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Market Intel Archives

Oil markets lower after weekly gain last week

April 21, 2014

Recap:  Oil markets were closed on Friday due to the Good Friday holiday. Thursday, April 17th settlements were as follows: NYMEX Crude 104.30, ICE Brent 109.53, NYMEX ULSD (HO) 3.0082, and  NYMEX RBOB 3.0547. In a week's time from April 11th to April 17th, weekly gains were seen in each of these four oil futures contracts. In terms of % increase, NYMEX ULSD (HO) was the biggest gainer, up 2.6% or 7.5 cents on the week, followed by ICE Brent, up 1.98% or $2.13. NYMEX RBOB's increase came in at 1.3%, or 4.03 cents, while NYMEX (WTI) Crude gain's were the weakest on the week at .5%, or 54 cents. Supporting ICE Brent pricing continues to be geo-political headlines including the Ukraine-Russia crisis, and Libya. It has only been a month since Libya's interim prime minister was appointed to his post, and after an attack on his family last week, he has announced he will step down. Factors that could reverse Brent's increase include the health of China's economy that posted its slowest pace of growth in 2 years, or a GDP increase of 7.4%, on official government estimates of 7.5%. Based on the EIA's April 2014 Short Term Energy Outlook, Brent crude oil prices are forecasted to average $2 per barrel lower this summer as compared to 2013. (See chart below)

Currently,  oil markets are down across the board with NYMEX ULSD down 76 points to 3.0006, NYMEX RBOB down 1.07 cents to 3.0440, NYMEX Crude down 19 cents to 104.11, and ICE Brent down 34 cents to 109.19.  NYMEX Crude futures expire tomorrow and will most likely cause some additional volatility as the May contract last settled at a 93 cent premium (backwardation) to the incoming June contract. Analysts are also expecting another build in crude oil stocks with the release of the EIA's DOE Inventory Report this Wednesday.

Keystone XL Pipeline decision put on hold again: The U.S. State Department announced late on Friday afternoon, ahead of the Easter holiday, that the government's review of the pipeline would be indefinitely extended. Pipeline supporter, Democratic Louisiana Senator May Landrieu expressed, "This decision is irresponsible, unnecessary, and unacceptable." Many analysts now believe that this decision pushes any final decision past mid-term elections in November, as another construction season is missed. As energy analyst Stephen Schork summarized in his daily newsletter this morning, "Nothing sends a warning to Russia's oil-centric economy like blocking access to a glut of North American crude oil." [Emphasis his]

Click here to review today's Refined Products MarketWatch.

Oil markets mixed on close ahead of Good Friday holiday

April 18, 2014

Recap: Oil markets started in lower territory yesterday morning and steadily moved higher until results of the Ukraine-Russia Geneva talks revealed an agreement that "requires all sides to refrain from violence, intimidation or provocative actions." (Reuters) The tentative agreement tabled Western economic sanctions in the short term, and oil markets moved off of their highs on the day and moved lower into the close. There was a mixed finish with NYMEX Crude finishing up 54 cents to 104.30, ICE Brent settled down 7 cents to 109.53, NYMEX ULSD (HO) down 24 points to 3.0082, but NYMEX RBOB was up 1.42 cents to 3.0547. Currently, due to Good Friday, the NYMEX and Globex are closed and will re-open at regular times for Monday's trading.

