Kelly Burke

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EIA Long Term Projections Dampen Inventory Effects

Posted by Kelly Burke on Oct 12, 2017 2:57:45 PM

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WTI was in the red today ahead of the EIA inventory report.

API projections were that Crude would show builds of 3.1mmb - of note on this is API was an outlier of sorts, Platts forecasted draws of 400K barrels ahead of the official reporting.

Internationally, IEA Forecasts for global oil demand growth remained at 1.6m bpd, so flat demand growth amid the continued oversupply that doesnt seem to have much of an end in sight, long term picture wise. 

Anyhow, the official EIA report showed a draw down in Crude of 2.8mmb for the week ending 10/6. Gasoline was up 2.5mmb and distillates were down 1.5mmb. Gasoline had been projected to be down 1.4mmb, so the drop off we saw on gasoline today makes sense given the actuals. 

Side note - the EIA Report showed builds in Nat Gas of 87 billion cubic feet, right in line with Platts projections. The market was essentially unchanged on the builds, presumably because it makes sense there would be a temporary bump in inventories given temperatures havent dropped off, so demand should be low.Usually in New England we are well into the battle to keep the heat off til November 1 by now - this year not so much. I still have my air conditioner in the window.  

Gulf Refineries are back online and at capacity after temporary shut downs for Hurricane Nate, which probably is a factor in pushing pricing down as well in the face of flat demand.

In addition to the U.S. being back fully functional, EIA forecasts put U.S. domestic crude production at 9.9mmb per day for 2018 which would be the highest on average in U.S. history. Continued domestic production is seen as being a factor that will offset moves by OPEC or other nations to push a pricing rally. Theoretically, a rally cannot be sustained long term globally if the U.S. keeps production levels rising. We'll have to wait and see on that. 

The official numbers we closed out at this afternoon were: ULSD 1.7655 (-.0206), Gas 1.5832 (-.0260) and Crude landed right around the benchmark at $50.60

Thats all for today!

 

 

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Topics: natural gas, EIA, EIA Inventories, $50 benchmark

EIA Draws Keep NYMEX Boosted; Venezuelan Vote & Sanctions Loom on the Horizon

Posted by Kelly Burke on Jul 26, 2017 3:26:56 PM

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Today, the NYMEX continued it's winning streak - At the end of the day, we settled up across the board yet again, with Crude settling out at $48.75/bbl (+1.7%), ULSD climbed +.0268 to $1.5953 and RBOB edged up +.02111 to $1.6173. 

Yesterday we talked about the OPEC production & export factors affecting the market, as well as projected slow downs in domestic oil & gas exploration. (For a refresher, you can peruse yesterdays article here: 2017s Largest One Day Rally Hits on OPEC & US Production Projections ) 

Today, while API projections called for a 10.23mmb draw in Crude, the EIA Inventory Report showed an actual draw of 7.2mmb. Current Crude levels are now around 483.4 mmb, or the upper end of average for this time of year. For finished products, distillates drew down 1.9mmb but are still on the upper end of what we normally see for average levels, while on gasoline, projections were calling for a build of 1.9mmb but actuals showed a draw of 1mmb. 

In broader news that can potentially have huge ("YUGE!") market impacts, the Trump administration has floated the possibility of a ban on Venezuelan Crude as a U.S. response to Venezuelan President Nicolas Maduro, should he choose to go forward with rewriting the country's constitution, in what the United States sees as a move to clamp down on opposition. The vote on rewriting the country's constitution is expected Sunday, and Platts is reporting that the U.S. Treasury department is crafting sanctions currently. 

At the same time however, even as the Treasury works out the details, it appears the Administration has already backed off of the idea after looking at its potential impacts. They are now hinting at more targeted sanctions than an overall ban, but that would still likely create some serious aftershocks in the market.

Venezuela is the third largest supplier of imported Crude oil to the United States (after Canada and Saudi Arabia), and supplies a huge percentage of the Crude refined in the Gulf Coast.

A ban could be devastating for US refiners and importers, and even simply not taking the option off the table could impact the markets in a drastic way over the next few days, particularly if the option remains even theoretically possible on Monday after the vote takes place (its expected to be a "show vote" with Maduro's desired outcome essentially 100% certain).

Definitely something to keep an eye on that could drastically change the supply and pricing picture as we know it.

Stay tuned!  

