Kelly Burke

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NYMEX Keeps Sliding on Dollar, Iraq, Margin Rates, and The Fed

Posted by Kelly Burke on Dec 4, 2014 3:54:48 PM

Line charts depicting the stock market scattered on a table

Oil prices kept sliding this week on positive signs, despite a draw in US Crude supplies. 

Tuesday dropped on news of Iraqis striking an export deal with the Kurds that will resume the flow of oil from Kirkuk that had essentially been stalled out previously. Brent responded to the news by almost completely reversing its 3% gain on Monday and settling down $2 to $70.54. WTI, which was up 4% on Monday also dropped a little over $2 to close out at $66.88.

Besdies the Iraqi deal, factors in play in the selloff were also that the CME Group raised initial margins on crude oil futures by almost 16% which probably spurred sell offs, and the dollar also hit a 4 year high, which continued to push commodities down across the board. 

On the NYMEX Tuesday both products tanked,  ULSD ended up at 2.1544 (-.0580) and gas closed at 1.8116 (-.0694). 

EIA Inventories out Wednesday saw draws on Crude (-3.5MMbbls) with builds in distillates and gasoline. NYMEX still closed down, although far more moderately than Tuesday's drop off, with ULSD settling out at 2.1334 (-.0210) and Gas settling out at 1.807 (-.0046). 

The Fed's "beige book" notes came out Wednesday as well and were generally positive on the economy as a whole  and referenced the growth potential from lower energy prices, especially from consumer spending.

There is also some positivity in the shale situation, despite the falling prices from oversupply, analysts are still predicting a minimum increase in production for 2015 of 500,000bpd, in addition to production from new Gulf projects set to come online in the near future. 

Today the trends continued, with Crude landing at 66.81 (-.57), ULSD settling out at 2.1177 (-.0159) and gas at 1.7948 (-0114), possibly on the belief that we're going to see a positive jobs report tommorow. Will be interesting to see how the market reacts to its release. (When was the last time anyone guessed the jobs report numbers correctly, anyway?)

Stay tuned!

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Topics: CRUDE, NYMEX, FED rates, EIA Inventories, Iraq

Double Black Friday - Commodities & Spending Both Dropped Off

Posted by Kelly Burke on Dec 1, 2014 11:44:34 AM

Black Friday overlaid on dollars

A doubly "Black Friday" this year as OPECs decision resulted in a commodities free fall. The second part is that it was hoped that the relief consumers have been getting at the pump since the summer would have helped boost retail sales for the season. As the numbers are coming in though, it's not looking good.

Despite the mayhem in shopping centers we've all seen on YouTube, it looks like Black Friday spending was down 0.5% or so this year over last (bad news, as last year was not a stellar one). 

Today is cyber monday - but dont look to that for relief and an influx of money to retailers either - analysts project that Cyber Monday sales will be off around 3% this year over last. 

The NYMEX was down this morning but has rallied into positive territory again, but who knows for how long. 

Analysts across the board are now pegging the new "floor" price to be around $40/bbl, with Murray Edwards, the Canadian Natural Resources Chairman saying WTI could drop to $30, although he does not expect thats where it would stabilize for very long. (As reported in Business Insider this morning).

Why so low? 

Well, the global picture is still lackluster, to put it as kindly as possible. Japan is back into a recession, and Moody's downgraded their credit rating. Chinese economic growth is still in the toilet, which puts their demand level in the same place.

It appears the move by OPEC to keep prices falling to maintain market share is working, US exports to Asia have essentially screeched to a halt as low Middle East prices become more attractive to the Asian markets. 

It's not all doom and gloom from the analysts though, Goldman Sachs maintains its $75/bbl forecasted price for WTI for 2015, maintaining the assumption that the OPEC move is to slow US production by reducing profitability and "test the bottom" as it were. However, once they get a feeling for the level they may want prices to start going up again, as so many OPEC nations economies rely on oil generated revenue. Its probably likely Russia enters the debate soon as falling oil revenue is tanking the Ruble and their general economy is really feeling the pinch. 

Stay tuned!

 

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Topics: Commodities, US Energy Boom, OPEC, russia, WTI Crude, consumer spending

OPEC Decision Puts NYMEX into Free Fall - Gas Closes Under $2!

Posted by Kelly Burke on Nov 28, 2014 2:57:54 PM

OPEC nation flags in a circle around an oil rig

The market is tanking across the board (and dragging the S&P with it) on the results of the OPEC meeting for November on Wednesday. The meeting officially cemented the long suspected decision by the cartel to keep oil production and output at current levels, despite the crashing prices and global glut of Crude oil. 

