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Market Intel Archives

Global crude oil markets moved lower after reports Iraq would not support production freeze

October 25, 2016

Recap: Global crude oil markets worked lower Sunday evening and early Monday on news reports that Iraq was not supporting any efforts to freeze or possibly reduce OPEC members' production levels. This price pressure came despite supportive news that Russia continued to demonstrate positive support for OPEC efforts to cobble together a production agreement between OPEC and non-OPEC members. The oil markets saw further selling pressure at midday as Reuters reported that the Buzzard oil field in the North Sea would restart Tuesday or Wednesday following completion of a month longed planned maintenance. This selling helped to trigger some additional technical selling  in the WTI market as prices dropped below the $50 per barrel level, pushing December WTI to a low of $49.62, a level not seen since October 4th. While prices did retrace the majority of the day's losses by the close, crude oil still finished the day down 33 cents, with gasoline off 2.76 cents, while heating oil finished on the positive side, up 58 points.

Fundamental News:  Iraq's oil minister claimed  on Sunday that Iraq should be exempt from OPEC crude oil output restrictions since it needs oil income to help support its fight against ISIS. He added that Iraq should receive the same exemption as Nigeria and Libya.

Genscape reported this morning that crude oil storage at Cushing, OK stood at 61,330,088 barrels as of October 21st, down slightly more than 1 million barrels from a week earlier.

Iran's deputy oil minister said on Monday that Iran was ready to encourage other OPEC members to join a plan to freeze output to bring stability to the oil market. He said that "Iran is ready to help OPEC to balance the oil market...We believe at $55-$60 a barrel is a fair price to bring stability to the market."

Russia's energy minister said on Monday it is essential that OPEC and non-OPEC countries address overcapacities in the oil market. He noted that OPEC and Russia were stepping up cooperation as they continue to discuss how Moscow might be able to help support a possible freeze or cut in oil production.

The Seaway Pipeline Company reportedly was working to contain a crude oil spill that was reported in Cushing, OK early Monday morning. The spill involved the 30-inch legacy pipeline on Sunday night. While the legacy line remained shut for the near term, the company reopened its 450,000 b/d Seaway twin pipeline by midday Monday after it had been shut as a precaution.

Reuters was reporting that according to an industry source, the North Sea Buzzard oilfield is slated to be restarted on Tuesday or Wednesday this week, following completion of a month long maintenance shutdown. The field normally produces 180,000 b/d.

PBF Energy reportedly will be restarting its 55,000 b/d FCC unit at its 180,000 b/d Paulsboro, NJ refinery on Wednesday. The unit had been offline for some 35 days for planned maintenance. The unit was expected to return to service over the past weekend, but was delayed due to a valve issue.

Monroe Energy reportedly will keep its 55,000 b/d FCC unit at its Trainer, PA refinery shut for at least another 30 days according to a report on Reuters today. The unit was unexpectedly shut back on October 13th and operators had moved forward planned maintenance work at the time which had been expected to last only for two weeks.


Early Market Call - as of 10:30 AM EDT

WTI - Dec $50.22 down 30 cents

RBOB - Nov $1.5041 up 3 points

HO - Nov $1.5700 down 98 points


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Oil prices rose for fifth straight week

October 24, 2016

Recap: Oil prices rose for the fifth straight week but an increase in the number of operating U.S. oil rigs kept gains to a minimum. December WTI traded within an 82 cent range under moderate volume. Oil traded slightly higher early in the session after Russia's energy minister said his country would make proposals to Saudi Arabia over the weekend on ways to support prices, which could include freezing production. Spot WTI closed at $50.85 a barrel, up 22 cents, or 0.43%. December Brent tacked on 40 cents, or 0.78%, to settle at $51.78.

RBOB futures got a boost from a report that Monroe Energy planned a 30 day extension on the shutdown of the fluid catalytic cracking unit at its PA refinery.  November RBOB reached a high of $1.5298 a gallon, the highest level for a spot month futures contract since June 29. This spot contract added 3.8 cents, or 2.5%, to $1.531 a gallon, up 2.5% for the week, while November heating oil gained 1.4 cents, or 0.9%, to $1.574 a gallon, up about 0.4% on the week.

Fundamental News:  Oil Movements reported that OPEC cargoes will increase by 130,000 bpd to 23.86 million bpd in the four weeks ending November 5th.  Mideast shipments will increase by 180,000 bpd to 17.15 million bpd during the period. 

