, closing at 3.54 cents to 3.2170. The Feb-Mar backwardation moved up again to settle at 18.95 cents along with the Mar-April backwardation moving up to 5.67 cents. The February futures contract will expire today (along with RBOB) and with another month of strong fundamentals, it will be an interesting close to the month. What will be the new backwardation? Basis in NY Harbor has retreated a bit on reports of a warmer upcoming weekend, but the picture has been mostly about fundamental, cold weather. NYMEX RBOB closed up 17 points to 2.6626. The upcoming March futures contract represents the last winter RVP spec product before we see the jump in price for the April contract, currently at an 18 cent premium to March. NYMEX Crude also moved up 87 cents to close at 98.23 and ICE Brent moved up 10 cents to 107.95. The Brent-WTI spread dropped below $10 since early November. 

Currently, the entire petroleum complex is down with ICE Brent down the most, $1.05 to 106.90, NYMEX Crude down 83 cents to 97.40, NYMEX RBOB down 1.57 cents and NYMEX ULSD down 11 points to 3.2159. 

Long Range Weather Outlook:  Although temperature forecasts through the weekend look to provide a "break" from extreme cold temperatures, the long range outlook for February from Meteorologist John Bagioni for most of the nation is stacking up to be in the "colder than normal category." From his Long Range Outlook published yesterday, he notes that whether "the February pattern can produce the same intensity of arctic outbreaks we have seen during the December-January period is a bit uncertain. But make no mistake about it, there will be a large source of very cold air positioned across much of central and eastern Canada in the coming weeks and a good deal of it will be transported southward into the U.S." 

Heating Degree Day (HDD) Forecast: Fax-Alert Weather Service has forecasted heating degree day (HDD) % of normal in its Ten Day Temperature Guidance report for the period January 31st through February 9th for the following Northeast locations. (HDD percentages above 100% indicate the additional HDDs above normal for the time period):
New York:  NYC 93%, Binghamton 97%, Albany 94%, Newburgh 90%

New Jersey:  Newark 93%, Trenton 92%

Pennsylvania:  Philly  97%

Massachusetts:  Boston 93%, Worcester 95%, Chicopee 102%, Hyannis 89%

Connecticut: Hartford 94%, Bridgeport 95%, New Haven 96%

NH: Manchester 92%, Portsmouth 92%, Lebanon 94%, Concord, 96%

Maine: Portland 95%, Augusta 96%, Bangor 101%

Vermont: Burlington 95%, Rutland 95%

Rhode Island:  Providence 93% 

Have a great weekend and stay safe on those roads!


Click to view today's Refined Products MarketWatch

Market up as inventory data revealed larger than expected draw

January 30, 2014

Recap: After the release of the EIA's weekly DOE Inventory Report, petroleum products took off as inventory data revealed a larger than expected draw in distillates at 4.6 MMbs (v. expectations of 2.5 MMbs) and a draw in gasoline stocks when the market anticipated a build. NYMEX ULSD (HO) rallied through 3 resistance points to close up 5.98 cents to 3.1816, a high not seen since the end of August 2013. ULSD (HO) futures are in the same price range we saw the first week of February last year. The Feb-Mar backwardation soared to 16.12 cents, and the Mar-Apr increased to 5.1 cents. Additionally, per the EIA for the week ending January 20th, average East Coast retail heating oil prices were $4.055, a 4.1 cent increase over last year at $4.014. Despite bitter sustained cold temperatures with distillate demand 22% higher than last year and exports 20% more than last year, retail prices are 1% higher than a year ago. This is not a consolation point for our end users, and certainly with temperature outlooks for February being a bit colder than "normal", normal is still cold, so heating degree days will keep churning.  Unfortunately, it was reported that Philadelphia Energy Solutions 335,000 bpd refinery shut down yesterday morning although planned maintenance was scheduled for later in February. Another unplanned East Coast refinery outage does not help the supply situation. Supply management will remain a priority until warmer weather prevails.