Driving season is upon us and after a harsh winter season, analysts have been anticipating that U.S. drivers will be eager to hit the roads. This holiday weekend will be a pre-test to this theory of pent-up demand, and according to the EIA's Summer Fuels Outlook released last week, forecasts for regular gasoline retail prices are to average $3.57 cents, a penny below the 2013 average of $3.58. (The summer driving season is from April to September.) The 2014 forecast and 2013 average are still more than 10 cents lower than the average 2011 and 2012 retail regular grade gasoline prices of $3.71 and $3.69, respectively. Recall, however, that the current backdrop of gasoline production has been transitioning from the winter grade to the summer grade material, and as the DOE Inventory Report revealed on Wednesday, U.S. gasoline stocks are down 5.1% since last year, and gasoline demand is up 2.8%. Since the beginning of April, NYMEX RBOB (Gasoline) futures have jumped from an April 1st close of 2.8697 to yesterday's close of 3.0547, an increase of 18.5 cents. Furthermore, just in the past week through April 14th, retail gasoline prices have jumped 5.5 cents from the previous week and 10.9 cents from the previous year (See EIA U.S. Regular Gasoline Prices chart below). As analyst Stephen Schork has been warning, there is significant concern over the geo-political issues in Venezuela, which could impact the import of intermediate/heavy sour crude oil, the crude feedstock to several key U.S. Gulf Coast refiners producing gasoline. Mexico supplied 44% of this sour crude feedstock, while Venezuela supplied 39%. In the April 16th edition of The Schork Report, Schork notes, "Thus, as we rev up for the driving summer, uncertainty remains regarding the availability of heavy sour crude from the second largest supplier to U.S. refineries in PADD 3."  We will continue to closely watch these supportive forces for gasoline prices.

Weekend Weather and HDD Planning: As April temperatures extend the heating season, Fax-Alert Weather Service has forecasted their Ten-Day Temperature Guidance report for the period April 16-April 26th.  And in most Northeast locations, we are colder-than-normal for this time of year! (HDD percentages above 100% indicate percentage increase of HDDs colder-than-normal temperatures):

New York:  NYC 98%, Binghamton 95%, Albany 105%, Newburgh 101%

New Jersey:  Newark 100%, Trenton 96%

Pennsylvania:  Philly  99%

Massachusetts:  Boston 110%, Worcester 104%, Chicopee 124%, Hyannis 110%

Connecticut: Hartford 114%, Bridgeport 108%, New Haven 107%

NH: Manchester 101%, Portsmouth 108%, Lebanon 101%, Concord, 104%

Maine: Portland 110%, Augusta 104%, Bangor 105%

Vermont: Burlington 107%, Rutland 105%

Rhode Island:  Providence 106%

Click here to view today's Refined Products MarketWatch. 

Oil markets steady after DOE Inventory data

April 17, 2014

Recap:  Oil markets were able to shrug off a bearish total commercial crude oil inventory build of 10 MMbs (on expectations of 1.75 MMbs) as NYMEX Crude finished up a penny higher to settle at 103.76 while ICE Brent Crude increased 24 cents to 109.60. Cushing crude oil stocks, where the NYMEX Crude contract is priced, fell .8 MMbs to a new low of 26.8 MMbs and are 47.5% lower than a year ago.  "While the market reaction to a large build like this would be predominantly bearish, it seems the escalating fear in Ukraine is holding prices of crude oil up,” John Macaluso, research analyst at Tyche Capital Advisors advised.  Russian-backed attacks in eastern Ukraine continue to capture headlines along with a new headline that Russia's economy is showing clear signs of distress. As reported by the Associated Press, Russian Economy Minister Alexei Ulyukayev told his parliament that "the acute international situation of the past two months and serious capital flight were to blame" for 2014 first quarter growth expanding just .8% on expectations of 2.5%, and represents a .5% contraction as compared with the previous quarter. Analysts believe that despite these results along with today's meeting in Geneva among leaders from Ukraine, Russian, the U.S. and E.U. , Russian President Putin maintains high popularity ratings and is not likely to alter his opportunistic position on Ukraine.

Products were mixed as NYMEX ULSD (HO) breached the $3 level to settle at 3.0106., up 2.36 cents as DOE inventory data showed a bullish,  larger than expected decline in total distillate stocks of 1.3 MMbs on expectations of little change from the previous week. NYMEX RBOB (Gasoline) closed down 16 points to 3.0405 as expectations of a 1.75 MMb decline did not materialize, as the draw was only .2 MMbs. Market participants will most likely be looking to square their books ahead of the Good Friday holiday where both the electronic Globex trading platform and NYMEX trading floor in New York will be closed. Trading resumes for Monday, April 21st, and the May NYMEX Crude futures contract will expire the following day on April 22nd. Currently, NYMEX ULSD is down 65 points to 3.0041, NYMEX RBOB is down 9 points to 3.0396, NYMEX Crude is up 10 cents to 103.86 and ICE Brent Crude is down 3 cents to 109.57.

