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Market Intel Archives

Oil markets strong last week on news of pipeline opening

December 09, 2013

Recap:  Oil markets were strong last week with NYMEX Crude (WTI) leading the way on news that TransCanada's southern portion of their Keystone XL pipeline will open mid-January 2015, moving crude from Cushing, OK to Port Arthur, TX. This announcement has produced a reaction that WTI crude will get pulled higher to the international crude pricing benchmark, Brent crude. The Brent-WTI spread continued  to narrow and closed below $14 on Friday. NYMEX Crude (WTI) finished up on Friday 27 cents to 97.65 while ICE Brent Crude finished up as well 63 cents to 111.61. NYMEX ULSD (HO) closed up 69 points to 3.0565 along with NYMEX Gasoline (RBOB), up 1.42 cents to 2.7269. Cold weather along with ice/snow events across the country (now landing in the Northeast) supported higher prices as well.

Currently,  the oil complex is down. NYMEX ULSD (HO) is down 70 points to 3.0495, NYMEX Gasoline (RBOB) down 64 points to 2.7205, NYMEX Crude (WTI) down slightly to 97.63 and ICE Brent Crude down 71 cents to 110.90.

Commonly Asked Question: “With all of this crude oil, why haven’t retail oil prices moved down more?” The simple answer to a new complex dynamic is: exports.

Background:  Despite record crude production, U.S. crude flow has been constricted due to a limited pipeline infrastructure and has not efficiently flowed to refineries where it can be refined into petroleum products like gasoline and diesel fuel.  One major crude storage center, and choke point, is Cushing, Oklahoma located in PADD 3 (Gulf Coast), just above Oklahoma City about 550 miles from the Gulf Coast refinery epicenter in Port Arthur, Texas.  Although TransCanada recently reported that the southern leg of their Keystone XL pipeline will finally connect these two locations for improved efficiencies by mid January 2014, President Obama has not approved the longer, northern portion of the Keystone XL.  Luckily, rail transportation has provided an alternative to pipelines for crude oil movements.  As more crude oil has moved out of the Bakken region, for example, inventory stocks have increased, and both the spot price (cash market) and the futures contract price (NYMEX Crude WTI-West Texas Intermediate) for crude have decreased. In relation to Brent crude, the “international” crude benchmark (as traded on the InterContinental Exchange (ICE), WTI crude has been the cheaper feedstock for U.S. refiners in 2013. Moreover, U.S. refiners have enjoyed a competitive advantage to European refiners that are using a more expensive, Brent crude feedstock. Due to federal law, crude oil extracted from U.S. land cannot be exported; however, once refined, a “new” product like gasoline or diesel fuel can be exported.

So, with cheaper crude feedstock and European and South American markets thirsting for cheaper U.S. petroleum products, we are now witnessing the creation of a robust export business for U.S. refiners. Who could have predicted one short year ago, this new dynamic of surplus crude oil stocks along with dwindling product stocks? And the prediction for 2014 oil markets? Markets will be difficult to predict precisely because of this evolving dynamic! Keep those questions coming!

Click to view today's full refined products market watch report in a downloadable format.

Refined products glossary

Oil markets recap and heating degree day information

December 06, 2013

Recap:  Oil markets were mixed as NYMEX Crude (WTI) continued its climb up during yesterday's session, on momentum from previous headlines of the southern Keystone Pipeline expansion from Cushing, OK to Port Arthur, TX and the crude inventory draws. NYMEX Crude settled up 18 cents to 97.38. ICE Brent Crude closed down 90 cents to 110.98, further narrowing the Brent-WTI spread to 13.60.  On the products side NYMEX ULSD (HO) migrated on either side of the previous day's close, ultimately finishing down almost a penny to 3.0496. NYMEX Gasoline (RBOB) also closed down 65 points to 2.7127.  The bigger energy news was on the natural gas side, where NYMEX Natural Gas (NG) surged over 17 cents to close at 4.132 after the EIA released its natural gas weekly inventory numbers that a massive 162 Bcf was delivered out of underground storage. Perhaps the nat gas surge took some interest off of the oil markets yesterday; however the Arctic temperatures and freezing rain/ice and snow conditions are moving towards the east coast today. For those in the Northeast, the temperatures should be in the "seasonably normal" category, and luckily that means colder than last December!

