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Market Intel Archives

Oil prices fell from session highs after rise in U.S. oil production

July 13, 2017

Recap:  A rise in U.S. oil production offset the 7.6 million barrel draw in U.S. oil stocks, taking the wind out of earlier gains in oil futures. Prices notched out new lows after falling from session highs, with August WTI stopping just above $45 a barrel, while at the same time, failing to penetrate support at $44.95. WTI settled at $45.49 a barrel, up 45 cents, or 1%. September Brent tacked on 22 cents, or 0.46%, to settle at $47.74 a barrel.

August RBOB rose less than half a cent to $1.521 a gallon, while August heating oil shed half a penny to $1.474 a gallon. 

Fundamental News:  The EIA reported that crude stocks fell by 7.564 million barrels in the week ending July 7th.  It was the largest one-week drawdown since September 2016.  Crude oil stocks held in Cushing, Oklahoma fell by 1.948 million barrels to 57.6 million barrels, the smallest level since November 2015.  US crude production increased to 9.4 million bpd, up 59,000 bpd on the week.  US crude exports increased to 918,000 bpd in the week ending July 7th, compared with 768,000 bpd in the previous week.

In its monthly report, OPEC stated that world demand for its oil will decline next year as US shale producers and other producers produce more, suggesting the oil market will see a surplus in 2018 despite the OPEC-led output cut.  It forecast demand of its oil next year at 32.2 million bpd, down 60,000 bpd on the year.    OPEC also reported that its output increased by 393,000 bpd in June to 32.611 million bpd, with output increases from Nigeria, Libya, Saudi Arabia and Iraq.  OPEC’s Secretary General, Mohammad Barkindo, said compliance remains high with the output cut agreement and added that OPEC remains optimistic to helping the market to rebalance itself.

A Saudi industry source said Saudi Arabia planned to reduce shipments in August by more than 600,000 bpd, taking exports for the month to the lowest level this year. 

Algeria’s Energy Minister, Mustapha Guitouni, said a joint meeting between OPEC and non-OPEC countries in Russia later this month will only discuss the oil market but will make no decisions. 

Iran’s Deputy Oil Minister, Amir Hossein Zamaninia, said the country’s oil output is expected to increase to about 4 million bpd by the end of the year.  Iran has been producing about 3.8 million bpd in recent months. 

Libya’s oil production is expected to increase to 1.05 million bpd, up from 1.012 million bpd. 

Nigeria’s Oil Minister, Emmanuel Ibe Kachikwu, said the country has no set timeframe to join OPEC oil production cuts.  Nigeria is currently producing 1.7 million bpd of oil. 

BP’s chief executive, Bob Dudley, said global oil markets are currently in balance and should tighten during the second half of the year as OPEC-led cuts help cut stock levels. 

China is expected to increase its oil and natural gas pipelines during the coming years as the country moves to secure stable supplies and cut its reliance on coal.  The National Development and Reform Commission and the National Energy Administration stated that the country’s pipeline network will stretch to 169,000 kilometers by 2020, with those for crude, refined oil and natural gas at 32,000 km and 104,000 km, respectively.  The total length of the networks will increase to 240,000 km by 2025.  The oil and gas pipeline networks ensure steady energy flows from foreign sources to the country and from remote border areas to prosperous inland cities.

IIR reported that US oil refiners are expected to shut in 111,000 bpd of capacity in the week ending July 14th, increasing available refining capacity by 59,000 bpd from the previous week.  IIR expects offline capacity to fall to 29,000 bpd in the week ending July 21st. 
 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $45.68, up 19 cents

RBOB - Aug $1.5250, up 40 points

HO - Aug $1.4764, up 28 points
 

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Oil prices rose higher after decreases in European product stockpiles

July 12, 2017

Recap:  Oil prices, along with heating oil and gasoline futures, rose during Tuesday’s trading session, pulled higher by decreases in European product stockpiles despite an increase in refinery runs. Both WTI and Brent rose by as much as 2 percent before trimming gains. August WTI settled at $45.04 a barrel, up 64 cents, or 1.44%, while Brent for September delivery tacked on equally as much, to settle at $47.52. A late session reaction to the API numbers pushed oil to new highs, with both WTI Brent hitting new highs.