 

NYMEX RBOB (Gasoline) moved up 3.31 cents to close at 2.6609 yesterday on an unexpected draw of .8 MMb when the market was expecting an increase of 1 MMbs of gasoline stocks. NYMEX Crude (WTI) closed down 5 cents to 97.36, weighed down by the products and announcements that indeed the Federal Reserve will taper down $10 billion to $65 billion. ICE Brent was still buoyed on reports that the Libyan Prime Minister survived an attempted assassination on his life yesterday. On going political unrest presents a shaky scenario for Libyan oil exports, and Brent closed up 44 cents to 107.85.

 

Currently, NYMEX ULSD is the biggest mover this morning, up 1.90 cents to 3.2006, bringing the current Feb-Mar backwardation to 17.53(!) cents. NYMEX RBOB is up 33 points to 2.6642. The February futures contract for both ULSD and RBOB expire tomorrow. Expect continued volatility. NYMEX Crude is up 50 cents to 97.86, and ICE Brent is up 4 cents to 107.89.

 

DOE Inventory Highlights: The bulk of the distillate stock draw, or 3.84 of the 4.6 MMb, or 83%, came out of PADD 1 (East Coast). PADD 1 Distillates are down 28.5% over last ear. Breaking PADD 1 down further, 1A-New England is currently down 16.8% v. last year, but 1B (Central Atlantic) is down 34%, and 1C (Lower Atlantic) is down 23%. Refinery utilization percentages are up to 88.2% from 85% last year, but PADD 1 utilization is at 76.4% v. 82.2% from last year. (And with the Philly refinery down, this number will be lower next week.) Distillate imports are up 51% over last year, but total distillate stocks are still overall, 11% below last year and 22% lower than the 5 year average (see EIA chart by clicking the link below). 

Today's oil markets market watch report in a downloadable format can be found by clicking here.

Refined products glossary

Oil markets firm on heating demand, ULSD backwardation still strong

January 29, 2014

Recap:  Oil markets were all up yesterday on "pick your headline."  From Dow Jones Newswires, "US Oil Futures Rise on Hopes of Cushing  Supply Declines "or "Oil Futures Climb as Traders Monitor Fed Meeting," or from the AP, "Oil climbs to above $96 as US chill cuts stocks." All eyes will be on the EIA's weekly DOE Inventory Report today (see estimates below). The biggest gainer on the oil side was NYMEX Crude that increased $1.69 to 97.41, followed by ICE Brent up 72 cents to 107.41. The front month February NYMEX ULSD had started to retreat, closing the Feb-Mar backwardation down to 10 cents, early in the session, but moved back out to a big 12.79 cents (see yellow boxes below and to the right) The ULSD contract finished up 2.94 cents to 3.1218. The Mar-April backwardation firmed to 4.16 cents (see orange boxes). NYMEX RBOB (Gasoline) was lifted up 61 points to 2.6278.

Currently, NYMEX ULSD is up 3.71 cents to 3.1589, and the Feb-Mar backwardation has moved out to 14.34 cents. Again, an indicator that the market is concerned about tight supplies. NYMEX RBOB has moved up as well, 2.47 cents to 2.6525, ICE Brent is also up, 36 cents to 107.77. NYMEX Crude (WTI) is down 12 cents to 97.29, perhaps in anticipation of crude builds in today's inventory numbers to be released at 10:30am.

The much anticipated DOE Inventory Report Day is here! As heating demand continues its upward trend on sustained cold temperatures throughout the Midwest and East Coast, oil markets are focused on the inventories to be reported by the EIA at 10:30am this morning. These fundamentals have been driving all heating fuel prices up and inventory updates outside of expectations along with expirations of both the NYMEX ULSD and RBOB futures contracts on Friday will provide added volatility to the mix.  Fax-Alert Weather Service reported in their Mid-Week Trends for the Northern Middle Atlantic, New York and New England Regions report this morning that "After the current Arctic air mass loses its grip by week's end, the large-scale pattern will transition through a 3 to 5 day period of relaxation until the cold pattern reloads next week...... Large-Scale pattern and model trends continue to strongly support a widespread colder than normal pattern covering much of the central and eastern U.S. for February (see NOAA's 6-10 Day Outlook below). 