Baker Hughes reported that the number of rigs searching for oil in the week ending October 21st increased by 11 to 443. 

Nigeria's Finance Minister, Kemi Adeosun, said the country hopes crude prices will stabilize in a range between $42 and $50/barrel. 

According to GBC's President and CEO, Alberto Cisneros-Lavaller, said Venezuela's oil production is falling and it is expected to fall further in the final quarter.  The company's estimates are even lower than those of the secondary sources used by OPEC, with output at 2.058 million bpd in September.  He said Venezuela's oil production fell by about 300,000 bpd in the first nine months of the year due to maintenance and flaring.  The largest decline came in May, when Schlumberger halted its operations in the country.  He expects Venezuela's production to end the year at 1.9 million bpd, down another 60,000 bpd from where it was in September.

Total's President of E&P, Arnaud Breuillac, said oil prices will not return to $100/barrel. 

Buckeye Partners, L.P. announced that its subsidiary, Buckeye Pipe Line Company, has successfully closed a binding open season for the second phase of its Michigan/Ohio Pipeline Expansion Project.  Once complete, the second phase of the project will allow Buckeye to offer expanded transportation service of refined petroleum products from origin points in Woodhaven and Detroit, Michigan, as well as Toledo, Findlay and Lima, Ohio, and Midland, Pennsylvania to a destination point in the Altoona area in central Pennsylvania.  Buckeye intends to reverse a portion of its existing Laurel Pipeline to facilitate the transportation of refined petroleum products from Pittsburgh to central Pennsylvania.  

Nigeria's Trans Forcados Pipeline will be down for at least 10 more days for cleaning and testing following repairs.  A tanker that loaded Forcados last week took crude that was already at the export terminal and new flows are not expected to begin until the repaired pipeline was cleaned and tested. 

Nigeria will cut its Usan crude exports to three cargoes of 1 million barrels each in December, down from four planned in November.  Separately, Nigeria plans to export about 245,000 bpd of Qua Iboe crude in December, down from 285,000 bpd in November.  The eight cargo schedule is lower than the usual 10-11 cargoes that were exported prior to a pipeline incident in July that forced Exxon Mobil to shut output and declare force majeure.      


Early Market Call - as of 9:00 AM EDT

WTI - Dec $50.28 down 56 cents

RBOB - Nov $1.5227 down 87 points

HO - Nov $1.5722 down 18 points


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Strength in dollar sparked sell off in oil on Thursday

October 21, 2016

Recap: Strength in the dollar and the expiration of the November WTI contract sparked a sell off in oil on Thursday, as traders looked to take profits. After reaching 15 month highs on Wednesday, WTI fell more than 2%, settling at $50.43, down $1.17 a barrel. Brent for December delivery slipped $1.29, or 2.45%, to settle at $51.38.

November RBOB eased by 2 cents or 1.3% to settle at $1.494 a gallon. Heating oil for November delivery slipped 2.8 cents, or 1.83%, to settle at $1.56 a gallon.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, October 18th fell by 1,246,981 barrels on the week and by 721,709 barrels from Friday, October 14th. 

Statoil's Chief Executive, Eldar Saetre, does not expect Norway to join OPEC in its output cut agreement. 

Exports of Libya's Es Sider crude oil is set to resume in the coming weeks, with the first cargo potentially being lifted by Libya's National Oil Corp during the first week of November from its Ras Lanuf terminal.  This would be the first cargo lifted since force majeure was declared on loadings from Es Sider port in December 2014.  Loading from the Es Sider port remains suspended due to infrastructure damage, including fire damage that occurred during the civil war over the past few years and has not yet been repaired to enable crude exports.

The arbitrage from the US Gulf Coast to Europe was once again open as freight rates fell, with several cargoes booked in recent days on the route.  Imports from the US Gulf Coast were expected to reach around 1.5 million tons in November as refineries end maintenance and demand from the agricultural sector eases. 

Nigerian exports of Bonny Light crude were expected to fall to 156,000 bpd in December, down from 175,000 bpd initially planned in November.  Bonny Light exports have been hampered by the closure of the Trans Niger Pipeline.  The pipeline has been closed since a fire was observed on the line in late September.   