Currently,  NYMEX ULSD (HO) is up 1.5 cents 3.064 to 1.5 cents, NYMEX Gasoline (RBOB) is up 2.82 cents to 2.7409,  NYMEX Crude is up 55 cents to 97.93 and ICE Brent is up 47 cents to 111.45.

Planning for weekend/next week:

I have gotten some feedback asking for some heating degree day information to help with procurement needs. As a point of reference point for HDDs (heating degree days), below is comparison of cumulative HDDs from January through November 2013, v. the previous year:

So the good news is that HDDs are tracking much better than last year and continue to be forecasted to be stronger and closer to "normal" for December. To find your weather station location and HDD  information, check out www.weatherdatadepot.com.  For the upcoming weekend, The Northeast Weather Services "NEWS" (administered by NEFI) released its weather trends today, Friday, December 6th.  Expected Heating Degree Days (HDDs) both as a % of normal HDDs and the average HDDs for the period through December 15th, are all up slightly as we head into seasonally cold weather across the following Northeast locations:

New York:  NYC 105%, Binghamton 107%, Albany 103%, Newburgh 102%

New Jersey:  Newark 105%, Trenton 101%

Pennsylvania:  Philly  105%

Massachusetts:  Boston 100%, Worcester 103%, Chicopee 108%

Connecticut: Hartford 102%, Bridgeport 101%, New Haven 98%

NH: Manchester 98%, Portsmouth 99%, Lebanon 100%, Concord, 100%

Maine: Portland 101%, Augusta 101%, Bangor 103%

Vermont: Burlington 101%, Rutland 102%

Have a great weekend!

Click to view today's full market watch report in a downloadable format.

Refined products glossary 

Oil markets mixed after EIA weekly DOE inventory report

December 05, 2013

Recap:  The oil markets were mixed yesterday on the overall bearish, EIA's weekly DOE inventory report showing total commercial crude stocks drew more than expected at  -5.6 Million barrels. NYMEX Crude (WTI) continued its climb up $1.16 to settle at 97.20 on both the larger than expected draw and the previous day's news of the Keystone southern pipeline section that will move crude out of Cushing, Oklahoma to refineries in Port Arthur, Texas. ICE Brent closed down 74 cents to 111.88 upon the expected news that OPEC will not change its production quota despite oil ministers from both Iran and Iraq claiming they will be increasing their production.  With the decrease in Brent crude and the increase in WTI crude, the Brent-WTI spread has narrowed down below $15. 

NYMEX ULSD (HO) had a bit of a respite from recent increases, closing down 60 points to 3.0591 as the EIA reported a larger than expected build in distillate stocks of 2.65 Million barrels. NYMEX Gasoline (RBOB) closed down 45 points to 2.7192 on realized expectations of stocks building 1.8 Million barrels.

DOE Inventory Highlights:  As reported by The Schork Report in today's newsletter, the large draw of crude should have been expected as the annual PADD 3 (Gulf Coast) crude oil inventory purge occurs. Storage owners are "encouraged to purge onshore inventory to avoid end-of-year ad valorem tax assessments." This purge typically happens in the month of December and with overall refinery runs topping 92.4% (and 94.4% specifically in PADD 3), products had the chance to build. Even PADD 1 (East Coast) refinery  runs topped 80% at 84.3% (last week this number was 76.2% and versus last year, 77.1%). So the product builds were welcomed, but as we stand now, let's consider the following:

* Gasoline stocks now stand at 212.4 MMbs, but represents a 1.6% surplus to the 5 year average.

* Distillate stocks built for the first time since mid-October, but current stock levels of 113.5 MMbs are at a 19% deficit to the 5 year average.

* PADD 1 distillate stocks improved 4.3% over last week.

* High sulfur (#2 heating oil) stocks are 32% lower than last year.

* 15 ppm, ultra-low stocks are 8% higher than last year.

*Kero stocks are 7% higher than last week and 5% higher than last year.