The DOE Expectations: CitiFutures is expecting the following ranges: 1 to 2MMb build for crude stocks, .5 to 1.5 MMb build for gasoline but 2-3 MMb decline for distillates, and a 1 percentage point increase in refineries to 87.5%.  Bloomberg comes in line with a 2.25 MMb build for crude, 1.6 MMb build for gasoline, and a 2.55 draw for distillates. The API reported yesterday afternoon a 4.8 MMb build in crude, .4 MMb build in gasoline, but a 1.8 MMb decline in distillates.

Click here for today's Refined Products MarketWatch report.

Oil markets move down despite frigid temperatures

January 28, 2014

Recap: Yesterday oil markets all closed down jolted by further slides in global equity and currency markets. Both crudes, NYMEX WTI and ICE Brent were influenced by global markets, with WTI moving lower 92 cents to 95.72, and Brent down $1.19 to 106.69.  NYMEX ULSD (HO) got as high as 3.1853 before sliding down to a low of 3.0747, and then settling down 4.50 cents to 3.0924. But, the Feb-Mar backwardation stayed in tact at 12.57 cents. NYMEX RBOB was down from the start and closed down 4.15 cents to 2.6217.

But the on-going story continues to be the blow-out of spot (cash market) distillates, on the East Coast as priced in New York Harbor, particularly ultra-low diesel and ultra-low heating oil. For example, on Friday the premium to ULSD versus Gulf Coast ULSD was 40.54 cents. Yesterday, ULSD and ULSHO basis in NY Harbor increased 10 and 9 cents, respectively, in one day. The sustained cold temperature-based heating demand has spurred a different kind of demand. For those industrial and commercial users who are able to convert back to diesel to avoid extreme natural gas pricing and "interruptibles",  they are paying 50-75 cents over NYMEX pricing to ensure that they have a back-up plan if they get shut off from natural gas.  This type of double whammy demand is pressuring distillate cash prices, pushing up basis. So for now, a NYMEX price reduction helps to soften the blow for increasing basis. Until we see a respite from the cold temperatures, a sustained respite, expect volatility in both cash and NYMEX markets. NYMEX ULSD and RBOB options on February futures expire today, and the futures expire this Friday, so another ingredient for volatility.

Currently, oil markets are mostly up, with NYMEX Crude leading, up 58 cents to 96.30, ICE Brent up 30 cents to 106.99, NYMEX RBOB up 87 points to 2.6304, but NYMEX ULSD is down 14 points to 3.0910. The Feb-Mar backwardation is 11.92.

Oil moves down on US data, global weakness:  As a catalyst to news last week on weaker Chinese demand and emerging markets, December data for U.S. new home sales declined more than expected, falling 7%, to a seasonally adjusted rate of 414,000 units compared to expectations of 457,000. Investors will be looking for guidance from the start of today's Federal Reserve meeting to see if more bond buying ("tapering") by another $10 Billion down to $65 Billion will happen. The result of tapering would be interest rate increases, perhaps creating some fear of stunting a slow U.S. economic recovery both here and abroad.

Why emerging markets matter: Emerging markets have played a larger role in the world economy (accounting for 40% of the global economy - up from 18% two decades ago [Societe General]). However, they are riskier assets, and it didn't help global markets when reports of weakening demand in China, economic instability in Argentina, and political scandals in Turkey helped to drive away investor confidence. So much like commodity markets where the "lure" of higher rates of return can overshadow the additional risk associated with these investments, when there is a shutter,  investors "flee" out of emerging markets to other perceived "safe havens." Hence, oil markets, along with natural gas, were following other asset classes down yesterday, and some short covering after the increases from last week. 