The Environmental Protection Agency reported that the US generation of renewable fuel blending credits fell in September.  About 1.25 billion ethanol blending credits were created in September, down from 1.33 billion ethanol credits in August and 395 million biodiesel blending credits were generated in August compared with 401 million a month earlier. 

The White House Office of Management and Budget received a draft of the final Renewable Fuel Standard plan for renewable fuels use in 2017 and biodiesel volumes for 2018.  A review by the White House is one of the last formal hurdles for the EPA's rule before the agency finalizes the plan ahead of a November 30th deadline. 

The US Labor Department reported that the number of initial unemployment benefit claims increased by 13,000 to a seasonally adjusted 260,000 bpd in the week ending October 15th.  Claims for the week ending October 8th were revised up by 1,000 to 247,000.  The four week moving average of claims increased by 2,250 to 251,750 last week.  The report showed that the number of continuing unemployment claims increased by 7,000 to 2,057,000 in the week ending October 8th. 


Early Market Call - as of 9:15 AM EDT

WTI - Nov $50.42 down 21 cents

RBOB - Nov $1.5015 up 78 points

HO - Nov $1.5641 up 45 points


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WTI futures hits highest level in 15 months

October 20, 2016

Recap: A drop in Chinese oil production, combined with the sixth straight week of declining U.S. crude oil inventories, pushed WTI futures to its highest level in 15 months. After dipping slightly lower early in the session, oil futures proceeded to trade sideways, within a narrow range; mirroring activity from the prior day's trading. Upon the release of the EIA report, which reflected a draw of 5.2 million barrels of crude oil, spot futures jumped 3% higher on the day, topping out at $51.93. Gains were slightly pared, with December WTI settling at $51.82, up $1.20, or 2.37%. Brent for December delivery settled at $52.67, up 99 cents, or 1.92%.

November RBOB gained less than a cent to settle at $1.514 a gallon, while November heating oil rose 1.9 cents, or 1.2%, to $1.588 a gallon.

Fundamental News:  According to the EIA, US refinery rates fell to 85% in the week ending October 14th, the lowest level since April 2013.  US commercial imports fell to 6.9 million bpd last week, the lowest volume since June of last year.  US crude oil inventories fell last week as refineries continued to deplete inventories.  Crude inventories fell by 5.2 million barrels in the week ending October 14th while crude imports fell by 912,000 bpd.  Crude stocks in Cushing, Oklahoma fell by 1.6 million barrels, the most since April.  Analysts attributed this in part to an outage on Plains All American's Basin Pipeline last week.  The company advised customers on Thursday that it delayed a planned restart, which affected supply coming from Colorado City, Texas into the Oklahoma hub.   

Saudi Arabia's Energy Minister, Khalid al-Falih, said many countries are willing to join OPEC in cutting production to secure a continued improvement in oil prices.  He said negotiations will continue until the scheduled OPEC meeting on November 30th in Vienna.  So far, only Russia has stated that it is considering an output freeze or cut, while other non-OPEC producers that cooperated with past supply cuts, including Mexico and Norway, said they will not cut.  

Exxon Mobil's Chief Executive, Rex Tillerson, and Saudi Arabia's Energy Minister, Khalid al-Falih, took opposing views on declining investment in the oil sector setting the stage for a possible major supply crunch.  The head of Exxon Mobil said that shale oil producers' resilience in cutting costs to make some wells profitable at as low as $40/barrel means that North American production has effectively become a swing producer that will be able to respond rapidly to any global supply shortage.  He said the world is developing enough oil resources to avoid a supply crunch in the next few years.  Meanwhile, Saudi Arabia's Energy Minister warned that the sector faces challenges due to a decline in investment.  He said OPEC's plan to freeze or even cut production along with several leading producing countries, including Russia, will help reduce an overhang of supplies and stimulate new investments in the sector.  Separately, Saudi Arabia's Energy Minister said oil markets were at the end of a considerable downturn as fundamentals were improving and supply and demand were rebalancing.  He called on non-OPEC producers to help stabilize the market saying their role was as critical as the role of OPEC members.    

Russia's Energy Minister, Alexander Novak, is planning to meet his Saudi Arabian counterpart, Khalid al-Falih, this weekend to discuss the coordination of possible actions on the global oil market. 

Halliburton Co said oil prices have to stabilize at above $50/barrel for producers to significantly increase their oilfield activity.  It said it expected pricing pressure to continue globally and activity in the current quarter to be weak due to holiday and seasonal weather-related downtime. 