Currently,  NYMEX ULSD (HO) is down 24 points to 3.0567, NYMEX RBOB is down 47 points to 2.7145, NYMEX Crude is up 20 cents to 97.40 and ICE Brent is down 23 cents to 111.65

View today's full refined products market watch report in a downloadable format.

Refined products glossary.

Crude up $2, Gasoline up 4.53 cents

December 04, 2013

Recap:  NYMEX (WTI) Crude took a fast sleigh ride up to over $96 and ultimately landed at 96.04, up $2.22.  The Dow Jones Newswire reported that a TransCanada Corp. filing with the Federal Energy Regulatory Commission revealed that their Keystone Gulf Coast Pipeline will start moving pent up inventory from Cushing, OK to Port Arthur, TX on January 3, 2014.  The pipeline is expected to carry 700,000 barrels of crude per day and will increase takeaway capacity out of the choke point in Cushing, OK.  By relieving this choke point in crude flows, the market is expecting that WTI crude will move up and closer to Brent crude pricing. In turn, the Brent-WTI spread should start to narrow and hopefully, minimize product exports and the negative impact to U.S. distillate and gasoline stocks. However, this export window may take some time to close. Unfortunately, this development may not help the current low product stocks as we enter seasonal cold weather and increased holiday transportation demands.

While the NYMEX (WTI) Crude contract was the main driver behind the whole complex moving up, the next big mover was NYMEX RBOB (Gasoline) closing up 4.53 cents to 2.723. With seasonal increased holiday transportation coupled with retail gasoline pump prices lower than last year, transport demand should remain solid. Additionally,  NYMEX ULSD (HO) moved up 1.50 cents to 3.0651. ICE Brent Crude moved higher as well closing at 112.62, up $1.17.

Currently, NYMEX Crude (WTI) is up $1.04 to 97.08, ICE Brent is down 55 cents to 112.07 along with NYMEX ULSD(HO) down 1.26 cents to 3.0525 and NYMEX Gasoline (RBOB) down 26 points to 2.7211.

EIA's weekly DOE Inventory Report will be released at 10:30am this morning. Bloomberg News Survey (median results of 8 analysts surveyed by Bloomberg) is predicting the first crude draw of .7 MMbs in 11 weeks. The Bloomberg Survey is pegging distillate stocks as declining as well by 1.15 Million barrels while gasoline stocks are expected to increase by 1.25 Million barrels. The API (American Petroleum Institute) released their predictions last night, calling for a sizeable crude stock draw of 12.4 MMbs, gasoline drawing .1MMbs, and distillates building .5 MMbs.  It should be another interesting DOE report, given the Thanksgiving holiday last week.

In other energy market news, OPEC members will be meeting today with expectations that the cartel will hold production levels. The meeting shall be interesting as Iran's oil minister appears to be exploiting  the recent interim "nuclear deal" (lifting sanctions) that caps Iranian crude exports to 1 million barrels per day by publicly stating they are already exporting more than that at 1.2 Million. The Saudis cannot be happy as Iran was second behind Saudi Arabia in OPEC oil production at about 2.7 Million barrels per day (pre-sanctions), and monitoring the currency-starved Iran will prove difficult( as it always has been). And to make matters worse for the Saudis, the Iraqi oil minister also announced yesterday that Iraq is planning on increasing crude exports to 3.4 Million barrels per day. This type of dialogue is definitely considered bearish, but both the NYMEX and ICE markets reacted as if the reality of these two players, Iran and Iraq, becoming larger, consistent crude exporters is more rhetoric (in the near term) than reality.  

Click to view today's full refined products market watch report in a downloadable format.

Refined products glossary.

What triggered the mid-day price uptick across energy

December 03, 2013

Recap: It's hard to know what exactly triggered the mid-day price uptick across the energy complex yesterday. Was it November Chinese manufacturing numbers providing some evidence that there was a glimmer of growth, although modest, in the world's #2 economy? Was it anticipation that OPEC will not increase production despite escalating Libyan civil war keeping Libyan oil exports from global markets? Was it Thanksgiving retail frustration over record shoppers spending less during the same weekend since 2006 (when the tracking started) and weighing down equity markets? Was it the plethora of weekend weather reports of bitter cold across most of the country leading to expectations that further declines in distillate stocks are being priced into the market before the EIA's weekly inventory report this Wednesday? Whatever the reason, or combination of reasons, the energy markets were active and aggressive yesterday.