News of the drawdown in European product stockpiles pushed the 3-2-1 crack spread to its highest level since May. The August crack gained 24 cents, or 1.2%, to settle at $18.82. 

August RBOB rose 1.8 cents, or 1.2%, to $1.518 a gallon, while August heating oil climbed 2.3 cents, or 1.6%, to $1.476 a gallon.

Fundamental News Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 1.4 million barrels to 58.1 million barrels in the week ending July 7th.  Separately, Genscape reported that crude oil stocks held in Cushing, Oklahoma fell by 2,108,239 barrels on the week and by 796,795 barrels from Tuesday, July 4th to 60,231,212 barrels.

OPEC’s Secretary General, Mohammed Barkindo, said all global oil producers should help balance the market, when asked what else OPEC could do to ease the oversupply. 

Saudi Arabia has told OPEC that it raised crude oil production to 10.07 million bpd in June, up from 9.88 million bpd in May.  The increase takes Saudi Arabia slightly above its OPEC production target of 10.058 million bpd for the first time since it brokered the output cut deal. 

Saudi Aramco will meet customers’ full crude oil requirement in India and southeast Asia in August.  This shows how Saudi Arabia aims to retain its market share in Asia.  Saudi Arabia has been cutting exports to Europe and the US to comply with a production cut agreement by OPEC and some non-OPEC producers. 

Iran’s Deputy Minister of Petroleum for Trade and International Affairs, Amir Hossein Zamania, said the country is currently producing 3.8 million bpd of oil.  Iran produced 3.76 million bpd in June. 

The IEA stated in its World Energy Investment report that following a 44% decline between 2014 and 2016, upstream oil and gas investments are likely to increase 6% this year.  It said that with oil prices falling below $45/barrel in mid-June, there is a real possibility companies may not be willing to fully implement these investment plans. 

The EIA in its Short Term Energy Outlook stated that it cut its 2017 world oil demand growth forecast by 70,000 bpd to 1.47 million bpd and its 2018 estimate by 10,000 bpd to 1.61 million bpd.  It forecast total petroleum demand in 2017 at 98.39 million bpd while demand in 2018 is estimated at 100 million bpd.  OPEC’s oil production in 2017 is estimated to fall by 160,000 bpd to 32.53 million bpd but increase by 470,000 bpd to 33 million bpd.  Total US oil demand in 2017 is estimated to increase by 310,000 bpd to 19.94 million bpd and increase by 360,000 bpd to 20.3 million bpd in 2018.  US oil production is expected to increase by 460,000 bpd to 9.33 million bpd in 2017 and by 570,000 bpd to 9.9 million bpd in 2018.  In terms of prices, the EIA forecast the price of Brent crude at $51/barrel in 2017 and $52/barrel in 2018, down $2/barrel and $5/barrel from its previous forecast, respectively.  The average WTI crude prices are forecast to be $2/barrel lower than the Brent price in both 2017 and 2018. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $45.99, up 94 cents

RBOB - July $1.5373, up 1.91 cents

HO - July $1.4940, up 1.78 cents


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Oil prices settled higher after traders geared up for upcoming OPEC meeting

July 11, 2017

Recap: Last week’s losses were extended in early morning trading, as oil futures fell to their lowest level in over a week. The sell-off, however, was unsustainable as traders geared up for OPEC’s upcoming July 24th meeting set to be held in Russia. It is highly anticipated that exemptions from supply cuts will be lifted from Nigeria and Libya, as both countries have been ramping up output. Prices climbed to new session highs before paring gains. September Brent settled at $46.88 a barrel, up 17 cents, while August WTI finished at $44.40 a barrel, also gaining 17 cents.

Products also inched higher, with August RBOB  rising under half a cent to a settlement of $1.501 a gallon, while August heating oil added just over a half penny to settle at $1.454 a gallon.

Fundamental News Russia’s Energy Minister, Alexander Novak, said Libya and Nigeria may attend a joint meeting between OPEC and non-OPEC this month.  Meanwhile, Kuwait’s Oil Minister, Issam Almarzooq, said Libya and Nigeria may be asked to cap their crude output soon in an effort to rebalance the market.  Both nations have increased their output since they were exempt from the OPEC-led output cut agreement.  Six ministers from OPEC and non-OPEC countries, including Kuwait, Venezuela, Algeria, Saudi Arabia, Russia and Oman will meet on July 24th in St. Petersburg, Russia, to discuss the current situation in the oil market.  The group called the Joint Ministerial Monitoring Committee, could recommend expanding the pact to the wider group.  Nigeria’s Oil Minister, Emmanuel Ibe Kachikwu, said Nigeria was not opposed in principle to joining OPEC’s production cuts, but would have to wait and see if production returned to acceptable levels.  The head of Libya’s National Oil Corp did not indicate any willingness to cap output yet, saying Libya’s humanitarian problems must be considered in any talks on the subject.