The first cargo of clean oil products from Iran since sanctions were lifted has landed in northwest Europe, with another cargo loading.


Early Market Call - as of 9:00 AM EDT

WTI - Nov $50.61 down 99 cents

RBOB - Nov $1.4904 down 2.32 cents

HO - Nov $1.5574 down 3.05 cents


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Oil futures opened higher in overnight trading, but fell as the dollar steadied

October 19, 2016

Recap: Oil futures opened higher in overnight trading, however, gains were reversed as the dollar steadied. December WTI quickly fell into a range of equilibrium as it bounced within a 10 cent range between $50.20 and $50.30 for more than an hour. A second round of gains came as OPEC's secretary general expressed the group's commitment to limit production. Oil futures finished higher on the day after two days of losses. December WTI closed at $49.76, up 29 cents or 0.58%. Brent for December delivery tacked on 16 cents, or 0.3% to settle at $51.68.

Traders are now focusing on the upcoming OPEC meeting in November but are also keeping an eye on U.S. shale production, which some believe will regain momentum as prices move higher. This will create a conundrum for traders as an increase in U.S. production will work to keep a lid on prices and possibility negate an production freeze by OPEC.

November RBOB gained 1.3 cents, or 0.9%, to $1.506 a gallon, while November heating oil tacked on 1.3 cents, or 0.8%, to $1.569 a gallon.

Fundamental News: OPEC's Secretary General, Mohammed Barkindo, said OPEC should be able to reach a deal next month to limit oil production without too much disagreement about individual countries' output levels.  He also told journalists on the sidelines of the Oil & Money conference that Russia was not backtracking on its pledge to contribute to output limits should OPEC reach a deal at its next meeting on November 30th. 

Russia's Energy Minister, Alexander Novak, will meet with Saudi Arabia's Energy Minister, Khalid al-Falih, on October 22-23.

Russia's Energy Ministry reported that Russia's Deputy Energy Minister, Kirill Molodtsov, and leading Russian oil producers met with Saudi Arabia's Deputy Energy Minister, Naif Al-Otaibi, on Tuesday to discuss technological cooperation in the oil and gas sector. 

According to the Joint Organizations Data Initiative, Saudi Arabia's crude oil exports in August fell to 7.305 million bpd from 7.622 million bpd in July after the country's production fell to 10.63 million bpd in August from 10.673 million bpd in July. Crude oil used to generate power increased by 42,000 bpd in August to 739,000 bpd.  Saudi Arabia's oil inventories totaled 281.01 million barrels, down from 281.463 million barrels in July.  Domestic refineries processed 2.6 million bpd in August, down from 2.611 million bpd in July.  Meanwhile , exports of refined oil products in August increased to 1.37 million bpd from 1.367 million bpd in July.

A source with knowledge of Iran's  preliminary tanker said  that Iran's October crude and condensate exports are set to hold near five-year highs reached in September. October crude oil and condensate exports are set at 2.56 million bpd.  Crude shipments in October are set for a three-month low of 2 million bpd while exports of condensate are expected to increase 22% from September to 559,000 bpd.  According to local oil officials, Iran is producing about 4.5 million bpd of crude and ultra light oil condensate.  Iran is seeking to increase its crude and condensate production to more than 5 million bpd by 2020. 

German consumer heating oil stocks increased to 62% of tank capacity at the beginning of October.  It is up from 60% of tank capacity at the beginning of September and just over the five-year average of 61%. 


Early Market Call - as of 9:12 AM EDT

WTI - Nov $51.14 up 70 cents

RBOB - Nov $1.5055 down 2 points

HO - Nov $1.5848 up 1.62 cents


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WTI dipped lower on Monday as number of operating U.S. rigs continued to climb

October 18, 2016

Recap: A steady climb in the number of operating U.S. oil rigs combined with long liquidating positions ahead of November expiration, drove WTI lower on Monday. This spot contract, which expires on the 20th of the month, dipped back below $50 a barrel, to settle the session at $49.94, down 41 cents, or 0.81%. Brent followed WTI lower, settling at $51.52, down 43 cents, or 0.83%.  