Click here to view today's Refined Products MarketWatch

ULSD (HO) continues its climb on cold temperatures

January 27, 2014

Recap:  NYMEX ULSD (HO) continued its climb up Friday, still supported by sustained cold temperature forecasts through the beginning of February keeping heating demand strong upon the backdrop of PADD 1 distillate stocks at a 21% deficit to last year. The contract closed 6.09 cents higher to 3.1374, but continued to climb up past 3.1543 in after-hours trading. The Feb-Mar backwardation expanded out to a whopping 12.16 cents (See the backwardation explosion since Jan 13th chart below). We were hoping that with the contract expiry next Friday, this backwardation would start to flush out. However, the Mar-Apr backwardation has already started to build to 5.19 cents as of Friday's close, indicating that the March contract will replace the February contract with another backwardation, the indicator the market is worried about tight supplies. Despite the arrival of 6 Russian tankers importing product to Boston, Providence, New York (2), Baltimore, and Charleston (SC) this past weekend through Feb 1st, that information did not hold heating oil markets down. It could be worse, like NYMEX Natural Gas closing up 45.2 cents to 5.182!  NYMEX RBOB (Gasoline) was most likely lifted by ULSD, closing up 14 points to 2.6632 after being down most of the session. On the other hand, NYMEX Crude lost 68 cents to settle at 96.64, likely prompted by economic concerns in emerging markets that triggered declines on both global and U.S. stock exchanges. ICE Brent closed 30 cents up to 107.88.

Currently, oil markets are mixed, with NYMEX ULSD (HO) already up 2.42 cents at 3.1616, after hitting 3.1835 in overnight trading. The Feb-Mar backwardation has expanded even more, to 14.68 cents. Cold temp fundamentals will continue to support ULSD through this week.  NYMEX RBOB is down 1.35 cents to 2.6497, NYMEX Crude is up 26 cents to 96.90 and ICE Brent is down 65 cents to 107.23.

Heating Demand Still On: HDD Forecast: Fax-Alert Weather Service has forecasted heating degree day (HDD) % of normal in its Ten Day Temperature Guidance report for the period January 27th through February 5th for the following Northeast locations. HDD percentages above 100% indicate the additional HDDs above normal for the time period:

New York:  NYC 106%, Binghamton 109%, Albany 107%, Newburgh 104%

New Jersey:  Newark 110%, Trenton 109%

Pennsylvania:  Philly  113%

Massachusetts:  Boston 106%, Worcester 108%, Chicopee 118%, Hyannis 103%

Connecticut: Hartford 107%, Bridgeport 105%, New Haven 104%

NH: Manchester 102%, Portsmouth 104%, Lebanon 108%, Concord, 107%

Maine: Portland 103%, Augusta 102%, Bangor 106%

Vermont: Burlington 102%, Rutland 107%

Rhode Island:  Providence 104%Click to view today's Refined Products MarketWatch report 
Tagged: ULSD

Oil markets responded to weekly inventory data, heating demand still high

January 24, 2014

Recap:  Oil markets reacted closely to the weekly DOE inventory expectations: commercial crude and gasoline stocks came in line with expectations of respective 1 MMb and 2.1 MMb builds. The NYMEX RBOB (Gasoline) futures contract proceeded to retreat down 1.53 cents to close at 2.6618. NYMEX Crude had opened higher before the inventory release and closed a bit higher on the day up 59 cents to 97.32. ICE Brent was softer on weak Chinese manufacturing data showing a contraction in the factory sector for the first time in six months AND, on further unwinding of the Brent - WTI spread. ICE Brent closed down 69 cents to 107.58 and the Brent-WTI spread narrowed to 10.26.

The larger than expected distillate stock draw of 2.3 MMbs, put NYMEX ULSD (HO) on the offensive, increasing almost 5 cents to 3.0875 before simmering down a bit to close 3.86 cents up to 3.0765. The eight day rally has moved the contract up 12.6 cents since January 10th. Additionally, the Feb-March backwardation gained steam again, increasing back up to 8.55 cents at the close. NY Harbor cash markets are still firm as heating demand remains strong and heating degree day forecasts remain strong through the beginning of February.  Despite these increases in heating oil, they pale in comparison to increases for both natural gas and propane. For example, Conway propane sits at $5.00/gallon compared to Mt. Belvieu propane (Today-Any) at 1.585, a $3.415 premium or 215%. WOW.