 

NYMEX Crude finished up strong $1.10 to close at 93.82, and tested the $94 mark, while ICE Brent traded as high as 112.34, but settled at 111.45, up $1.76.  NYMEX Gasoline (RBOB) traded as high as 2.72, but settled up 1.56 cents at 2.6784. Interestingly, during this time last year, NYMEX RBOB was in the $2.55 range. Is the market pricing in some potential anxiety over tight gasoline supplies come spring? On the distillate side, NYMEX ULSD (HO) broke up through 2 resistance points to 3.0869 before backing down and settling up 1.93 cents to 3.0501.  Were national cold temperature forecasts behind this acceleration?

 

NYMEX ULSD has now closed above the $3 mark for the past 7 sessions. Does this mean the "Santa rally" has started? As much as I want to believe that we can break down below the $3 level again, I am reminded by one of my statements from the November 20th issue of MarketWatch:  "As we have seen with recent surges in U.S. exports of products, combined with lower than normal product inventories, particularly in PADD 1, domestic product cash prices in New York Harbor and NYMEX futures will continue to be challenged, especially as colder temperatures move in." I watched in awe, with 0 on the clock,  as Auburn University ran 109 yards back on a failed Alabama field goal to score a touchdown this past Saturday. So, I believe in those moments (along with Doug Flutie-esque Boston College "Hail Mary's").  However, we are seeing too many bull factors  on the product side, particularly distillates, to ignore.  With wide ranges of trading, like yesterday, there will be intraday buying opportunities. But unlike last year at this time with warmer weather and larger distillate stocks,  planning for tighter supplies will be important.

 

Currently:  NYMEX Crude is up 10 cents to 93.92, ICE Brent is down 30 cents to 111.15, NYMEX ULSD (HO) is down 74 points to 3.0427, and NYMEX Gasoline (RBOB) is up 23 points to 2.6807.

 

Weather Update:   The Northeast Energy Weather Service (NEWS), released their December long range outlook today, and they are predicting, nationally, colder than normal temperatures with the coldest anomalies across the central United States. The Northeast and New England sectors will remain unstable with alternating cold and milder surges, much like the month of November, with cold weather "edging out." (Recall that last year at this time, we had warmer than normal temperatures and East Coast refineries running above 80%.)


Click to view today's refined products market watch report in a downloadable format.
Refined products glossary

Refined products market watch recap, weekly inventory highlights and more

December 02, 2013

Recap: Renewed concerns over Libya's reduced export ability with reports of escalating violence along with OPEC output for November declining to its lowest level in about two years helped support NYMEX Crude (WTI) on Friday. NYMEX Crude closed up 42 cents to 92.72.  Interestingly,  even with this news, ICE Brent closed down $1.17 to 109.69, thus narrowing the Brent-WTI Spread to just under $17 to 16.97 after being over $18 last week.

Currently, NYMEX Crude (WTI) is up 43 cents to 93.15, ICE Brent Crude is down 5 cents to 109.64, NYMEX ULSD (HO) is down 19 points to 3.0289, and NYMEX Gasoline is up 68 points to 2.6696.

DOE Weekly Inventory Highlights:

The bigger news lingering from last week's EIA inventory report is record U.S. commercial crude stocks. However, this new phenomenon has to be coupled with distillate stocks that are shrinking.  This new dynamic can be summed up in the following highlights:

*Total commercial crude oil stocks up highest since EIA started reporting in 1982. BUT Lowest US distillates stock levels since 1982.

*Total US Distillate Exports up 28% since last week

*Total US Exports of Petroleum Products up 19% since last week

*ULSD Stocks down 25% since last week, PADD 1 down 7.3%

*High Sulfur (>500 ppm) stocks up 6.3%, PADD 1, up .9%

*Total Refinery Runs are up post maintenance, 89.4% BUT PADD 1-East Coast is at 76.2%.  PADD 1 Refinery Runs have not been above 80% since going on maintenance the first week of October.