DOE Inventory Highlights: Although total distillate stocks are down 3 % over last year (see EIA Distillate Stocks chart below), PADD 1 (East Coast) distillate supplies are down 5.8% over last year and are still 26% below the 5 year average. Total gasoline stocks are down 5% as compared to last year and are the below the 5 year average range (see EIA Gasoline Stocks chart below).

Click here to view today's Refined Products MarketWatch.

Ukraine-Russian conflict and potential price support to oil markets

April 16, 2014

Recap: Oil markets started in negative territory on Tuesday morning, but by settlement time at 2:30pm, the products posted positive marginal gains, while the crudes moved marginally lower. NYMEX ULSD (HO) traded in a 3 cent range with a low on the day of 2.9667, but moved higher and fell short of the $3.00 mark at 2.9977 before moving back down to settle up 79 points on the day to 2.9870.  Likewise, NYMEX RBOB (Gasoline) hit a low of 3.0100, and then reversed up to 3.0482 before settling at 3.0421, up 37 points. Crudes most likely were consolidating ahead of the weekly release of the EIA's DOE Inventory Report (see estimates below) along with the expiration of the May ICE Brent Crude futures contract. While the May Brent contract moved lower on the day, losing 33 cents to 103.75 , the incoming June Brent contract posted a slight gain of 29 cents to close at 109.36.

Ukraine takes military action:  The Ukraine-Russian conflict continues to capture headlines as a potential price support to oil markets. In a significant AP report on Tuesday afternoon, "In the first Ukrainian military action against a pro-Russian uprising in the east, government forces said they clashed Tuesday with about 30 armed gunmen at a small airport ... Ukraine's ex-prime minister and presidential candidate Yulia Tymoshenko said Tuesday what Kiev was seeing in the country's east was in effect a war. 'We have to tell the Ukrainians the truth: the Russian Federation is waging a real war against Ukraine in the east.'" Meanwhile, officials from the U.S., European Union, Russia and Ukraine are scheduled to meet in Geneva on Thursday for "negotiations aimed at persuading Russia to back off in Ukraine." This meeting will also be important to figure out how Ukraine will pay for its energy as Ukraine's Naftogaz Ukrainy has stopped paying Russian energy provider, Gazprom, after Gazprom cancelled gas price discounts to push Naftogaz's price to $13.5/MMBtu. Ukrainian aid packages continue to be worked out by the IMF, World Bank, and EU.

DOE Inventory Estimates: The EIA will report its weekly DOE Inventory Report Wednesday morning at 10:30 AM.  CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: 1.5 to 2.5  MMb build for crude stocks, 2 to 3 MMb draw for gasoline, a .5 draw to a .5 MMb build range for distillates, and a .5 percentage point decrease in refinery % operable utilization to 87%.  Bloomberg comes in with a crude build at 1.75 MMb, a 1.75 MMb draw in gasoline, and neither a build nor draw in distillate stocks. The 5-year average for this period is a 1.3 MMb build for crude, a 2.8 MMb draw for gasoline, and a .9 MMb decline in distillates.  The American Petroleum Institute (API) released its data Tuesday afternoon with the following results: a crude build of 7.6 MMb, gasoline draw of .5MMb, and a distillate stock draw of 1.1 MMb. Stay tuned for DOE Inventory results Wednesday at 10:30am.

Winter weather in the middle of April? For the evening of April 15th,  Meteorologist John Bagioni of Fax-Alert Weather Service, LLC issued a "Snow, Sleet and Icing Potential" email Tuesday afternoon calling for sleet and snow accumulations of generally 2 to 4 inches in the following Northeast areas: north and west of Albany, NY, most of Vermont and New Hampshire, and interior Maine. NOAA's 6-10 Day Temperature Probability Outlook (see chart below) confirms that we will be seeing colder than normal temperatures in the Northeast and along the East Coast for the next week! Say it isn't so!!