Saudi Arabia determined production would remain at current levels - as the largest producer in the group, they essentially set the policy. Several smaller members reportedly wanted to curb supply to raise prices, largely because a huge part of their country's economy runs off of the money generated from oil sales. 

Today we're just watching product prices tank across the board, Crude is below 70 for the first time in almost 5 years. Today's trading alone saw a 9% decline in price. Yowza.

Crude closed out the day at 66.15, -7.54/bbl.

ULSD closed out -.1657 to 2.2308 for December and -.1679 to 2.1612 for January (this was the last day for DEC trading)

Gas closed off -.1312 to 1.9039 for December trading and -.1843 to 1.8276 for January. Under 2 dollars on the screen?! Its been quite some time since thats been the case!

There could be some interesting geopolitical and other ramifications from the record drops on commodities. Countries like Russia who base a lot of their economy on projected oil revenue are really feeling the decline, and we will have to see how long their economies can withstand the steep drop in renevue. 

Domestically, the resultant falling gas prices are a positive for consumers obviously. They can also be a huge relief to construction, manufacturing, and transportation companies, as well as general retailers.

Its said that every ten cent drop in the price of gasoline unlocks 3 billion dollars to be spent elsewhere. (According to Wells Fargo). We may get a quick confirmation or refutation of that theory when the numbers start rolling in on the prime shopping season that kicked off today with the infamous "Black Friday", the Superbowl of shopping. 

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Topics: CRUDE, OPEC, NYMEX

NYMEX Tanking Despite Inventory Draws

Posted by Kelly Burke on Nov 13, 2014 2:20:00 PM

Line charts depicting the stock market scattered on a table

 

The EIA inventory report for the week ending November 7 showed draws in Crude & Distillates, with a build in gasoline. Crude drew down 1.7MMb and distillates drew down 2.8MMb, while gas built 1.8MMb.

Watching the screen though, you wouldnt think we showed draws - ULSD and RBOB are both dropping like the proverbial stone - both products had intraday lows well over 6 cents, with gas dropping down 8 for a few. 

UPDATE - ULSD close 2.3621 (-.0848) and Gas -.1054) - Yikes!! January& February gasoline closed under $2 at 1.9827, and 1.9899, respectively

So whats going on? Why even with a draw down on products, and once again heightening tensions in Russia/Ukraine are commodities dropping?

The jobless number report was higher than anticipated by about 10,000, but the numbers are still are hanging near a 14 year low so that ought not be a huge factor in either commodity numbers, or the stock market. The stock market, by the way, is retreating a little from it's record highs and hanging flat on the back of falling energy shares once again, due to falling prices. 

We still are in the same situation with OPEC and American production being sky high, and global demand due to economic growth being anemic at best, so the dismal supply demand situation is still at play.

Going out on a limb I would credit the extra oomph of todays drop off to lots of news regarding Keystone - with a bill being pushed through to the Senate that will actually make it to the floor, things are being shaken up on the energy front. Word is, in an attempt to save the seat of Landreiu, from Louisianna, who faces a runoff election challenge next month, Senate leader Reid has agreed to allow the legislation to the floor. 

Although most talking heads seem to think Obama will veto - still, the implication is that the midterms probably will be forcing some of the top energy agenda items through, and thats good news  - unless of course you fixed high, in which case dropping energy prices might start hitting you in the wallet very soon. 

How low can we go?

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Topics: Keystone XL, RBOB tumbles, NYMEX, Crude draws, EIA Inventories

NYMEX Flips on EIA Data, Stocks Continue to Surge

Posted by Kelly Burke on Nov 5, 2014 3:33:09 PM

 Line charts depicting the stock market scattered on a table
 
Analysts predicted Crude would build in the neighborhood of 1.2million barrels for the week ending October 31. The market hung flat until the report's release at 10:30 this morning and initially jumped up after.

The EIA data showed builds of only 0.5 MMbbls on Crude and draws in all other products. Distillates were down 0.7MMbbls, and Gasoline was down 1.3MMbbls.

The Market jumped up over 3 cents at 11 after the report came out, but has since backed off significantly with ULSD hanging up relatively flat (.0025 - .0049 range) and gasoline hovering up almost 2 cents (.0187) for most of the early afternoon.

The Dow, Nasdaq, and S&P 500 all surged into positive territory today. Historically, stocks tend to go up post Midterm elections as there generally is a lot of uncertainty leading up to them, and traders may have a clearer picture of what agenda items will be moved on and their results once the dust settles and the votes are cast.