Separately, Russia’s Energy Minister, Alexander Novak, said he is scheduled to meet with Qatar’s Energy Minister, Mohammed al-Sada, later on Monday.

Meanwhile, Kremlin Spokesman, Dmitry Peskov, said there are no new agreements on the global oil output cut between OPEC and non-OPEC producers.  Last week, Russia’s President, Vladimir Putin, said that Russia planned to keep cooperating with other countries to harmonize global energy markets and reduce price volatility. 

Saudi Aramco’s chief executive, Amin Nasser, said the world may be heading for an oil supply shortage following a steep decline in investments and a lack of new conventional discoveries.  He said unconventional shale oil and alternative energy resources are an important factor to help meet future demand but it is premature to assume that they can be developed quickly to replace oil and gas. 

Iran’s leading oil tanker operator, NITC, said its shipments to Europe were increasing daily and the company plans to upgrade its fleet to support expansion. 

An Iranian energy official said the country is preparing for its first round of oil and gas exploration tenders since the easing of economic sanctions, and is hoping to attract companies such as BP and Gazprom.  Iran has already been working on deals to develop existing fields such as South Pars, South Azadegan, Yadavaran, West Karoon, Mansuri and Abe-Timur.  NIOC is planning to tender 14 oil and gas blocks for exploration in the next two to three months. 

IIR reported that US oil refiners are expected to shut in 111,000 bpd of capacity in the week ending July 14th, increasing available refining capacity by 59,000 bpd from the previous week.  IIR expects offline capacity to fall to 29,000 bpd in the week ending July 21st. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug  $44.25, down 15 cents

RBOB - Aug $1.4900, down 1.05 cents

HO -Aug $1.4465, down 70 points


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Oil futures fell 4%, impacted by global oversupplies and U.S. active rig count

July 10, 2017

Recap: The tug-of-war between bulls and bears picked up speed on Friday, with bears gaining ground. Oil futures fell as much as 4% on signs that OPEC/non-OPEC production cuts have had little impact on global oversupplies, and as the U.S. oil rig count rebounded after falling last week. Baker Hughes reported the U.S. active rig count rose by 7 to a total of 763. Despite last week’s drawdown in U.S. inventories, investors are focusing on the increase in U.S. production. According to the Energy Information Administration, production rose by 88,000 barrels per day, or 0.95% to 9,338,000 barrels per day, or up 10.8% year-to-date.

Exchange traded futures fell to their lowest level in just over a week, with WTI dipping back below $43 a barrel and Brent falling below $47 a barrel. Losses were trimmed ahead of the weekend, with August WTI settling at $44.23 a barrel, down $1.29, or 2.83%. Brent for September delivery slipped $1.40, or 2.91%, to settle at $46.71 a barrel.

Fundamental News Baker Hughes reported that US energy firms added oil rigs for the 24th week in the past 25 weeks.  The number of rigs searching for oil in the week ending July 7th increased by 7 to a total of 763, the most since April 2015. 

According to S&P Global Platts, OPEC’s crude oil production increased 500,000 bpd in the last two months, as the continued recoveries of Nigeria and Libya pushed the group’s output to 32.49 million bpd. 

Saudi Arabia’s Energy Minister, Khalid Al-Falih, has repeatedly promised to do what’s necessary to eliminate the global oversupply.  While the country is still cutting slightly deeper than required, it increased production in June to the highest level since the agreement began, increasing exports by even more, and this week cut prices for Asian buyers.  Given the current state of the oil market, that may not be enough. 

A spokesman for Russia’s Energy Ministry stated that Russia is ready to consider proposals from its partners, including on revising parameters of the agreement, if needed.  Separately, Russia’s President, Vladimir Putin, said that Russia planned to keep cooperating with other countries to harmonize global energy markets and reduce price volatility.  Speaking at an informal meeting of BRICS nations in Hamburg where the Group of 20 summit is underway, Russia’s President said that the country viewed the Paris climate change agreement as a basis for long-term cooperation.   