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

Oil markets retreating after yesterday's gains

April 15, 2014

Recap: Oil markets all moved higher yesterday on better than expected U.S. retail sales for March of 1.1%, the largest gain since September 2012, continuing Ukraine tensions on the eastern border with Russia, and concerns over increased Libyan instability upon the resignation of their prime minister. ICE Brent Crude reacted more strongly than WTI crude, advancing $1.74 to settle at 109.07, as renewed international geo-political factors spurred interest in the contract along with the expiry of the May futures contract today. The June Brent crude oil contract is positioned to replace the May contract at current $108.50-$109 levels not seen since early March. The next price area to watch is the $110 psychological Brent crude level that was achieved was on March 3rd, settling at 110.77, but reaching a high on the day of 111.87. This was the same day that Russia supported Crimea to leave Ukraine leaving some market analysts thinking that this higher price range may reflect a premium if Russian oil supplies were to be disrupted.  Although Russian troop builds on the eastern Ukraine border continue and pro-Russian separatists seized more buildings in eastern Ukraine, additional sanctions upon Russia have not materialized, but can not be ruled out. Perhaps the Brent contract is reflecting some additional premium concerning the possibility of Russian sanctions at this time.  NYMEX (WTI) Crude moved up 31 cents to 104.50, showing signs of consolidation and profit taking after last week's gains. Additionally, the weakness in WTI crude may reflect concern that crude oil inventories will rise again upon the release of the weekly DOE Inventory Report tomorrow.  NYMEX ULSD (HO) was the stronger product, moving up 4.59 cents to 2.9791, while NYMEX RBOB (Gasoline) advanced 2.40 cents to 3.0384. 

Currently, oil markets are down across the board with NYMEX ULSD (HO) down 84 points to 2.9707, NYMEX RBOB down 2.09 cents to 3.0175, NYMEX (WTI) Crude down 96 cents to 103.09, and ICE Brent Crude down 63 cents to 108.44. Again, with markets down after yesterday gains, we may be seeing some profit taking.

Speculator "Spec" Watch:  Last Friday, the CFTC released its Commitment of Traders Report for the period ending last Tuesday, April 8th. Although this data is a lagging, it can provide insights on where flows of money into the oil commodities are going. Typically, we look at the category called "Money Managers" or those buying futures and/or options that are not involved in the process of taking physical delivery of product to see where the speculative interest may lie. On the U.S. side, NYMEX (WTI) Crude net speculative length increased through last Tuesday, 10% or 30,136 futures and options contracts to 331,056. For example, for the same time period, NYMEX Crude pricing moved up from an April 2nd close of 99.62 to an April 8th close of 102.56, a $2.94 increase. The point here is that when there is more interest and more buying in a contract, there will naturally be a tendency for the contract pricing to move higher, or, resist moving lower. NYMEX RBOB saw a decrease in net speculative length of 1,672 futures and options contracts, or 3%, down to 57,596, but an increase in total open interest of 20,466 contracts, or 7.1% which could be part of the seasonal uptrend as the gasoline driving season starts to ramp up. On the other hand, NYMEX ULSD (HO) net speculative length fell by 29% to a three month low of 15,065 futures and options contracts, while total open interest declined to new post-2009 low to 262,214 futures and options contracts, 22% lower than last year at this time. However, in this case, the April 2nd settlement of 2.8666 to the April 8th settlement of 2.9344 represents a price increase of 6.78 cents. So here we have declining net speculative interest and total open interest,  but a price increase over the period, indicating that keeping these factors in mind is important, but is only one part of the overall price driver of a particular oil commodity on a particular day.
Click here to view today's Refined Products MarketWatch