Also, as we mentioned, the ADP report was good for October, which is always a positive.

The commodities price slide we've seen has hit the brakes on the newest EIA Inventory reporting, which is probably why the S&P isnt dropping on energy share prices. Exxon, Chevron and Shell are all trending up this afternoon.

At the close, ULSD settled out -.0040 to 2.4387, and gas settled up +.0087 to 2.0867. The Dow is set for a record close, the S&P is holding strongly positive and the Nasdaq is falling slightly. Crazy, crazy day on the markets!

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Stocks Rebound on Election, Energy Shares Continue to Falter on Cheap Crude

Posted by Kelly Burke on Nov 5, 2014 9:51:45 AM

Stock market numbers on a digital board

The Dow & Nasdaq were up in pre-market trading on news of a Republican sweep last night, and stocks are continuing to rebound this morning after Tuesdays drop off. The exception to this rule being energy shares, which are pulling the S&P down on the back of plummeting Crude prices. 

The ADP report on October job creation came in at 230K, 10K above the projected number. Strong payroll numbers for October and September, continually falling initial jobless claims and a surprisingly good Q3 growth number (3.5%) are all good signs for the overall economy.

However, there is still the factor of weakening global growth and demand, which will probably keep the domestic growth pace a lot slower than we'd all prefer. The Q4 growth number is expected to be much less exciting than Q3, thanks to global concerns. 

We saw WTI touch on a 3 year low yesterday on the back of the Saudi price cuts, oversupply, and booming production in the US. This is pulling energy shares down and impacting oil field companies and major industry players, as Crude starts to touch levels that make expensive shale play exploration an increasingly less profitable proposition.

 The Platts pre-report on US inventories is projecting the EIA report will show another build in Crude of about 1.2million barrels. Currently the NYMEX is relatively flat ahead of the EIA report's scheduled release at 10:30 this morning.

We should see then if the analysts got it right, and what, if any, impact the stock data will have on pricing moving forward. 

 

 

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Topics: US Energy Boom, CRUDE, WTI Crude, EIA Inventories, stock market, Election Results

Election Day Free Fall for WTI, Stocks

Posted by Kelly Burke on Nov 4, 2014 11:31:54 AM

Line charts depicting the stock market scattered on a table

Everything is dropping across the board today - WTI is maintaining itself under the $80 benchmark (currently -1.76 at 78.78/bbl), Gas and ULSD are both down over 5 this morning on the NYMEX and the Dow and Nasdaq are both following suit into the red. 

So whats going on?

The reason the dropoff has escalated today in particular is likely due to the Saudi announcement that they will discount Crude imported to the US, which has really ramped up the economic pressure on fracking companies.

It appears the Saudi price pressures are starting to take effect on American production, with Chevron and Shell both announcing scale backs in popular shale plays and exploration proposals.

The estimated cost per barrel extraction in the US is around $60, which is about double the production cost for the Saudis. So when WTI is getting toward the mid 70's/bbl the profitability starts to drop off, and quickly. 

Additionally, the trade deficit is at a 4 year high, as global growth remains at a crawl, further dropping demand and therefore prices in the face of ever increasing supply. Slow global growth demand plus a strong dollar put a damper on exports. Additionally, construction spending fell in September, so the economic outlook for Q4 aint looking so good, and seems to be bringing the bears out across the board.

Stay tuned!

 

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Topics: Fracking, OPEC, WTI Crude, stock market

Goldman Sachs Cuts Price Forecast for Oil: Projects $75/bbl Benchmark

Posted by Kelly Burke on Oct 27, 2014 4:38:05 PM

Line charts depicting the stock market scattered on a table

Goldman Sachs has revised its projected oil prices for 2015 to $75/bbl for WTI and $85/bbl for Brent Crude, in response to ramped up supplies and slow projected global economic growth. 

Production from the US, Brazil, and the Gulf is projected to increase almost 1 million bpd, combined, and OPEC production is assumed to remain more or less stable - with gains in Iraqi production and drops in Libyan output essentially cancelling one another out. 

Like wev'e talked about, OPEC may curb production to offset the decline at some point, and analysts seem to think 75 may be the price point at which US shale production slows and spurs OPEC to drop production. Its unlikely they will make major moves until US production shows signs of slowing against low margins, or thats the prevailing theory, anyway. 

Oil was down today on that and other ho-hum economic news, and stocks fell in tandem. Europe settled 2.2 billion in bond purchases today in a preventative move against deflation, and the re-election of Brazilian President Rouseff reversed the hope some had that the country would move in a more positive, business-friendly direction. 