A senior energy economist at ABN Amro, Hans van Cleef, said the push and pull between bullish and bearish factors will keep volatility high. 

Morgan Stanley reported that a WTI price of $46 to $50/barrel would likely prevent US production rising in the mid- to long-term, but added that prices need to be in the low $40s for US output to fall significantly.  Morgan Stanley said it expected to see WTI prices to remain below $50/barrel until mid-2018.

Bank of China International cut its third quarter WTI price forecast to $48/barrel and its fourth quarter price estimate to $46/barrel. 

Japan’s Trade Ministry reported that the country is preparing to increase the crude storage capacity that it lends to state-owned Saudi Aramco by 1.9 million barrels or 300,000 kiloliters this summer.  Last October, Japan and Saudi Arabia agreed to raise the storage capacity in Okinawa from 1 million kl to 1.3 million kl or 8.2 million barrels by the summer.  Currently, the work is underway to have the additional storage ready at a storage facility in Uruma City in Okinawa prefecture. 
 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $43.87, down 36 cents

RBOB - Aug $1.4837, down 1.50 cents

HO -Aug $1.4384, down 98 points


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Oil prices moved higher after greater than expected draws in US crude oil and gasoline inventories

July 07, 2017

Recap: Greater than expected draws in both U.S crude oil and gasoline inventories pushed prices higher on Thursday, reversing Wednesday’s losses. Both WTI and Brent shot back to over $46 a barrel, but were unable to sustain strength above it. Gains were pared as the session progressed, with August WTI settling at $45.52 a barrel, up 39 cents, or 0.86%, while Brent for September delivery tacked on 32 cents, up 0.67%, to settle at $48.11 a barrel.

Fundamental News Saudi Aramco said its recoverable crude oil and condensate reserves fell to 260.8 billion barrels at the end of 2016 from 261.1 billion a year earlier.  Its gas reserves increased to 298.7 trillion standard cubic feet from 297.6 trillion standard cubic feet.  Saudi Aramco said it discovered two new oil fields, Jubah and Sahaban, and one new gas field, Hadidah, all located in the Eastern Province.  The company’s daily oil production reached a new high of 10.5 million bpd in 2016, up from 10.2 million bpd in 2015.  Its oil exports increased to 7.6 million bpd in 2016 from 7.1 million bpd in 2015. 

Russia’s Energy Minister, Alexander Novak, said the agreement by OPEC, Russia and other producer to cut output had cut price volatility and was reducing inventories.  He said there was no immediate need for extra measures to support prices.  He said there was potential for an oil price rise from current levels and that $50 to $60/barrel was fair value.  He also said prices had room to rise from current levels and inventories in industrialized countries were expected to ease back to the five-year average thanks to the decision by OPEC and its allies to extend supply cuts from the first half of 2017 to the first quarter of 2018.  The Joint OPEC and non-OPEC Ministerial Monitoring Committee is scheduled to meet on July 24th.  Ministers from Russia, Oman, Algeria, Venezuela, Kuwait and Saudi Arabia and OPEC’s Secretary General, are scheduled to attend.  Russia’s Energy Minister said there were no proposals for more nations to be represented at the meeting. 

Kuwait Oil Company said an oil spill from the pipeline at Kuwait’s northern al-Ratqa field on Thursday was brought under control within two hours.   

According to the US Census Bureau, US crude oil exports reached 1.02 million bpd in May, up from 1 million bpd in April.  Exports to Canada totaled 372,000 bpd, while exports to China totaled 147,000 bpd and exports to Netherlands was 108,000 bpd. 

Morgan Stanley sees WTI below $50/barrel until mid-2018.  It cut its WTI estimate for the third and fourth quarter forecast to $48/barrel from $55/barrel, previously.  Morgan Stanley also sees WTI crude reaching $55/barrel by the end of 2018 and $60/barrel by 2020.  It cut its third quarter and fourth quarter Brent forecasts to $50.50/barrel from a previous estimate of $57.50/barrel.     

Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp hub in the week ending July 6th fell by 4.52% on the week and by 25.79% on the year to 823,000 tons, while gasoil stocks fell by 1.49% on the week and by 10.6% on the year to 2.901 million tons and fuel oil stocks fell by 6.19% on the week but increased by 18.49% on the year to 955,000 tons. 

Permit approvals for drilling new wells across the US has been on an upward trend since April, but approvals are declining in the Permian Basin, suggesting that the active rig count increases may decline in the second half of the year. 

 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $44.76, down 76 cents

RBOB - Aug $1.5012, down 2.76 cents

HO -Aug $1.4532, down 2.86 cents


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U.S. oil futures fell for the first time in eight days

July 06, 2017

Recap:  U.S. oil futures plummeted more than 4% on Wednesday, reversing 8 days of gains, and putting an end to the longest gaining streak in 5 years. The dip in prices follows a rise in OPEC’s oil exports, which rose 450,000 barrels per day from May to June. This also reflects 1.9 million bpd more than a year ago. Strength in the dollar added to the pressure. August WTI settled at $45.13 a barrel, down $1.94, or 4.1%. September Brent fell $1.82, or 3.7%, to settle at $47.79 a barrel.

August gasoline fell 3.2 cents, or 2.1%, to $1.502 a gallon, while August heating oil lost 3.4 cents, or 2.3%, to $1.479 a gallon.

Fundamental News Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 400,000 barrels to 60.44 million barrels in the week ending June 30th. 

According to Bloomberg, OPEC’s crude production increased to the highest level this year in June as member nations exempt from output cuts produced more.  OPEC members increased their output by 260,000 bpd on the month to 32.29 million bpd.  Libya’s oil production increased by 80,000 bpd, while Nigeria’s output increased by 50,000 bpd.  Saudi Arabia increased its production by 90,000 bpd to 10.02 million bpd in June. 

Thomson Reuters reported that OPEC oil exports increased for the second consecutive month in June.  OPEC exported 25.92 million bpd in June, up 450,000 bpd on the month and up 1.9 million bpd on the year. 

Russian government officials stated that Russia opposes any proposal to deepen the production cuts at the OPEC ministerial meeting later this month.  An official said any further supply reduction so soon after the existing agreement was extended would send the wrong message to the oil market.  He said such a move would suggest that OPEC, Russia and their allies are nervous that their agreement to reduce output by 1.8 million bpd through March 2018 is not doing enough to support prices.  Russia plans to host a meeting of some OPEC ministers and several non-OPEC producers in St. Petersburg on July 24th. 

Russia’s Energy Minister, Alexander Novak, said he sees potential for an increase in the world oil prices in the second half of the year.  He also stated that he believes that demand on oil markets will increase in the third quarter of 2017. 

Qatar Petroleum is taking legal actions after Abu Dhabi National Oil Co. declared force majeure to halt shipments from Qatar of condensate.  An ADNOC official said currently there is no force majeure imposed on Qatari cargoes.  Qatar will continue to supply natural gas via pipeline to the UAE and Oman. 

According to Bloomberg, observed crude exports from Libya increased to the highest level in at least three years in June following the resumption of production from the Sharara oil field as well as those operated by Wintershall. 

The EIA was set to propose requiring fuel companies to blend 19.24 billion gallons of renewable fuels in the country’s fuel supply, down from 2017 levels.  It will propose keeping the 2018 target for conventional ethanol at 15 billion gallons, unchanged from 2017 levels, and set the requirement for advanced biofuels, including cellulosic ethanol, at 4.24 billion gallons. 

IIR reported that US oil refiners are estimated to shut in 170,000 bpd of capacity in the week ending July 7th, increasing available refining capacity by 90,000 bpd from the previous week.  IIR expects offline capacity to fall to 111,000 bpd in the week ending July 14th. 


Early Market Call - as of 9:00 AM EDT

WTI - Aug $45.91, up 77 cents

RBOB - Aug $1.5234, up 2.09 cents

HO - Aug $1.4939, up 1.56 cents


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Oil prices closed higher for seventh day straight

July 03, 2017

Recap: Oil prices rose for the seventh straight day on Friday, though they suffered their worst half-year performance since 1998. The spot prices for WTI futures fell 12% during the first half of the year, while spot Brent posted a 16% loss. Volume was light due to the upcoming 4th of July U.S. holiday, as traders took to the road for a long weekend. August WTI tacked on $1.11, or 2.47%, to settle at $46.04 a barrel, while Brent for August delivery climbed 50 cents, or 1.05%, to settle at $47.92 a barrel.