Oil markets moving up as Ukraine tensions intensify

April 14, 2014

Weekly Recap:  For the week ending April 11, 2014, oil markets moved higher with NYMEX (WTI) Crude being the largest gainer on the week, up $2.60, settling up 34 cents on Friday to 103.74.  Supporting NYMEX is the on-going pattern since the opening of the southern leg of the Keystone XL pipeline whereby barrels are flowing out of, or declining in, Cushing, OK - the location where the NYMEX Crude contract is priced, yet those barrels are building farther south in the Gulf Coast (PADD 3). Although Cushing crude stocks increased 1.3% to 27.6 MMbs last week per the weekly DOE Inventory Report, stocks there are close to a low since 2009. The market continues to view this PADD 2 Cushing "draining" as bullish to pricing the NYMEX Crude futures contract. It does become harder to reconcile a bullish NYMEX crude market when we see weekly builds (bearish) of 4 MMbs of total commercial crude oil stocks.  The Gulf Coast (PADD 3) has now grown to 202 MMbs, the highest level of commercial crude stocks since 1990. Tim Evans of Citi Futures believes that "it's possible that the recent era of declining Cushing inventories and the associated rise in WTI futures .... may be coming to an end." And, Stephen Schork of the Schork Report takes it further this morning, "... the heady days of Brent's premium to WTI are numbered and the NYMEX contract will once again assume its place as the global benchmark."  On the other hand, the international crude benchmark, ICE Brent Crude, only gained 61 cents on the week, settling down 13 cents on Friday to 107.33. The dynamic of WTI crude increasing faster than Brent crude, has narrowed the Brent-WTI spread from $5.58 to $3.59 upon Friday's settlement, a 36% weekly decline. However, if NYMEX (WTI) Crude reverses its upward trend, and ICE Brent maintains its current pricing range,  the Brent-WTI spread will expand again. ICE Brent Crude may see some additional volatility as the May futures contract expires tomorrow.

On the products side, NYMEX RBOB (Gasoline) was the big gainer, increasing 8.31 cents last week, settling up 65 points on Friday to 3.0144. A larger 5.2 MMb draw of gasoline stocks than the 1 MMb expectation helped to support the RBOB contract from Wednesday's DOE Inventory Report through the remainder of the week. Total gasoline stocks are now 5.4% lower than last year at this time and East Coast (PADD 1) stocks are at a 9.1% deficit to last year. The May NYMEX RBOB settled at 3.0144, while the June contract settled at 2.9762. Here we see a backwardation building for NYMEX RBOB at 3.82 cents: one week ago the backwardation was 2.45 cents. As we saw with the NYMEX ULSD (HO) contract this winter during peak demand season, when supplies were getting low, a premium was built into the current futures contract versus the next contract. Gasoline demand is picking up as spring weather improves. Last but not least, NYMEX ULSD (HO) ended the week up 2.53 cents, but settled 58 points lower on Friday to 2.9332. With total distillate stocks building to almost even to last year and PADD 1 supplies increasing to shrink a 1.8% deficit versus last year, East Coast supply is at the lowest level since 2008, or a 33% deficit to the 5-year average. Even though heating demand continues to decline, we will have to watch how the NYMEX ULSD futures contract moves, like it did last week, with the strength of the NYMEX RBOB and Crude contracts. 

Currently,  ICE Brent Crude is up with the products on information in the overnight that tensions between Russia and Ukraine continue to intensify. As reported by the AP, "Ukraine's government announced Sunday it was sending in troops to try to quash a pro-Russian insurgency in eastern Ukraine despite warnings from the Kremlin." Ice Brent Crude is up 46 cents to 107.79, NYMEX ULSD is up 1.84 cents to 2.9516 and NYMEX RBOB is up 71 points to 3.0215. NYMEX Crude is down 19 cents to 103.55.
Click here to view today's Refined Products MarketWatch.

Oil markets rally yesterday continues [Includes Sulfur Map]

April 04, 2014

Recap: Oil markets rallied yesterday as NYMEX RBOB (Gasoline) moved up 4.5 cents to 2.9118, NYMEX ULSD (HO) moved up 3.96 cents to 2.9062, ICE Brent led the crudes up $1.36 to 106.15, and NYMEX (WTI) Crude moved up 67 cents to break $100 to 100.29. ICE Brent moved up as the on-again off-again reports that Libyan export terminals would reopen for sure (move over 600,000 barrels per day) fizzled. Traders are waiting for proof that these terminals are open for business, and that proof did not transpire, so Brent ICE crude broke its 3 day losing streak, and helped lift the oil complex up. In the U.S., markets are looking to the release of March jobs data today. A Reuters poll indicates economists are expecting an addition of 200,000 jobs for March, which will be an improvement over February's 175,000 added positions. Despite these expectations of a stronger U.S. economy, initial claims for unemployment benefits released yesterday showed an increase of 16,000 claims to 326,000 for the week ended March 29th (expectations were for 319,000). Additionally, the U.S. Commerce Department released data yesterday showing that the U.S. trade deficit climbed to $42.3 Billion, or 7.7% higher than in January, the highest level in 5  months.  Currently, oil markets are up with NYMEX Crude up 76 cents to 101.05, ICE Brent up 106.47 to 32 cents, ULSD up 82 points to 2.9148, and RBOB up 67 points to 2.9185. 