 

Planning this week: The Northeast Weather Services "NEWS" (administered by NEFI) released its weather trends on Friday, November 29th.  Expected Heating Degree Days (HDDs) both as a % of normal HDDs and the average HDDs for the period through December 8th, are all normal to slightly up across the following Northeast locations:

New York:  NYC 102%, Binghamton 104%, Albany 104%, Newburgh 101%

New Jersey:  Newark 104%, Trenton 103%

Pennsylvania:  Philly  106%

Massachusetts:  Boston 101%, Worcester 105%, Chicopee 113%

Connecticut: Hartford 104%, Bridgeport 104%, New Haven 103%

NH: Manchester 102%, Portsmouth 111%, Lebanon 102%, Concord, 103%

Maine: Portland 104%, Augusta 104%, Bangor 103%

Vermont: Burlington 106%, Rutland 104%

View today's refined products market watch report in a downloadable format.

Oil markets appear skeptical about the Iran deal

November 26, 2013

Yesterday, the market reacted initially bearish, as ICE Brent hit a low during the day of 108.05. But as reports that Iran would not have the ability to ramp up oil production to pre-sanction levels for some time, ICE Brent turned around and settled at 111.00, down only 5 cents.  NYMEX ULSD (HO) stopped short of the 2.97 mark, and then moved back up past the $3 level to close at 3.0321 down only 92 points, after being down as much as 7 cents. The on-going frigid temperatures in the Northeast, along with low inventories, several key refineries now under maintenance, and the "Iran deal" provided enough momentum for the contract to break back up through important resistance points, including the $3 level. NYMEX RBOB tested the downside and continued moving down 4.54 cents, closing at 2.6807. NYMEX Crude migrated down 75 cents to close at 94.09.

However, for today, it appears as if the oil markets are skeptical about the "Iran deal." The US State Department's fact sheet states that the P5 (US, Germany, Great Britain, France, Russia) + 1 (China) Nations reached an agreement on Sunday with Iran that will limit Iran's maximum uranium enrichment to 5% in exchange for economic sanctions being lifted that are valued at $7 billion over the next six months.  According to the AP, pre-sanction production levels would be 1 million barrels per day - "enough to meet the entire growth in demand for 2014 projected by the International Energy Agency." Initial production estimates come in at a more modest 285,000 barrels per day, but even that figure would offset the decline seen from Libyan exports due to their civil unrest.

Israeli Prime Minister Benjamin Netanyahu was quick to establish that any deal with Iran would not make Israel, nor any country in the region safer as purported by US Secretary of State, John Kerry. Stephen Schork of The Schork Group really summed up how the markets are responding to the "Iran deal" in today's newsletter: "Bottom line, idealists think a deal with Iran is worth a roll of the dice, while realists think the U.S. just set the table for further destabilization in the region.  For the time being, the oil market is coming down on the realist's side."

More news to support bullish prices:

According to ICE's Commitment of Traders report for the week ending November 19th, speculators increased their net long positions on the Brent contract by 20.5%, the first time in 6 weeks. In the U.S., the CFTC published its Commitment of Traders report as well and as of November 19th, Wall Street increased their long or bullish position on the NYMEX Crude contract by 5.8%. For NYMEX RBOB, Wall Street increased its longs by 19% to a six week high, and for NYMEX ULSD (HO) speculators increased their length as well to 3.4%, representing a 36,067 net longs and a new six month high.

Be prepared as strong East Coast storms move into the area now through tomorrow afternoon. Widespread rainfall in the 1.5 to 3.0 inch range is expected to create flooding conditions with rain running off frozen ground. Wind gusts are also expected.

Currently, NYMEX ULSD is up 74 points to 3.0395, NYMEX RBOB up 21 points to 2.6828 and NYMEX Crude up 26 cents to 94.36. ICE Brent Crude is slightly down 10 cents to 110.9.

Click here to view today's Sprague Refined Products Market Watch report in full.

Refined products glossary.

Oil markets down despite bitter cold temperatures

November 25, 2013

As of this writing, oil markets are down across the board despite bitter cold temperatures across the Northeast. NYMEX ULSD (HO) is down almost 5 cents, dropping below 3.00 to 2.9945. It was as low as 2.9701 in the overnight. NYMEX RBOB is down 3.5 cents to 2.6902, NYMEX Crude (WTI) down $1.30 to 93.55 and ICE Brent down $1.79 to 109.27.

