Crude Continues to Drop on Supply Estimates & Manufacturing Speculations

Posted by Kelly Burke on Apr 1, 2014 1:44:21 PM

Crude - both Brent and WTI - continued to drop today on speculations of another inventory build on tommorows EIA report. According to a Bloomberg survey, tommorows report may show increases of 1.8mbl up to 2.5mbbl. The prior weeks report (the tenth increase in a row) indicated US Crude inventories climbed to 385 million barrels, the highest on hand since November, with PADD 3 numbers (Gulf Coast) hit over 200 million barrels, the highest since 1990. 

Additional domestic factors in the market drop is an anticipated failure of US Manufacturing increases to meet projected gains. Internationally, China is showing a drop in manufacturing index to below 50, signaling a contraction in the sector. Euro zone manufacturing is expected to show stagnant to weak numbers as well. Overall, global economic indicators are not very confidence inspiring, and in combination with increasing supply, and the impending end of the heating season in the US, we should see the market continue a downward trend, assuming EIA reports back speculative numbers. 

Last week's jobless numbers saw an unanticipated drop of 10,000 initial jobless claims. It will be interesting to see what this Friday's numbers look like - a continuing downward trend would be a positive economic sign, but time will tell what the overall impact will be. 

 

U.S. crude oil stocks graph

(Image Credit: EIA.gov)

 

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Topics: EIA, Brent Crude, Brent vs WTI, Jobless numbers, US Manufacturing Data, WTI Crude

Houston & Ukraine Concerns Drive Early Week's Market Swings

Posted by Kelly Burke on Mar 26, 2014 2:29:49 PM

 

Sinking barge

(USCG Photo/Reuters)

The first half of the week saw futures up and down on reactions to international tensions, and on the news of the 22nd’s collision between a bulk carrier and a barge resulting in the temporary closure of the Houston shipping channel connecting the Gulf of Mexico with Gulf Coast refineries. The collision resulted in a spill of up to 170,000 gallons of bunker fuel into Galveston Bay and caused immediate closure for cleanup operation, according to the AP in Houston. Tuesday saw the channel partially reopen, but the Coast Guard reported it would be an additional several days before it reopened to full capacity. About 10% of US refining capacity is based in the Gulf area. The positive news is that the channel will reopen relatively quickly and isn’t anticipated to have any long term price implications.

Of more concern for long term energy pricing is the growing and continued tension over Russia’s annexation of Crimea, and the potential impacts on the European energy situation that could hike prices significantly. We will likely see impact of US and/or G7 proposed sanctions begin to hit the markets this week or next, especially if significant action is taken on the proposed intervention on Russian oil nat & gas dependency, and on Emergency Funding measures for Ukraine. In the US, the Senate voted down the IMF/Ukraine Emergency fund Legislation presented on Tuesday, but another vote on the bill without the more controversial IMF reforms included is scheduled for Thursday, and according to both Speaker Boehner and Senate Majority Leader Reid, it is expected to pass both houses.


 

 
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Topics: Gulf Oil Leak, G7 summit,, Putin,, ukraine,, Houston Shipping Channel,

"Polar Vortex" saw Nat Gas hit Record Highs

Posted by Mark Pszeniczny on Jan 31, 2014 3:41:00 PM

Natural gas hit $5/mmBTU on the NYMEX for the first time in over 3 years last week, over concern about supply and a increase in demand due to to continuing frigid temperatures throughout the country. As of Jan 30, prices have backed off some but the underlying supply issues behind the spike may still play a relevant role in Nat Gas volatility going forward. 

The spike involved inventory reports showing Nat Gas storage 13% below the 5 year average which raised some supply concerns. Additionally, production can be affected by extreme cold by what are referred to as "freeze offs" - pipes become constricted from frozen liquid, diminishing their output capacity. Analysts speculated that if the cold extends well into February, we may not see the anticipated price corrections as continually high demand will push prices up further. Again, prices have backed off a little bit, but with another cold snap we could be having deja vu on the issue.

Natural Gas has been touted as a cheaper, more efficient way to heat than using heating oil (the EIA estimates 50% of Americans use Nat Gas as their primary heating source, compared to roughly 6% on heating oil, the majority of which are in the North East). A major selling point when heat prices skyrocketed was that Natural Gas prices were less volatile - but as Natural Gas conversions to homes and buildings happen left and right, and Nat Gas spikes on the NYMEX is that really true anymore?

Looking at prices for Nat Gas versus Heat isn't apples to apples given the way each is measured, but if you convert the cost for Natural Gas versus Heating Oil per therm you can get an idea of the comparison.  

You get about 35% more BTUs out of oil, so basically if Nat Gas ends up landing at a spot where its not at least 40% cheaper than oil, the price advantage breaks down. Additionally, thats product cost alone, not factoring utility fees and the like. 