Weekend Weather and HDD Planning: Fax-Alert Weather Service has forecasted their Ten Day Temperature Guidance report for the period April 4-April 13th.  (HDD percentages above 100% indicate percentage increase of HDDs colder than normal temperatures):

New York:  NYC 98%, Binghamton 96%, Albany 103%, Newburgh 133%

New Jersey:  Newark 107%, Trenton 106%

Pennsylvania:  Philly  106%

Massachusetts:  Boston 101%, Worcester 96%, Chicopee 114%, Hyannis 107%

Connecticut: Hartford 104%, Bridgeport 104%, New Haven 108%

NH: Manchester 98%, Portsmouth 108%, Lebanon 107%, Concord, 106%

Maine: Portland 110%, Augusta 108%, Bangor 105%

Vermont: Burlington 107%, Rutland 109%

Rhode Island:  Providence 102%

Low Sulfur Heating Oil Changes effective July 1: Sprague has been busy getting ready for the imminent state regulations mandating low sulfur, 500 ppm maximum sulfur content heating oil in Massachusetts, Vermont, New Jersey, and Connecticut. Although Rhode Island legislators have not passed a 500 ppm requirement as of this writing, industry officials believe this legislation will pass in 2014. Heating oil marketers crossing state borders will need to talk with their suppliers about which products will be available. Sprague will be ready for the changes!  See both the Heating Oil Sulfur Maximum Chart below and the EIA's progression of sulfur mandates 2010-2020. 
Have a great weekend and MarketWatch will return on Monday, April 14th.

Click here to view today's Refined Products MarketWatch.

View the Sulfur Map showing the Low Sulfur Heating Oil Changes Effective July 1.

Oil markets down on DOE inventory results

April 03, 2014

Recap:  Oil markets opened lower yesterday across the complex in anticipation of the EIA's DOE Inventory Report. Inventory results were skewed due to the closing of the Houston Shipping Channel that halted shipments, but showed just over a 10% reduction in crude imports and an increase in refinery operating utilization from 86% to 87.7% from the previous week. Total commercial crude stocks declined, not completely unexpected with the channel closure, 2.4 MMbs to 380.1 MMbs, along with a gasoline decline of 1.6 MMbs to 215.6 MMbs. Although the market was looking for a seasonal crude build of 2.5 MMb, oil markets seemed to understand the skew, and NYMEX Crude moved down 51 cents, then hit a low of 98.86 before moving back to close at 99.62, down only 12 cents. Because total gasoline stocks came within expectations, NYMEX RBOB continued to move down within 6 points at 2.8252 of its third support level before moving back up, closing down 29 points to 2.8668. NYMEX ULSD (HO) held on best to its lows, closing down 2.12 cents to 2.8666 after total distillate inventories increased .6 MMbs to 113 MMbs, slightly bearish as expectations were for no change. ICE Brent crude was the larger mover of the crudes, closing down 83 cents to 104.79, on further Libyan news that the Libyan government has confirmed that an agreement  to open the oil terminals could be reached with rebels within 2-3 days. This would increase Libya's export capacities by 600,000 barrels per day.  (Dow Jones Newswire) Currently, oil markets are mixed with products up slightly; NYMEX ULSD is up 55 points to 2.8707 and RBOB is up 1.2 cents to 2.8788.  NYMEX Crude is down 17 cents to 99.45, while ICE Brent is up 50 cents to 105.29.