Currently, oil markets are all down with ICE Brent down 87 cents to 106.71, NYMEX Crude down 24 cents to 97.08, NYMEX RBOB down 1.29 cents to 2.6489 and February NYMEX ULSD (HO) down 49 points to 3.0716. March NYMEX ULSD (HO) is down 1.75 cents to 2.9735, widening the backwardation even more to 9.81 cents.

DOE Inventory Highlights: Percent of operable utilization (refinery runs) decreased from 90% to 86.5%. However, peeling back the details, PADD 1 (East Coast) has shrunk steadily since Dec 27, 2013 from 85.1, to 84.9, to 75.5, to January 17th at 70.1%. For example, the PBF Energy Paulsboro, NJ refinery (180,000 barrel per day capacity) had unexpected maintenance the second week of January. Distillate imports were down last week by 12% over last year, while exports were up 24%. This dynamic coupled with on-going heating demand has shrunk total distillate stocks about 9% (see EIA's graph below), but PADD 1 distillate stocks are down 21% v. last year. PADD 1A (New England) actually increased stocks over the previous week, but is still down 8.7% v. last year. In PADD 1B (Central Atlantic) distillate stocks are down to 17.01 MMbs from 24.24 MMbs last year, a decline of almost 30%. Gasoline stocks are slightly up over last year, but as more refineries move into February and scheduled turnarounds, there is not much of a buffer. After all of the record U.S. crude production, the 2013 year end draw down has left commercial crude stocks 3% below last year. Again, with refinery turnarounds around the corner, barrels could pile up at the southern end of the Keystone XL pipeline in Texas, rather than in Cushing, Oklahoma, and we could see crude builds. However, the bigger concern with unplanned and planned refinery shutdowns in a high heating demand environment is shrinking product stocks, specifically distillates, more specifically in PADD 1 (East Coast), and the market has been screaming this message.
Click here to view the Refined Products MarketWatch report

Tagged: oil markets

Oil markets up on heating demand, opening of Keystone XL Pipeline section

January 23, 2014

Recap:  Oil markets started trading above the previous day's settlements and all finished higher yesterday. Clearly, on-going heating demand created by cold temperatures east of the Mississippi are weighing on all energy markets as supplies of all fuels have tightened even more during the current cold snap. Additionally, TransCanada started shipping crude barrels down the southern leg of their Keystone XL Pipeline connecting storage center, Cushing, Oklahoma with Port Arthur, Texas, the Gulf Coast refining center (see map below). TransCanada had announced the opening of the pipeline back in December, and as analysts had expected, WTI crude pricing is moving closer to the more expensive Brent crude contract because the storage glut that held WTI prices down, will be eliminated. Initially, as reported by the Down Jones Newswire, 300,000 gallons barrels per day started to flow, although expectations to average 520,000 bpd with a an ultimate target of 830,000 bpd. Lastly, a string of unplanned refinery outages and reports of traders "unwinding" Brent-WTI spread trades also created pressure on NYMEX WTI Crude pricing thus, pressuring the entire complex up.

NYMEX Crude (WTI) settled up $1.76 to 96.73, NYMEX RBOB (Gasoline) settled up 5.65 cents to 2.6771, and NYMEX USLD (HO) settled up 2.32 cents to 3.0379. ICE Brent was supported by the NYMEX oil complex, along with on-going unrest in Libya as five government ministers resigned, settling up $1.54 to 108.27.

Currently,  oil markets are mixed with February NYMEX ULSD (HO) up 2.02 cents to 3.0581  while the March contract is up 58 points to 2.9870, bringing the current Feb-Mar backwardation to 7.73 cents, a 2 cents higher than yesterday's close. NYMEX RBOB is down 43 points to 2.6728, NYMEX Crude is up 31 cents to 97.04, but ICE Brent is down 32 cents to 107.95.