Oil futures began the session trading above unchanged, with December WTI gaining a modest 25 cents, peaking the session at $51 a barrel. Comments from Iran's vice-president stating his country still needs to work on regaining market share sent this soon to be spot contract tumbling more than a $1, to a low of $49.90. Prices somewhat recovered as the EIA released expectations for falling U.S. shale oil production. December WTI settled at $50.37, down 38 cents, or 0.74%.

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending October 14th fell by 2,373,340 barrels on the week and fell by 525,272 barrels from Tuesday, October 11th.

Iran's Oil Minister, Bijan Namdar Zanganeh, said the country plans to increase its oil output to 4 million bpd this year, potentially complicating OPEC's plan to cut production.  He said he hopes OPEC will agree next month at a meeting in Vienna to limit output.  Iran is seeking about $200 billion of investment in its oil, natural gas and petrochemicals industries to raise production and sales.  The country is targeting an average daily output of 4.28 million bpd of crude and 1 million barrels of condensate within four years.  Meanwhile, the managing director of National Iranian Oil Co, Ali Kardor, said Iran aims to raise production from 3.89 million bpd currently.  He also stated that Iran is targeting 2.5 million bpd of crude exports by March 2017.  Amir Hossein Zamaninia, Deputy Oil Minister for International Affairs, said Iran produced 4.085 million bpd before sanctions were imposed on its economy.  He said the country's current oil production is almost sufficient to agree to a freeze.  He said current oil exports are over 2.2 million bpd.  Iran's Vice President, Eshaq Jahangiri, said the country needs to regain its share of the global oil market, which was lost during the years it was subject to international sanctions. 

Venezuela's Oil Minister, Eulogio Del Pino, vowed the agreement by OPEC countries to freeze output will be made official in November.

Russia's Energy Minister, Alexander Novak, said an oil output freeze is the most acceptable and effective option for Russia while consultations with OPEC members are continuing. 

Kuwait's Finance Minister and Acting Oil Minister, Anas al-Saleh, said he was optimistic that an understanding on production at least would be reached between producers at an OPEC meeting in November.  He said expectations that oil prices would be between $50 and $60 over the next 10 to 15 months were logical and acceptable.

US gasoline imports into New York Harbor may increase as Colonial Pipeline limits its flow.  The US Pipeline and Hazardous Materials Safety Administration is calling on Colonial Pipeline Co. to cut the pressure below pre-spill levels on a segment that stretches for more than 200 miles from Mississippi to Alabama.  The reduced flows will remain in place until the regulator determines it is safe to lift the restrictions.  Separately, Colonial Pipeline will be performing pipeline system integrity work to remove the temporary bypass in Alabama.  Line 1 allocation levels for Cycle 60 and 61 will be reduced by about 20% which will allow to maintain average 5 day length for two cycles.


Early Market Call - as of 9:30 AM EDT

WTI - Nov $50.24, up 30 cents

RBOB - Nov $1.5004, up 80 points

HO - Nov $1.5659, up 98 points


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Oil futures rose for fourth straight week as U.S. crude production declined

October 17, 2016

Recap: Oil futures rose for the fourth straight week as traders weighed in on the possibility of Russia cutting production, declining U.S. crude production in the lower 48 states and weekly declines in domestic gasoline and distillate inventories. It was the 16th week in a row that the U.S. oil rig count climbed as producers added 4 rigs in the week to Oct. 14 and worked to keep a cap on prices. Brent rose to its highest level in a year, topping the week at $53.73, prior to severing gains to settle at $51.95, down 8 cents from yesterday's close. WTI peaked the week at $51.60, the highest level for a spot contract in 4 months. Gains were slightly pared on the day, with November settling at $50.35, down 9 cents.  

November RBOB gained 1.2 cents, or 0.8%, to $1.494 a gallon, for a weekly gain of 0.8%. November heating oil fell 1.2 cents, or 0.8%, to $1.567 a gallon,about 0.8% lower on the week.

Fundamental News:  Oil Movements reported that OPEC cargoes are expected to fall by 50,000 bpd to 23.79 million bpd in the four weeks ending October 29th.

Wood Mackenzie stated that the fracklog or the backlog of unfracked wells may be here to stay.  Even as oil and natural gas prices increase, a quarter of uncompleted US wells will ultimately never come online. 

Credit Suisse lowered its oil price forecast for 2018 and 2019 by $5/barrel.  It now has forecast Brent in 2018 and 2019 at $65/barrel and WTI at $62.50/barrel. 