July RBOB rose 3 cents, or 2%, to $1.515 a gallon, while July heating oil added 3 cents, or 2%, to $1.446 a gallon. The July contracts expired at the end of Friday's session.

Fundamental News:  Baker Hughes reported that the number of rigs searching for oil in the US fell by 2 to 756 in the week ending June 30th.  It fell for the first time in 24 weeks. 

A Reuters survey showed that OPEC’s oil output in June increased by 280,000 bpd to a 2017 high of 32.72 million bpd.  It said high compliance by Saudi Arabia and Kuwait helped keep OPEC’s adherence with its supply cuts at 92% in June, compared with 95% in May.  Saudi Arabia increased its production by 40,000 bpd, although its compliance remained above 100%. Even with the increase in its production, Saudi Arabia production cut was 564,000 bpd, well above its target cut of 486,000 bpd. 

According to a source with knowledge of Iran’s tanker loading schedule, the country’s crude oil exports in July are expected to fall 7% from June’s three-month high, mainly due to a decline in exports to Europe.  Crude oil loadings from Iranian ports, excluding condensate from gas fields, will total 1.93 million bpd next month, with 2 million barrels of them being put into storage on tankers.  Total crude oil exports for July will be 1.86 million bpd, up 2% on the year, with 1.28 million bpd destined for Asia and 580,000 bpd bound for Europe.  This is compared with 1.3 million bpd shipped to Asia and 700,000 bpd to Europe in June. 

The Trump administration on Thursday said it was taking steps to expand oil drilling in the Arctic and Atlantic oceans as President Donald Trump continues to push for US energy dominance in the global market.  The Interior Department is rewriting a five-year drilling plan established by the Obama administration. 

According to Bloomberg, the number of tankers that are filling with Qatari crude along with that of Saudi Arabia or the UAE actually increased since tensions between the countries escalated on June 5th, when Saudi Arabia led three other countries in accusing Qatar of links to terror groups.  

Bank of America Merrill Lynch cut its crude oil price forecasts due to increasing supplies and a lower demand outlook.  The bank cut its average 2017 and 2018 WTI price outlook to $47/barrel and $50/barrel, from $52/barrel and $53/barrel, respectively.  It also lowered its Brent crude price forecast for this year and next by $4/barrel each to $50/barrel and $52/barrel, respectively. 

A Libyan oil industry source stated that the country’s oil production increased to 1.012 million bpd.  Libya’s National Oil Corp had targeted reaching 1 million bpd by the end of July. 

IIR reported that US oil refiners are expected to shut in 260,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 63,000 bpd from the previous week.  IIR expects offline capacity to fall to 170,000 bpd in the week ending July 7th and to 111,000 bpd in the subsequent week. 

Early Market Call - as of 9:00 AM EDT

WTI - Aug $46.52 +.047

RBOB - Aug $1.5240 +1.03

HO - Aug $1.5028 +0.98

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Oil prices rose for the sixth straight day

June 30, 2017

Recap:  Oil prices rose on Thursday, marking the sixth straight day of gains. This comes on the heels of falling 15% since the end of May. Prices began their ascent on fear that Tropical Storm Cindy, which hit the Gulf of Mexico last week, would shut in production in that region. Despite some shut-ins, U.S. output fell by only 100,000 barrels, much smaller than expected. Deeper draws in gasoline sparked this week’s rise, however, a further study of the numbers indicates demand for gasoline over the last four-week period fell by 2.7%. All this comes at a time when U.S. production is at its highest level since August of 2015.

Without a shift in the true underlying fundamentals, one can lean toward the extended gains being more technical in nature. With OPEC efforts failing to prop up prices, OPEC members must hope at this point, for lower prices to force weak producers out of the market. August WTI squeezed out a 19 cent gain, to settle at $44.39 a barrel. Brent for August delivery finished up 11 cents, to settle at $47.42 a barrel.

July gasoline rose less than half a cent to $1.486 a gallon, while July heating oil gained 1.3 cents, or 0.9%, to $1.446 a gallon. The July contracts expire at Friday’s settlement.