On the NYMEX, ULSD closed off -.0066 and gas settled out at 2.11702, down -.0115 for the day. 

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Topics: Goldman Sachs, Brent Crude, OPEC, WTI Crude, stock market, shale

OPEC Chatter Drives up BRENT, Friday Trading Reverses CRUDE Rally

Posted by Kelly Burke on Oct 24, 2014 1:52:54 PM

Line charts depicting the stock market scattered on a table

Thursday saw prices tick up after it was reported that the Saudi's output dropped from 9.69 million barrels to 9.36 million barrels. There has been some chatter and concern around the scheduled OPEC meeting in November. The concern being that OPEC will push curbing supply to stop the price declines we've seen in recent months. Brent Crude was up 3% on the news, the highest its been in 4 months.

However, despite the OPEC chatter, the Saudi's have said they will keep output at scheduled high levels even with lower pricing to maintain market share. Additionally, reportedly only a small number of members have suggested supply curbing.

US Inventories surged on this weeks EIA report as well, up 7.1 million barrels to a little over 377 million barrels, which was about twice what analysts predicted, and hopefully helps to calm some of the potentially unfounded fear of OPEC that's pushing volatility. 

If we look back, the 20% drop in crude pricing we've seen over the past several months have been directly related to an abundance of supply, and with US oil production surging ahead, and the Saudi's not indicating they will initiate any sort of hold back to drive prices up, the situation remains the same and the volatility should back off. However, it's possible that some roller coastering will remain until after the meeting, when its officially settled whether or not we have to worry about supply curbing. 

The market seems to concur today, though, with both Brent and WTI trending back downwards.

ULSD & RBOB are trending down on the NYMEX today as well, down about a penny and a half on both at the moment. Both products closed up significantly yesterday - ULSD +.0256 to 2.499 and gas up +.0513 to 2.2069, which effectively cancelled out Wednesdays drops of .0398 and .0578, for those keeping score at home.

 

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Topics: Brent Crude, CRUDE, RBOB, OPEC, WTI Crude, EIA Inventories, ulsd

OPEC Tensions and "Break Even" Testing Pause NYMEX Dropoff

Posted by Kelly Burke on Oct 17, 2014 9:08:15 AM

Abstract image of an oil rig, dollars and a calculator

Thursday we saw ULSD settle out to erase most of Wednesdays drop - Wednesday it closed down -.0136 to 2.4586, and Thursday settled out at 2.4703 (+.0117). Gas not only erased Wednesday's 3 cent drop, but rebounded up +.0622 for the day to 2.2109. This morning, ULSD is trending up about a penny/penny and a half, while gas is hanging in the +.005 range, both having backed off earlier jumps.

So what's going on?

EIA stock reports came out Thursday (thanks to Columbus Day) and showed a build in Crude (+8.9 million barrels), a drop in gasoline (-4 million barrels) and distillates were down as well (-1.5 million barrels). CRUDE actually hit a 52 week low for a brief moment Thursday morning prior to the reports' release but ended up settling out at 82.70

With a decent stock report though, why is everything up when we've been on such a streak? Most likely culprit is the increasing tension slash standoff within OPEC. Historically, when prices dropped below a certain benchmark and started impacting the revenue of OPEC nations they could slow production output somewhat to stabilize. 

But now with thee US becoming a major player in global supply, thing have gotten a little awkward. Its possible that normal rampdowns in output will no longer have the huge impacts on price they once did, given that these nations are now not essentially the only players making an impact. 

However, a lot of analysts speculate that the reason OPEC is taking the giant hits to their nations' revenue without stalling production is an attempt to "find the bottom" and let supply run up to test what level American production can maintain in the face of dropping prices, especially given that the projected minimum level would be around $80 in order to still be profitable production from Shale.

Additionally, in comparison to OPEC operations, a lot of American projects are just that - projects - and in the face of falling revenue, its possible some of the higher cost, longer payout projects will stall out. However, given the remarkable jumps in efficiency from fracking to refinining we've seen domestically, it will be interesting to see where that level might actually be.

Given the weakness of the global economy, raising prices may be a tricky game with less return than anticpated as well, given the concurrent drop in demand. Saudi Arabia, who produces about a third of the OPEC output also looks motivated to maintain market share by any means necessary even at a short term loss in revenue. Specifically it appears motivated to maintain market share in the Asian teritorries - which will probably become even more relevant to them over the coming years, especially if the Alberta to St John pipeline project is approved which would open Canada up to export and become yet another global competitor on supply. 

 

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Topics: CRUDE, OPEC, EIA Inventories, shale

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