South Korea's Korea Customs Service reported that the country imported 1.5 million tons or 10.9 million barrels of oil from Iran in September, up 85.8% on the year.  South Korea imported a total of 12.3 million tons of oil last month compared with 10.4 million tons imported last year.  

Brazil's Petrobras said it was cutting fuel prices as part of a new policy tracking international benchmarks more closely after politically driven pricing cost the company billions in recent years.  Petrobras will cut the price of diesel by 2.7% and gasoline by 3.2%.  The new prices will come into effect on Saturday. 

North Dakota's Department of Mineral Resources said the state's oil production averaged 981,039 bpd in August. It was the first time since March 2014 that the state's monthly output averaged less than 1 million bpd.  It stated that the decline below 1 million bpd, while expected, could be a significant signal to the global market.  The EIA reported that the decline in US oil production in response to persistently low prices would not be as severe as initially forecast.  North Dakota's oil production fell about 49,000 bpd from July, when the state averaged 1.03 million bpd.  Oil price weakness is the primary reason for the decline and is now anticipated to last into at least the fourth quarter of this year and perhaps into the second quarter of 2017.    

Statistics Canada reported that Canada produced 19 million cubic meters of crude oil and equivalent products in July, down 3.8% compared with the same month in 2015.  In July, production of crude oil and equivalent products continued to recover from the effects of both the Alberta wildfire in May, and spring maintenance at various oil sands facilities.  The recovery in production was mainly attributable to non-upgraded crude bitumen, which increased 4.7% from July 2015 to a record high of 7.7 million cubic meters.  Meanwhile, production of light and medium crude oil fell 9.7% to 3.5 million cubic meters in July, and that of heavy crude oil fell 5% to 2 million cubic meters. 


Early Market Call - as of 9:30 AM EDT

WTI - Nov $50.13 down 22 cents

RBOB - Nov $1.4954 up 18 points

HO - Nov $1.5607 down 66 points


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Oil prices rose after EIA report indicated a drop in U.S. output

October 14, 2016

Recap: Despite U.S. oil stocks rising 4.2 million barrels in the week ending Oct. 7, the first rise since August, oil prices rose after the EIA report indicated a drop in U.S. output. According to the report, domestic oil production for the lower 48 states fell by 36,000 barrels per day, to 7.969 million per day. This is the lowest level since June 2014. Traders typically hold 8 million barrels per day as a gauge.

November WTI was trading just above $50 a barrel prior to the release of the numbers, when a knee jerk reaction kicked in, sending this spot futures contract to the day's low of $49.36. After traders took an in-depth look at the numbers, realizing the domestic drop in output, the down move was reversed and November WTI made a steady climb toward $50.59, the high of the day. Gains were slightly pared, with spot WTI settling at $50.44, up 26 cents, or 0.5%. Brent for December delivery gained 22 cents, or 0.4%, to settle at $52.03.

November RBOB settled at $1.482 a gallon, up 2 cents, or 1.4%, while November heating oil  added 1.3 cents, or 0.8%, to $1.58 a gallon.

Fundamental News:  In its Short Term Energy Outlook, the EIA reported that the outlook for global crude oil demand was revised modestly downward from its previous report, with global oil demand expected to grow by 1.3 million bpd in both 2016 and 2017.  Total global petroleum demand is forecast to increase by 1.29 million bpd to 95.33 million bpd in 2016 and by 1.34 million bpd to 96.67 million bpd in 2017.  It reported that OPEC production is expected to increase by 880,000 bpd to 39.2 million bpd in 2016 and by 870,000 bpd to 40.07 million bpd in 2017.  Total US petroleum demand is forecast to increase by 70,000 bpd to 19.6 million bpd in 2016 and increase by 230,000 bpd to 19.83 million bpd in 2017.  Gasoline demand is estimated to increase by 160,000 bpd to 9.34 million bpd in 2016 and by 50,000 bpd to 9.39 million bpd in 2017.  Distillate demand is forecast to fall by 180,000 bpd to 3.82 million bpd in 2016, but increase by 130,000 bpd to 3.95 million bpd in 2017.  US oil production is expected to fall by 690,000 bpd to 8.73 million bpd in 2016 and by 140,000 bpd to 8.59 million bpd in 2017.  The price of Brent crude is forecast to average $43/barrel in 2016 and $51/barrel in 2017, $1/barrel higher and $1/barrel lower respectively, than forecast in last month's report.  WTI crude prices are forecast to average about $1/barrel less than Brent in 2016 and 2017. 