Last Friday was a different story, with mixed results on both the product and crude sides. NYMEX ULSD (HO) led the way to a 3rd positive session on the week, up 3.46 cents to settle at 3.0413. Colder than normal temperatures across to the East Coast most likely fueled the move up. On the other hand, NYMEX RBOB settled at 2.7261, down 1.77 cents. The backwardation from the December to the January contract shrunk a penny and stood at 1.5 cents. The December contracts for both NYMEX ULSD and NYMEX RBOB will expire this Friday, November 29th, and end of month expiry can add volatility to the mix.

On the crude side of the barrel, NYMEX Crude settled down 60 cents to 94.84. ICE Brent closed up 97 cents to 111.05. The Brent-WTI spread continued its move up, and was pivotal in the results on Friday, settling at $16.22. The last time it finished at this level was last March 2013.

Enjoy the day - and let's keep our fingers crossed that oil markets keep their momentum down!

Click here to view our more detailed Refined Products Marker Watch report in a downloadable format.

Refined products glossary

Oil markets raced up following reports

November 22, 2013

Yesterday, oil markets raced up, initially, on reports blaming the stalled Iranian talks, although most analysts would argue the market had already priced in this unlikely event that could have brought more crude supply to the world market.  The more likely increase was due to the on-going anxiety around low product supplies amplified by reports of (1) unscheduled maintenance at the Phillips 66 Bayway, NJ refinery (second largest refinery on the East Coast) and (2) an unexpected power outage at a Valero refinery in Texas City. Valero declined to comment on potential production impact.

 

As a result, NYMEX Gasoline (RBOB) broke through three daily resistance points to close over 8 cents to 2.7438, followed by NYMEX ULSD (HO) breaking two daily resistance points to close above the infamous $3 mark, 3.0067, up 5.22 cents higher. As confirmation of this solid move up, the December, front-month contracts for both RBOB and ULSD (HO) were both in a 2.5 cent backwardation to the next, January contract. Translation - the market was pricing in a 2.5 cent premium per gallon in the short term, again, confirming market fears of low supplies with looming cold weather forecast.

NYMEX Crude posted its highest settlement for the month of November at 95.44, up $1.59.  ICE Brent followed suit, although on a slower pace than the rest of the complex, up $2.02, settling at $110.08. The Brent-WTI spread is still strong at $14.64.

 

Currently NYMEX ULSD (HO) is up 2.26 cents to 3.0293, NYMEX Gasoline is up 38 points to 2.7476, and NYMEX Crude (WTI) is down 25 cents to 95.19. Ice Brent is up 75 cents to 110.83. 





Click to view today's refined products market watch report.

Refined products glossary

ULSD (HO) rallied to highest point for the month of November after storage report release

November 21, 2013

NYMEX ULSD (HO) rallied to its highest point for the month of November upon the release of the EIA's weekly DOE report yesterday, showing that total distillate inventories shrunk 4.8 MMbs to 112.5 MMbs. NYMEX ULSD(HO) closed up 4.87 cents to 2.9545, and NYMEX RBOB followed up 2.35 cents to 2.6630.  NYMEX Crude (WTI) was virtually unchanged closing at 93.85, while ICE Brent Crude continued its move up, $1.14 to close at 108.46.  The current Brent-WTI spread stands at $14.25.

 

Total U.S. distillate stocks are at their lowest level for this year, since last year (even with Super Storm Sandy's impact), and against the 5 year average. Likewise, distillate stock days of cover are below 30 days, or lower than last March and June. Given that we are at the beginning of the heating season and colder temperatures are forecasted to roll into the Northeast for the Thanksgiving week, dealers will need to brace for the potential of increasing basis and NYMEX prices.

Currently, the energy complex is up across the board with NYMEX Gasoline leading the way, up 2.20 cents to 2.6850, NYMEX ULSD (HO) trading up 1.5 cents to 2.9695, NYMEX Crude up 38 cents to 94.23, and ICE Brent up 43 cents to 108.48.

Click to view today's refined products market watch report.

Refined products glossary