DOE Inventory Highlights:  Distillate inventories are actually exactly where they last year at this time; however, this represents the lowest supply since 2000 with a 38% deficit to the 5 year average. PADD 1 (East Coast) is down 5.4% over last year, and breaking distillate numbers down further, PADD 1A (New England) now has a 3.8% surplus over last year; however, PADD 1B (Central Atlantic) is still struggling with a 21% deficit. 90% of distillate imports reached PADD 1, and luckily have kept up with heating demand, up to 215,000 b/d as compared to 80,000 b/d, up 169% over last year. Additionally, total distillate exports moved lower by 9% from the previous week, yet are up 36% over last year to 1.155 MMb/d. Total gasoline stocks are down 2.3% over last year. With stronger than expected refinery operating utilization of 87.7% compared to 86.3% last year, Stephen Schork noted that "... domestic crude oil production topped imports by the largest margin, 1.36 MMb/d, since March 1993."

What are "PADD"s? PADD stands for "Petroleum Administration for Defense District" and 5 regions across the country were established during  WW II to help administer petroleum fuel allocation including distillates and gasoline.  Today, the PADD regions are used for data collection purposes. Below is a U.S. map from the EIA that breaks out those five regional PADDs. For us on the East Coast, we are in PADD 1, but it is broken further into the following three subdistricts:

Subdistrict 1A (New England): Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont.

Subdistrict 1B (Central Atlantic): Delaware, District of Columbia, Maryland, New Jersey, New York, Pennsylvania.

Subdistrict 1C (Lower Atlantic): Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia.

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Oil markets keep moving lower

April 02, 2014

Recap: It was no joke on April's Fools when oil markets slid down across the board on a number of factors yesterday including stronger U.S. manufacturing data that sent investors into equity stocks (and out of commodities) and weaker Chinese manufacturing data, indicating an on-going anemic Chinese economy.  On the U.S. side, the Institute for Supply Management (ISM)  purchasing managers index increased .5 points from 53.2 in February to 53.7 in March, with readings over 50 suggesting growth. On the other hand, the China Federation of Logistics and Purchasing manufacturing index moved up .1 from February's 50.2 reading to 50.3 for March. Again a reading over 50 indicates growth, and this small increase represented the smallest March increase on record "and suggests continued slowing in the country's manufacturing activity," per analyst, Jim Ritterbusch. The move out of oil commodities accelerated with all contracts breaking through 3 daily support levels. ICE Brent crude lost the most, $2.14 to settle down to 105.62 helped more with reports out of Libya that eastern oil import terminals should be reopening within days as an agreement with rebel leaders looks more promising. NYMEX Crude broke below $100 to settle down $1.84 to 99.74 putting the Brent-WTI spread down to $5.88, along with NYMEX RBOB down 4.82 cents to 2.8697 and NYMEX ULSD down 4.2 cents to 2.8878.   

Currently, oil markets are all down this morning as they prepare for the release of the EIA's weekly DOE Inventory Report at 10:30am. NYMEX RBOB is down 3.06 cents to 2.8391, NYMEX ULSD is down 2.26 cents to 2.865, NYMEX Crude down 53 cents to 99.21, and ICE Brent is down $1.14 to 104.48.

DOE Inventory Estimates: The EIA will report its weekly DOE Inventory Report this morning at 10:30 AM. Due to the closing of the Houston Shipping Channel last week, expect numbers to be skewed. For example, the American Petroleum Institute (API) released its data yesterday afternoon with the following results: a crude draw of 5.8 MMb, while gasoline and distillate stocks were unchanged from last week on lower imports and higher refinery runs. CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: 2 to 3  MMb build for crude stocks, 1.5 to 2.5 MMb draw for gasoline, a .5 to 1.5 MMb draw for distillates, and a .5 percentage point increase in refinery % operable utilization to 86.5%.  Bloomberg comes in with a crude build at 2.5 MMb, a 2.0 MMb draw in gasoline, and neither a build nor draw in distillate stocks. The 5-year average for this period is a 3.7 MMb build for crude, a .9 MMb draw for gasoline, and a .6 MMb decline in distillates.   Stay tuned for DOE Inventory results at 10:30am. 