The EIA reported that US refinery utilization last week reached its lowest level since April 2013.  Total US distillate stocks fell by 3.7 million barrels on the week.  US East Coast distillate stocks reached its highest level since December 2010 while US Gulf Coast distillate stocks fell by the largest amount since September 2005.  US East Coast crude oil imports saw the largest increase since September 2008. 

Iraq nominated 97.18 million barrels or 3.239 million bpd of crude oil for export in November, down 41,000 bpd from October's loading program.  The program consists of 2.339 million bpd of Basrah Light crude.  A total of 900,000 bpd of Basrah Heavy crude has been allocated, up from 678,000 bpd in October. 

India received its first cargo of 260,000 metric tons of Iranian crude for its strategic reserves on the west coast. 

PDVSA is seeking one 300,000 barrel cargo of ultra low sulfur diesel and one 300,000 barrel cargo of high sulfur diesel. 

Gasoline stocks held independently in the Amsterdam-Rotterdam-Antwerp oil terminal in the week ending October 13th increased by 4.66% on the week but fell by 15.34% on the year to 651,000 tons.  Gasoil stocks increased by 0.56% on the week but fell by 18.09% on the year to 3.039 million tons while fuel oil stocks fell by 38.78% on the week and by 50.05% on the year to 513,000 tons. 


Early Market Call - as of 9:00 AM EDT

WTI - Nov $50.76, up 31 cents

RBOB - Nov $1.4806, down 12 points

HO - Nov $1.5721, down 78 points 


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Oil market continued to trend low over uncertainty of Russia limiting its production

October 13, 2016

Recap: On Wednesday, the oil market traded lower once again following Tuesday's sell off.  The market traded mostly sideways in overnight trading, posting a high of $51.17 in early morning trading.  However, the crude market breached its previous low of $50.39 and sold off to a low of $49.89.  The market continued to trend lower amid doubts on whether Russia will join OPEC in limiting its production, despite Russian President Vladimir Putin's recent support for a collective cut.  There was talk about an informal meeting between OPEC and non-OPEC producers on the sidelines of a conference in Istanbul, but it was no more than a consultation on the state of the market with no specifics of a freeze discussed. 

The market was also pressured amid the continued strength in the dollar.  The crude market later settled in a sideways trading pattern during the remainder of the session.  The November WTI contract settled down 61 cents at $50.18 while the Brent market settled down 60 cents at $51.81.  The product market also settled lower, with the RBOB market settling down 2.1 cents at $1.4619 and the heating oil market settling down 2.05 cents at $1.5668. 

Fundamental News: In its monthly report, OPEC stated that it produced 33.39 million bpd in September, up 220,000 bpd from August.  Output from Saudi Arabia is estimated to have fallen to 10.491 million bpd in September from 10.578 million bpd in August.  Meanwhile, Iraq's oil production increased by 153,000 bpd on the month to 4.775 million bpd in September.  OPEC also raised its forecast of non-OPEC supply next year, saying supply from outside the group would increase by 240,000 bpd, up 40,000 bpd from an earlier forecast.  OPEC left its 2017 world oil demand growth forecast unchanged at 1.15 million bpd.  OPEC raised its forecast for demand for its crude in 2017 by 110,000 bpd to 32.59 million bpd.  The report implied that the oil market would see an average surplus of 800,000 bpd next year, up from 760,000 bpd.

Energy ministers from Qatar, the UAE, Algeria, Venezuela and Russia began informal closed door talks with OPEC's Secretary General, Mohammed Barkindo, in Istanbul on Wednesday as they attempt to coordinate efforts to rebalance the market.  Later, Qatar's Energy Minister said Mexico and Russia were the only non-OPEC producers attending the informal meeting in Istanbul.

OPEC's Secretary General, Mohammed Barkindo, said OPEC is confident of Russia's commitments. 

The UAE's Energy Minister, Suhail bin Mohammed al-Mazrouei, said OPEC members were committed to working with other oil producers to balance the oil market and there is a realization that an oil price of $40/barrel is not sustainable and needs to increase.

Russia's Energy Minister, Alexander Novak, said the US will be invited to the Vienna meeting on October 29th to discuss details of an output freeze. 