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Topics: CRUDE, EIA Inventories, sanctions, Venezuela

2017s Largest Rally Hits on OPEC & US Production Projections

Posted by Kelly Burke on Jul 25, 2017 3:45:14 PM

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Today saw oil prices have the biggest one day rally of 2017 thus far, with WTI Crude surging up 3.3% ($1.55) to settle out at $47.89/bbl. Likewise, refined products surged, with ULSD jumping over 5 cents (+.0516) to 1.5685, and gasoline jumped +.0394 to settle at 1.5962.

So whats going on?

On the global news front, at an OPEC gathering in Russia on Monday, Saudi Arabia pledged to cut Crude exports beginning in August, and Nigeria stated it will cap its production at 1.8 million barrels per day. (WTI closed out up 1.3% at $46.34 on the day Monday immediately following the news. ULSD settled up as well but by a mere 17 points to $1.5169, while gasoline dropped 65 points to close out at $1.5568.)

An important note pointed out by Market Watch regarding the OPEC news, however - its not unusual for the Saudis to drop exports this time of year, and the "cuts" promised by Nigeria are actually at levels higher than they are producing at the moment (they will cap at 1.8mmb and they are currently producing 1.6mmb) so its likely that this news was another somewhat nothing-to-it story out of OPEC that caused a (presumably temporary) jump on the NYMEX, as most OPEC meetings seem to do. 

Today was likely impacted more from domestic news and forecasts than the OPEC news of yesterday. Cuts are looming in the Oil & Gas sector in the U.S., which signals an oncoming slow down in domestic output. Anadarko, one the nations leading oil & gas exploration companies cut investment guidance by $300 million for 2017 after posting losses for the second quarter of over $415 million, or roughly twice estimates. Add this to Halliburton's forecasts for flat to declining rig counts, and projected crude draws on this weeks EIA reporting and you had the perfect storm in place for todays rally. 

 

 

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Topics: CRUDE, OPEC, anadarko

U.S. Inventory Projections Slow Today's NYMEX Losses

Posted by Kelly Burke on May 31, 2017 3:17:20 PM

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The oil markets were down sharply this morning on increasing cynicism that, essentially, global supply will not be driven down sufficiently by either OPEC or "non-cartel" producer production caps, or the summer driving season in the U.S. being upon us (despite the weather here in Boston, technically yes, its summer driving season). 

It would seem that the prior rally was a knee jerk reaction to what basically amounted to a baseless hope that somehow OPEC and other producers would be setting limits that actually addressed the ongoing supply glut, and therefore the lackluster pricing. It was unlikely that would be the case, given that the prior meetings we have seen, despite the hoopla, have also failed to address supply in a meaningful way. 

Despite promising to address the fundamentals involved, we've actually seen some ramp up in production on the part of Libya, Nigeria and Iran - none of which had any sort of ceiling placed on them at the recent gathering. 

We often talk about other countries production as being an unpredictable factor in global pricing & supply, however, it's worth noting that U.S. production has ramped back up substantially as well. Current production is around 9.3 million barrels a day (up over 6% from this time last year) and on the rise.Given this, it's not likely we will see OPEC seriously curb their levels, particularly the Saudi's, as the concern over U.S. encroachment on their market share has been inarguably a major driving factor in the current glut and its failure to resolve. Saudi Arabia has been beyond clear that they are prepared to hunker down and withstand whatever price declines are necessary for market share retention, particularly as concerns the U.S. At this point, it's pretty clear they are not bluffing about that. 

Anyhow - Today, unlike last Thursday's wild plunge,has pared losses as the day goes on, while investors factor in the near term projections on U.S. supply reports (due out tommorow, thanks to the holiday) versus the overall global supply picture.

Platts is projecting a draw down of 3.2 million barrels of crude on tommorow's reports, which would be the 8th week in a row, and definitely helped to stem the bleeding today on the NYMEX by close.

At the close we ended out with Crude at $48.32/bbl, July ULSD at 1.5179 (-.0356) and July Gas at 1.5965 (-0278). 

Stay tuned! 

 

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Topics: OPEC, NYMEX, EIA Inventories

Benchmarks & OPEC & Hurricanes, Oh My

Posted by Kelly Burke on Oct 6, 2016 4:33:46 PM

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Crude closed out today at over $50 ($50.44 to be exact) which is the highest close we've seen since June. ULSD closed up .0135 to $1.5958 and RBOB ended up .0050 at $1.4978.