Fundamental News:  UAE Energy Minister, Suhail bin Mohammed al-Mazroui, said there is no talk of further oil output cuts by OPEC and non-OPEC producers, despite only a slow drawdown in inventories.  Separately, he said he does not foresee any shortage in fuel supply in the country due to the Gulf embargo on Qatar on fuel supplies to the UAE.  Qatar supplies natural gas to the UAE and Oman through the Dolphin pipeline. 

Libya’s oil production is fluctuating between 950,000 bpd and close to 1 million bpd, rising from about 935,000 bpd earlier this week.  Production has been fluctuating mainly due to technical and power generation problems. 

Goldman Sachs analysts stated that OPEC may need to make deeper output cuts to rebalance the market as increasing output from Libya and Nigeria threatens to undercut the group’s efforts.  The analysts stated that unexpected increases in those countries’ output, which were exempt from OPEC's output cut agreement, could offset inventory declines expected in the third quarter.  They lowered their three-month forecast for WTI crude to $47.50/barrel from a previous estimate of $55/barrel.  Also, Goldman Sachs forecast 3, 6 and 12 month Brent crude prices at $50/barrel, $58/barrel and $58/barrel, respectively.

The Federal Reserve Bank of Dallas’ Second Quarter Energy Survey showed that executives at the largest oil and gas companies do not expect OPEC’s effort to rebalance the global oil market succeeding for at least another year.  It reported that 56% of the executives surveyed said the market will not rebalance until the second half of 2018 or beyond. 

Bloomberg reported that global crude oil in floating storage and transit has increased sharply in recent week, reaching 209 million barrels as of June 28th, up from 155 million barrels in April.   

Europe’s exports of gasoline to the US has slowed substantially this year as tanks reached capacity in the US and demand growth slowed.  The decline in gasoline shipments to the US East Coast is forcing European exporters to turn to less steady buyers in West Africa and compete with refineries elsewhere in the US to export to Latin America and Asia.  Deliveries to the US Atlantic Coast form Northwest Europe this month are set to fall 35% compared with the 400,000 bpd that sailed on the route in June 2016.  May imports, at 246,000 bpd, were down nearly 20% compared with a year ago levels.
 

Early Market Call - as of 9:00 AM EDT

WTI - Aug $45.27, up 34 cents

RBOB - July $1.4853, up 2 points

HO - July $1.4524, up 65 points
 

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A decrease in U.S. gasoline inventories helped push oil prices to highest level in a week

June 29, 2017

Recap: A greater than expected decrease in U.S. gasoline inventories offset the less than expected decrease in U.S. crude oil inventories, pushing oil prices to their highest level in a week. August WTI jumped 79 cents after the EIA reported a 900,000 barrel draw in gasoline inventories. Oil prices then whipsawed for the next half hour as traders tried to come to grips with the true impact of the overall EIA report. After falling back below $44 a barrel, August WTI worked its way back to a new high, topping the session at $44.84 before settling at $44.74, up 50 cents, or 1.13%. August Brent settled at $47.31, up 66 cents, or 1.41%.

July gasoline rose 2.4 cents, or 1.6%, to $1.483 a gallon, while July heating oil tacked on 1.9 cents, or 1.4%, to $1.433 a gallon.

Fundamental News:  Royal Dutch Shell lifted a force majeure on exports of Bonny Light crude following pipeline repairs.  It declared a force majeure in early June after a leak was found on the Trans Niger Pipeline.  Exports of the crude grade were continued during this period at a reduced rate.  The July export program was about 40,000 bpd less than June’s export program with 164,000 bpd.

Russia’s Energy Minister, Alexander Novak, said Russia is not discussing deeper cuts to oil production than those already agreed on with OPEC.  He said Russia’s average oil output in June fell by 305,000-308,000 bpd from its output level in October.    Separately, he stated that Russia plans to ship 4.5 million tons of oil to Belarus during the third quarter. 

Mexico’s Pemex has declared force majeure over at least two cargoes of Maya crude to be loaded at its Salina Cruz terminal on the Pacific Coast after a fire shut its refinery earlier this month.  One of the affected cargoes was scheduled to be delivered to the US West Coast and another cargo was bound for Japan. 

US pipeline operators are selling their underused space at steep discounts to keep crude flowing.  Pipeline firms such as Plains All American and TransCanada Corp move about 10 million barrels of crude around the US every day.  Some of the pipeline companies are offering prices as low as 25% of federally regulates rates, creating a secondary market that undercuts shippers with long-term contracts. 