Genscape reported that there was no crude-by-rail unloading at Plain All American's 140,000 bpd facility in St. James, Louisiana in the week ending September 30th. 

According to Bloomberg, preliminary US waterborne crude imports fell by 229,100 bpd to 4 million bpd in the week ending October 6th. 

Exports of distillates from the US Gulf Coast to Europe look to be set at 1 million metric tons for October.  In September, US exports fell 700,000 metric tons on the month to 1.03 million metric tons.

IIR reported that US oil refiners are expected to shut in 1.47 million bpd of capacity in the week ending October 14th, cutting available capacity by 146,000 bpd from the previous week.  IIR expects offline capacity to fall to 1.345 million bpd in the week ending October 21st. 


Early Market Call - as of 9:00 AM EDT

WTI - Nov $50.22, up 4 cents

RBOB - Nov $1.4639, up 20 points

HO - Nov $1.5740, up 72 points


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Oil market fell on Tuesday after Russia's largest oil company said it would not cut production

October 12, 2016

Recap: The oil market fell on Tuesday amid uncertainty over whether Russia would join OPEC in curbing its oil production.  Russia's largest oil company, Rosneft, said it would not cut its production while Russia's Energy Minister, Alexander Novak, said the country was willing to work with OPEC to stabilize the world oil market.  The market, which attempted to test Monday's high of $51.60, posted a high of $51.54 early in the session before it erased some of its previous gains.  It sold off to a low of $50.39.  The market's price decline also accelerated as the dollar increased and thus cut the appeal of commodities.  The crude oil market settled down 56 cents at $50.79.  The Brent crude market settled down 73 cents at $52.41. Meanwhile, the product markets also settled in negative territory, with the RBOB market settling down 1.43 cents at $1.4829 and the heating oil market settling down 2.29 cents at $1.5873.  

Fundamental News: The IEA stated that oil supply and demand could come back into balance earlier than expected next year if OPEC's agreement to freeze production is implemented.  It said that its supply-demand outlook suggests that the market may remain in oversupply through the first half of next year.  The IEA said that OPEC produced 33.64 million bpd in September, up from 33.48 million bpd in August.  Returning volumes from Libya, Nigeria and Iran, which are set to be exempt from the Algiers deal, suggest that larger cuts would have to be made by others, notably Saudi Arabia, to meet the agreed target.  The IEA stated that the world needs an estimated 33.2 million bpd from OPEC and inventories over the coming winter, almost in line with the lower limit of the group's target.  It expects world oil demand to grow at a rate of 1.2 million bpd next year, keeping its forecast unchanged from last month, but cut its estimate of growth in 2016 by 40,000 bpd to 1.2 million bpd from 1.3 million bpd last month.  Separately, the head of the IEA, Fatih Birol, said crude prices of $60/barrel would likely trigger a strong increase in North American oil production. 

OPEC will hold talks with non-OPEC oil producers on Wednesday to discuss the agreement to limit production for at least six months.  Representatives of some OPEC members and non-OPEC countries, including Russia, Azerbaijan and Mexico will hold a meeting on Wednesday on the sidelines of the World Energy Congress. 

Saudi Energy Minister, Khalid al-Falih, said an agreement among OPEC members outlined last month should not shock the market.  Speaking at the World Energy Congress, he stated that he was optimistic the details of last month's preliminary agreement would be pinned down when OPEC holds its regular meeting in November.  He also stated that he saw signs that countries outside OPEC were willing to contribute to balancing the oil market. 

OPEC's Secretary General, Mohammed Barkindo, said OPEC is not interested in or targeting a specific oil price.  He expects a common understanding at a meeting of oil producers on October 12th. He said any deal to freeze oil production would likely be reviewed after six months. 

Russia's Energy Minister, Alexander Novak, said Russia was ready to work with OPEC in order to stabilize global oil markets. 

Goldman Sachs stated that recent comments by Saudi Arabia and Russia point to greater probability of a production cut, although higher production from Libya, Nigeria and Iraq are reducing the odds of such a deal rebalancing the oil market in 2017. 

Bloomberg reported that crude oil stocks held in Cushing, Oklahoma increased by 100,000 barrels in the week ending October 7th to 62.8 million barrels.


Early Market Call - as of 9:00 AM EDT

WTI - Nov $50.71, down 8 cents

RBOB - Nov $1.4761, down 68 points

HO - Nov $1.5777, down 96 points 


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