This week the NYMEX has ticked up steadily on all products, holding firm since OPEC announced they had a tentative agreement in Algiers, despite said agreement not being formalized in any way.

Additionally, this weeks EIA inventory report indicated more product draws as well, which pumped prices almost 2% Wednesday. Analysts had projected builds, but the governments official reporting showed US Crude stockpiles dropped 3 million barrels versus the expected a 2.5 million barrel build forecast by industry projections. 

Despite OPEC chatter and EIA draws, its entirely possible we have already seen an outsized pricing build up on commodities, given that the global demand picture is not an overly rosy one, and supply is not in any way guaranteed to either stabilize or drop anytime in the near future - with or without an OPEC agreement. 

Today (and probably tommorow) whats trending in the news is Hurricane Matthew, which is roaring up the East Coast of Florida currently as a category 4 storm, and would be the strongest hurricane to make landfall in the US in about a decade if it should touch down at its current intensity.

We're hearing reports of local gas outages in the Southeast, as residents flee the coastal areas on the advice of Florida governmer Rick Scott and President Obama. However, given that as its currently tracking, Hurricane Matthew is East Coast centered, versus hitting the Gulf, national or regional supply outages are not anticipated. Obviously all of that could change essentially instantaneously however, and we will let you know what we do, as soon as we do, if there are new relevant developments.

 Stay tuned!

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Topics: OPEC, $50 benchmark, hurricane MAtthew

OPEC "Deal" and Inventory Draws Prop Up NYMEX

Posted by Kelly Burke on Sep 30, 2016 4:33:29 PM

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On Wednesday, OPEC countries made a surprise agreement to cap production at 32.5-33 million BPD at their meeting in Algiers (if you’re keeping score at home, current production is about 33.24mmb.. insert yawn here, in other words). This marked the first deal since 2008, largely on account of Saudi-Iranian tensions – more on that later. Oil spiked on the news before backing off slightly over the remainder of the week.

 

Wednesday saw Brent and WTI both surge up over 5% (5.9 and 5.3, respectively). Wednesday ended the day up across the board, with refined products ULSD and RBOB both up over 8 cents on the day (ULSD $1.4910; RBOB $1.4777) and WTI closed out at $47.05/bbl.

 

Analysts are projecting that the OPEC “deal” could add up to $10/bbl to the price of oil. However it is worth noting that there is a reason we put “deal” in quotes – as we have seen previously OPEC is not shy on talking up oil prices, but when it comes to an across the board agreement and even more importantly, ACTION, on said agreements, the jury is still out. Watch for the ongoing standoff slash game of chicken between the Iranians and the Saudi’s to likely cause this so called deal to amount to little more than a few days of upward trending on the screen versus actual, actionable changes to the fundamental supply glut we still find ourselves in.

 

Thursday saw prices continue to climb on distillates, although in a much less drastic fashion as bigger picture doubts about the OPEC deal set in – these were somewhat offset by another draw down in U.S. inventory levels, however, and as a result we saw ULSD gain $0.0192 to close out at $1.5102, RBOB dropped $0.0109 to close out at $1.4668, while Crude settled relatively flatly at $47.83.

 

The EIA report Thursday indicated a 1.9mmb draw down in commercial crude inventories, more than double the API’s projection of a 752K draw, and the fourth draw down in as many weeks. Distillates mirrored crude, also drawing down 1.9mmb, but gasoline saw a build of 2 million barrels to buck the trend.  The timing worked out well on the inventory draws as far as price stability is concerned, given that by the hour the hope for the OPEC agreement amounting to actual supply cuts fades.

Despite the clear incentive for Riyadh and Tehran to bolster their economies and Thursday’s announcement by the Saudis that they are willing to cap production, it’s almost unimaginable that Iran agrees to cuts post sanction lifting, as has been the case for the past several months.

 

Today we saw October trading expire (doesn’t seem possible!) and November trading kept products range bound with WTI closing out at $48.24, up against yesterday’s number. ULSD closed up as well, settling up $0.0281 for November trading at $1.5383, with gasoline again bucking the trend and settling down 37 points to $1.4631.

 

We ought to in theory see either movement on OPEC next week, or see the market shed the bump in pricing. Longer term, it will be interesting to see how things settle out over the next few weeks as we start heading towards the winter and heating oil season – hopefully a colder one than last year’s, at least up here in the Northeast.  