The US and Middle East are set to increase their supply of fuels, such as diesel, to Europe to the highest level in at least six months, helping to offset reduced flows from Russia and India.  Bloomberg reported that total imports of so-called clean products, including diesel from the US, Middle East, plus India and East Asia are expected to increase to more than 1 million bpd in June for the first time this year. 

Colonial Pipeline Co is allocating space for Cycle 38 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee.

Natixis cut its 2017 Brent price forecast by $4/barrel to $53.50/barrel. 

IIR reported that US oil refiners are expected to shut in 75,000 bpd of capacity in the week ending June 30th, increasing available refining capacity by 93,000 bpd from the previous week. 

Early Market Call - as of 9:00 AM EDT

WTI - Aug  $45.20, up 47 cents

RBOB - July $1.5002, up 1.72 cents

HO - July $1.4562, up 2.33 cents


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Oil futures rose on an expected bullish EIA inventory report

June 28, 2017

Recap:  Oil futures rose on Tuesday, as traders covered shorts ahead of what is expected to be a bullish inventory report by the EIA. Mixed estimates are calling for a draw of between 2.6 and 3.25 million barrels in U.S. crude oil inventories. This, combined with sentiment that this market may have found a near-term bottom pushed August Brent above $47 a barrel and August WTI above $44 a barrel. Gains were pared, with Brent settling at $46.67 a barrel, up 84 cents, or 1.8% and WTI gaining 89 cents, or 2.1%, to settle at $44.27 a barrel.

July gasoline added 2.1 cents, or 1.5%, to $1.460 a gallon and July heating oil rose 3.4 cents, or 2.4%, to $1.414 a gallon.

Fundamental News:  Bloomberg reported that crude stocks held in Cushing, Oklahoma fell by 700,000 barrels to 60.4 million barrels in the week ending June 23rd. 

OPEC delegates stated that OPEC will not rush into making a further cut in oil output or end some countries’ exemptions to output limits.  An OPEC delegate said a larger cut could be an option, adding that further steps could be to place limits on further growth in Nigerian and Libyan output, rather than requiring them to cut back their supply.  Another source stated that removing more crude from the market was an option but said it was not being actively considered. 

Libya’s oil production increased to 935,000 bpd, up from 885,000 bpd last week.  The country is targeting a production level of 1 million bpd by the end of July.  A source stated that Libya’s NOC is repairing several pipelines that connect fields and the Es Sider and Zueitina export terminals. 

Russneft’s Chief Executive Officer, Yevgeny Tolochyok, said it will cut its oil output by about 200,000 tons this year under Russia’s deal with OPEC.  Mikhail Gutseriyev, a co-owner of Russneft, said the company would be able to restore its oil production very quickly after the OPEC and non-OPEC output cut agreement ends. 

Russia’s Rosneft said its servers had been hit by a large-scale cyber-attack but added that its oil production was unaffected. 

The head of Vitol, Ian Taylor, said Brent prices will remain in a range of $40-$55/barrel for the next few quarters. 

US Energy Secretary, Rick Perry, said the US has a unique opportunity to develop a North American energy strategy with Canada and Mexico.  

Based on US Customs data compiled by Bloomberg, the US imported 595,800 bpd of gasoline and gasoline blendstock, excluding naphtha and natural gasoline in the week ending June 22nd.  This is compared with 909,000 bpd in the previous week.   

IHS data reported that crude and refined product shipments from the US Gulf fell to 3.82 million metric tons on 92 ships in the week ending June 22nd.  It is down 12% from the previous week’s 4.32 million metric tons on 102 ships. 

According to Bloomberg, preliminary US waterborne crude imports increased by 102,000 barrels to 4.5 million bpd in the week ending June 22nd.  West Coast imports fell by 75,300 bpd to 757,700 bpd while East Coast and Gulf Coast imports increased by 136,000 bpd and 41,100 bpd, respectively.  Total crude and product imports increased by 8,600 bpd to 6 million bpd.   


Early Market Call - as of 9:00 AM EDT

WTI - Aug $44.11, down 12 cents

RBOB - July $1.4518, down 83 points

HO - July $1.4111, down 27 points


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