When you see headlines like this, take note : "US Gas - Party like it is pre-2008?" (CitiResearch), "Natural Gas Futures Post Highest Settlement in Over Two and a Half Years" (Dow Jones), "Storm Sends Natural Gas for NYC, Mid-Atlantic  States Soaring" (Dow Jones Business News). NYMEX Natural Gas closed up 25.8 cents to 4.689, a new season to date high. The natural gas mid-point price for delivery in Transco Zone 6, where NYC gas prices are set, was $123.81 per MMBtu yesterday. This represents a BTU equivalent of around $17 per gallon of heating oil. WOW.

DOE Weekly Inventory Report out at 11 AM today: The API reported their inventory data yesterday afternoon showing a 4.9 MMbs build in crude stocks, 2.3 MMbs decline in distillates and a 1.1 MMbs build in gasoline stocks. However, Bloomberg is estimating a smaller crude build at 1.15 MMb, smaller distillate draw of .5 MMb, and bigger build of gasoline at 1.75 MMbs. And, to stir the estimation pot even more, CitiFutures is pegging a 1 to 2 MMb draw range for crude stocks, in line with distillates in a 1 to 2 MMb draw range, and with gasoline in a 1 to 2 MMb build range. Estimates are across the board for refinery operating utilization to decline from last week's 90% down into the 88 to 89.5% range. The 5 year average is 82.4%.

Click to view today's Refined Products MarketWatch report

Oil Markets moved higher, then retreated.

January 22, 2014

Recap:  Yesterday, oil markets started and stayed in positive territory except for NYMEX ULSD (HO). After rallying up almost 6 cents, hitting a high of 3.0834,  a curious thing happened. At the 3.08 mark, the contract started to fall on little volume and phone calls and emails started crossing my desk asking why. After searching newswires, nothing legitimate surfaced to explain why heating oil would be falling with such current high heating demand. Logic points to profit-taking, and perhaps when we have visibility to this time period  via the Commitments of Traders Report by the CFTC next week, perhaps we may see some net long positions in NYMEX ULSD futures and options shrink. Are speculators favoring the natural gas contract and building even longer positions ? (NYMEX natural gas increased 10.5 cents...hmmm....) For now, we know NYMEX ULSD retreated from its 3.0834 high and closed at 3.0147, down 90 points from the previous close. Additionally, the backwardation we have been watching shrunk to 6.36 cents.

NYMEX RBOB (Gasoline) took a similar ride as its ULSD product counterpart, trading  in a 5.82 cent range, hitting a high of 2.6682 before retreating back down to 2.6206, a gain of 2 points.  The February NYMEX Crude (WTI) contract hit a high of 95.46 before it came off the board yesterday just under $95 to close at 94.99, gaining 62 cents. (March NYMEX Crude contract closed at 94.97, down 38 cents.) March ICE Brent moved up to $108 as the market responded to the International Energy Agency's monthly report, released yesterday, that revised global petroleum demand outlook up. However, this level was not sustained, and Brent closed up 25 cents to 106.73. The Brent-WTI spread, another indicator we have been watching to provide guidance on refiner's export appetite, narrowed to $11.74. Last week, on January 14th, the Brent-WTI spread stood at $13.80.

Currently, oil markets are again all up. NYMEX ULSD (HO) is up 78 points to 3.0225, NYMEX RBOB is up 92 points to 2.6298, NYMEX Crude is up 49 cents to 95.46, and ICE Brent is up 62 cents to 107.35. NOAA's 6-10 Day outlook continues to put the East Coast (except Florida!) in colder than normal temperature zones. Heating demand should stay strong for all heating fuels through the weekend.

"Spec" Speculator Watch:  According to the CFTC's Commitments of Traders Report reporting through January 14th, NYMEX Crude (WTI) Wall Street decreased its net long position (futures and options) by 7% to a seven week low of 229,722. Wall Street's net speculative length for NYMEX ULSD (futures and options) plunged 80% to a 2 month low of 3,303. The paper ratio has reversed from 2:1 to under 1 now, at 2:7. NYMEX RBOB net length also fell, 12% to 47,938. Reduction of net length across the complex will definitely help offset any fundamental heating demand pricing pressure in the near term.

Reminder: DOE Inventories will be released tomorrow at 11am.

Click to view today's refined products MarketWatch report.
Tagged: oil markets