 

Stay Tuned!

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Topics: OPEC, EIA Inventories, wti

Dramatic Inventory Drawdowns Pump Up Prices

Posted by Kelly Burke on Sep 8, 2016 5:02:38 PM

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Crude jumped on today’s inventory report after jumping up on the overnights last night as well. Post close yesterday, the API numbers were indicating significant draws and the EIA release backed that projection up.
The EIA report this morning indicated that Crude inventories dropped by 14.5 million barrels for last week, which is the biggest drop we’ve seen this millennium (since 1999).
Analysts are partly blaming the effects of Hermine on the Gulf Coast delaying production and explaining the draw down in stocks.  
Gasoline stocks also dropped, by 4.5 million barrels, and also unexpectedly.
Today closed out up across the board, with diesel up .0557 to $1.4822, Gas up .0701 to $1.4165 and Crude closing out at $47.62. (significantly up from yesterday’s Crude settle of $45.50)
An interesting aside on gasoline’s jump today was that the lowest Labor Day retail gasoline prices in 12 years were seen this past weekend, and if you jump online there are literally dozens of articles projecting that the post summer driving season price levels for gasoline will drop below $2 per gallon. It’s more likely than not that these articles are correct versus today’s inventory and price rebound. Nothing has changed fundamentally with either Crude or gasoline in terms of long term supply and demand outlooks (despite some new rumblings about Russia and Saudi Arabia, as usual).

Stay tuned!

 

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Topics: CRUDE, EIA Inventories

Dwindling OPEC Agreement Hopes Reverse Rally

Posted by Kelly Burke on Aug 30, 2016 4:00:34 PM

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August has been all over the place. Crude futures this month were up 23% in less than 3 weeks as of the 28th. We've bounced from an August 10th low of $41.71 to an August 19th a high of $48.52 -  and today we’re in the middle at $46.35.

So what’s going on?

Last week, optimism reigned. Longs were up and shorts were way down across the board on WTI, RBOB and U.S. ULSD. Citigroup and BOA/ML were saying the global glut is diminishing based on the narrowing Brent discount we were seeing. That was reflected in last week’s rally but we saw that rally reverse yesterday as hopes backed off on just how quickly we might see that supply glut fade.

So what caused the overabundance of hope in just how quickly the supply glut could fade?

Stop me if you’ve heard this one before: OPEC countries are set to meet September 26-28th in Algiers for “informal talks” in which the Saudis are reportedly “prepared to listen” to the input of the other OPEC nations in regards to agreeing on output caps to curb global oversupply. This drove the market higher on hopes of an agreement propping up pricing longer term, but hopes on any such agreement coming to fruition have begun to drop off.

Déjà vu all over again.

If you recall, the last OPEC meeting had a similarly framed narrative and a similarly bullish impact on the markets a few weeks out from the meeting before falling off, as it became clear that the conference would fail to produce a deal. There was no agreement on output cuts last go around largely because of Saudi insistence that Iran be a full participant in agreeing to output limits, which the newly un-sanctioned Iran obviously refused to agree to.  Given the dynamic there has not changed substantially it’s hard to imagine that a meaningful deal is reached this time either.  

That seems to be the conclusion that traders reached as well just like leading up to the prior meeting. Today saw Crude close out at $46.35, down marginally from Monday’s close but over a dollar down from Friday’s $47.64. (ULSD and RBOB followed suit, dropping -.0151 and -.0186 respectively for August trading)

What’s becoming interesting about the other dynamics involved in the OPEC meetings is Russia realistically needs an agreement sooner rather than later. While they are not in Venezuela style meltdown yet, a huge portion of their revenue depends on oil and the ongoing standoff with the Saudis on over production for market share retention will presumably hit breaking point at some time, as both Russia and Saudi Arabia hemorrhage money.

Meanwhile, it looks like long term the supply situation may correct itself, and largely courtesy of the Russia/Saudi standoff, somewhat ironically. Bloomberg is reporting that oil discoveries have plummeted to lows not seen in over half a century as a result of ongoing price depression that has halted new discoveries by severely curbing investment in drilling and exploration. This is especially notable in the U.S. where exploration is at multi year lows after the crash in prices from 2014 highs.

So although this OPEC meeting is unlikely to produce an agreement to cut supply and stabilize pricing this time, in an odd twist of fate, ultimately the ongoing standoff may push long term pricing up over time regardless of OPEC input.