There are no winners:  At a news conference yesterday, NATO Secretary General Anders Fogh Rasmussen told reporters that after Russia's annexation of Crimea "there could be no business as today we are suspending all practical cooperation with Russia, military and civilian." (Reuters) This news along with the elimination of Russia from the "G-8" should come as no surprise. In response, the AP reported that Russia sharply hiked the price for natural gas to Ukraine and threatened to reclaim billions [in] previous discounts. Gazprom  (Russia's state-controlled energy company) CEO Alexei Miller announced Tuesday that Ukraine's new price of natural gas would increase over 40% from $268.50 to $385.50 per 1,000 cubic meters for the second quarter of 2014. As Ukraine struggles to avoid economic collapse, the modern day version of waging "economic" war in a global environment of energy interdependence will be closely watched as both global commodity and equity markets will most certainly be influenced.

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Oil markets moved lower as April NYMEX ULSD and RBOB contracts expire

April 01, 2014

Recap: Oil markets pulled back yesterday upon the expiration of both the NYMEX ULSD and RBOB April futures' contracts. The April NYMEX ULSD (HO) finished down 2.59 cents to 2.9320, while the incoming May contract fell 1.80 cents to 2.9298. During the course of March, the April ULSD contract opened at 3.0230 and landed down 9.10 cents on the month. We said goodbye to the April-May backwardation at 22 points, but now will be looking at a May-June backwardation that will be starting off April with 56 points.  The April NYMEX RBOB (Gasoline) futures contract finished at 2.9110, down 2.65 cents on the day, and down 7.2 cents on the month from its open at 2.9830. Besides the expiration of the products, oil markets seemed to gravitate lower while equity markets moved higher after new Fed Chair Janet Yellen made comments in her address to the 2014 National Interagency Community Reinvestment Conference that the Federal Reserve will continue supporting economic growth despite its campaign to slowly reduce the size of its monetary stimulus program. (AP) NYMEX (WTI) Crude declined 9 cents to 101.58 while ICE Brent declined 33 cents to 107.76 with the closing Brent-WTI spread closed at $6.18.  Currently, oil markets are flat to down with NYMEX ULSD even at 2.9298, NYMEX RBOB down 75 points to 2.9104, NYMEX Crude down 28 cents to 101.30, and ICE Brent down 15 cents to 107.61.

Speculator "Spec" Watch: The CFTC released its Commitment of Traders Report for the period through March 25th, revealing that net speculative length ("Money Managers") dropped in NYMEX Crude by 3% to 293,403 futures and options contracts. NYMEX RBOB also saw a decline in the net speculative length, down 3% to 55,652. On the contrary, net speculative length increased for NYMEX ULSD (HO) futures and options contracts by 5% to 24,201. Notice that there is more than twice the amount of managed money in "net long" positions for RBOB than for ULSD. With a 3% reduction in RBOB length perhaps the traditional speculators' hope that the market will move higher on increasing transportation demand during another month of refinery turnarounds is coming into question. With gasoline stocks down 2.3% over last year at this time, tomorrow's DOE Inventory data release at 10:30am will most likely provide guidance for oil markets.

Barron's Sunday cover story jumped off the front page: "$75 Oil Bad News for Putin." Despite the lack of military action by the U.S. or Europe relative to Russia's annexation of Crimea, Barron's makes the case that the economic impact of cheaper North American oil could be the more harmful outcome for Russia. A study from the U.S. Energy Information Agency (EIA) reveals that Russia's economy "largely depends on energy exports ... that works well when prices are high, but quite badly when prices fall." More than half of Russia's federal government income comes from oil and gas revenues; however, 60% of Russian oil is produced in Siberia, were costs are much higher. A recent study from University of California Davis and Rice University co-authored by Amy Jaffe and Mahmoud El-Gamal, believes that "barring a war that destroys physical installations for the production and/or transport of oil, that oil prices will fall precipitously over the medium term of three to five years ... and the average price could fall below $75." However, they also reveal that the "Russian government's budget is expected to need an oil price of over $100 to stay balanced between now and 2020."  As the changing dynamic of oil production and transportation to refining areas and then to the ultimate end users across the globe gets more efficient, $75 oil seems plausible. However, it also seems plausible that Russia knows this, and knows that military action can put a premium into oil markets.

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