Stay tuned!

 

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Topics: OPEC, russia, WTI Crude, saudi arabia, oil glut

OPEC & Inventories Close Out August NYMEX in Bearish Territory

Posted by Kelly Burke on Aug 1, 2016 3:45:26 PM

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After a strong start to the month of July post Brexit, markets settled down again today after closing out August's futures yesterday. 

Today's close saw Crude touching the $40/bbl mark at $40.06/bbl, this coming just a few weeks after it appeared we had essentially rebalanced and analysts were looking at Crude staying range bound $45-$50 bbl. Now we are, according to some analysts, looking at a $38 target.

The last week of July delivered a few knocks courtesy of Reuters who reported on 7/29 that OPEC had produced 100,000 additional barrels per day in July, the increases coming from Iraq and Nigeria. If you recall, Nigeria has been dealing with militia attacks on its oil refineries and recently hit 20-year lows on levels of export.

Incidentally, those Nigerian refinery attacks had pushed Crude to over $50 ($51.23 to be exact) in June, its highest since July 2015 - and now we are seeing Crude start to slide back to April lows after July 2016 saw a drop of over 15%. To put that in perspective, we are still up almost 50% from the low for this year in February but it does appear that once again the bears are in sell mode due to perceived oversupply.

(And keep in mind that "oversupply" is with a Nigeria that has not fully recovered capacity, and with domestic turmoil in Venezuela and Libya limiting their production as well. Essentially - the glut could get a lot worse, very quickly, depending on how the domestic situations play out in those 3 OPEC countries.) 

This summer saw seasonal gasoline stockpiles hit 25 year highs, which according to reports, caused refiners to begin blending winter grade gasoline early. Ironically, refiners made a similar decision in the face of lower winter demand and began blending summer gas early this year, and that is probably partially to blame for high inventories that plagued pricing this summer season. Also of note is that due to these inventory levels, forward market pricing for gasoline was not showing the usual slide that precedes the switch to winter blend gasoline (often of around 20 cents or thereabouts) we normally see starting to develop right around the end of July. 

At the end of the day, despite production disruptions in Canada and Nigeria, anticipated economic fallout from Brexit, more terrorist attacks, and dropping domestic production - supplies have gone from what looked like a rebalancing to oversupply once again. This has kicked the NYMEX back to the bearish side, which still sort of amazing when you think about how sharply a single one of the events just mentioned could have spiked the market prior to the US shale boom.

Stay tuned!

 

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Topics: OPEC, Brexit

BREXIT Surprise Sends Financial, Oil Markets Reeling

Posted by Kelly Burke on Jun 24, 2016 4:53:56 PM

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Yesterday traders across the globe were all but certain that Britain would never vote to leave the EU. As a result we saw confidence in the markets, including oil.

100% of those traders were apparently incorrect. 

Today we saw Japan shut down trading, the pound lose over 15%, oil markets tumble and Wall Street get hammered. The Dow closed down 600 points today, the worst day since 2011 - all of this in the wake of Britain indeed voting to leave the European Union. 

On the commodities side, while gold and the dollar went up, WTI slipped 4.9% (over $2/bbl)  to close out at $47.64. Gasoline tumbled $.0785 to $1.5250, and ULSD dropped $.0653 to $1.4553.

So what now?

Many analysts think that oil prices will rebalance and stabilize given the UK is essentially irrelevant to global oil demand, and therefore pricing.

Others caution however that this move by Britain may signal rough waters ahead for the European Union and its economic growth - and therefore oil demand, which could increase supply versus demand. 

With the British pound's slip comes a necessarily strengthening dollar, which would argue aginst a precipitous slide in oil prices, given the backdrop that production and demand issues aren't, at least in the near term, greatly impacted by the Brexit vote. (Backdrop being U.S. Rig counts are still by and large declining with the exception of a few pop ups, the new Saudi Oil minister is still seen by many as a step forward in market stability, etc etc...). However, its also likely the dollar is extra overpriced today simply because of its strength relative to the pound, which ought to also rebalance - at least in theory.

After one hell of a suprise Friday - Next week should be an interesting one on the markets, to say the least. 

Enjoy the weekend, everyone. If you need us, give us a shout. 

 

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Topics: European Economy, CRUDE, Dollar Strengthens, Brexit

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