Currently Natural Gas still strongly holds the price advantage, but without serious pipeline and transport fixes, supply crunches will likely continue - particularly in the Northeast where spot prices are incredibly higher than the national average. It will be interesting to see how prices settle out (or not) over the coming months.

 

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Topics: NYMEX, Commodities, natural gas

Futures Firm After Almost 2 Week Correction

Posted by Mark Pszeniczny on Jan 10, 2014 4:58:00 PM

NYMEX values appeared to find support just above the 2.90 level on front month HO after a long cold stretch.  The Polar Vortex that gripped a large portion of the Country, and plagued us in the Northeast with long terminal lines, appears to be subsiding.  Many of us are getting a well deserved breather as we return to somewhat normalcy.  

The recent correction has shaved off roughly 18 cents on Heat and close to .20 on RBOB.  Bulls returned as new unemployment figures were released showing that while the actual rate was down to 6.7%, the economy failed to add the expected 200k jobs in the last month.  Many point to the loss of December seasonal workers and the fact that more and more Americans have simply stopped looking for a job.  This caused the greenback to fall, thus pushing Commodities higher.  The new talk will ultimately put immediate pressure on new FED Chief Yellen and her stance on any new rate changes.  Strong foreign import data also put supported markets as China was said to have a nearly 14% increase in Crude over the last 30 days.  Look for next week to be a choppy session with HO testing and ultimately bouncing off the 2.90 mark.  

 

At the Close, Crude added  1.06 to close at 92.72, RBOB closed up .0265 at 2.6691, and heat settled out +.0193 at 2.9407

RBOB Close
                      CLOSE     CHANGE            
FEB   2.6691         +.0265
MAR   2.6797         +.0245
APR    2.8547         +.0217
MAY    2.8511         +.0207
JUN    2.8272         +.0202
             JUL    2.7949         +.0190     
HEAT Close
      CLOSE            CHANGE
FEB   2.9407        +.0193
MAR   2.9234        +.0180
     APR    2.9100        +.0167     
 MAY   2.9019        +.0159 
JUN   2.8968        +.0157
 JUL   2.8948        +.0153

 

 

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Topics: CRUDE, Jobless numbers, FED rates, Dollar falls, Commodities, Chinese Crude Builds, Yellen

Distillate Inventories Carry Futures Higher

Posted by Mark Pszeniczny on Nov 20, 2013 5:25:00 PM

Last night API's set the early tone for todays rice action as preliminary numbers showed large draws in distillates.  Those numbers were confirmed this morning with the EIA releasing a staggering 4.8mbl draw in distillates vs expectations of a mere 700k.  Gasoline was down slightly at 345k and Crude showed a slight build at 375k bls.  On the surface it appears distillate demand is on the rise, not only in the US, but also from an export position.  Soon after the data released, pits jumped almost .04, and stayed in that range for most of the afternoon.  Supporting the bullish price action was FED meeting minutes which appear to confirm last weeks chatter that we will start to see some significant unwinding of the Bond buying program in the months to come, as well as a positive retail report for October.  The hope is that a positive October doesn't turn into a lackluster November and December which is often the case in the retail world.  News hit mid afternoon of US-Iranian talks ended almost as quickly as it started, one report said the talks lasted less than 10 minutes with few words spoken.  Even with the draw in distillates, the market appears to be well supplied as Crude actual lost .01 to close out at $93.33, RBOB added .0235 to $2.6630 and HO led the gainers settling up .0487 to $2.9545.  Again, well within its comfort zone.

RBOB Close
                      CLOSE     CHANGE            
DEC   2.6630         +.0235
JAN   2.6458         +.0259
FEB    2.6483        +.0257
MAR    2.6609         +.0253
APR    2.8241         +.0239
           MAY   2.8209         +.0227         
HEAT Close
      CLOSE            CHANGE
DEC   2.9545    +.0487
JAN   2.9528     +.0464
     FEB    2.9503     +.0431   
 MAR   2.9449     +.0397
APR   2.9355    +.0361
 MAY   2.9267    +.0327
 

 

 

Line graph

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Topics: Iran, EIA, API report, Inventory Draws, FED rates

Renewed Global Concerns Reverse Tuesday's Futures Sell Off

Posted by Mark Pszeniczny on Nov 13, 2013 2:07:00 PM

We have all been in this far too long to get overly excited when the pits fall a few cents - like New England weather, wait and it will change.  

The recent sell off was primarily pinned to the expectation of growing Crude supplies (released this week on Thursday due to the Holiday), a better than expected Jobs report, and the talk of unwinding the government bond buying program.  That all came to a halt this morning as renewed concerns of global strife, specifically Libya, filled the newswires.  

Brent Crude surged early and brought the US markets along for the ride. Still, I have to give weight to some of the technical aspects, as HO has bounced higher again after touching the 2.85 level.  Recall, this has been the much talked about seasonal support level that has yet to be broken for more than a session.   

Heat still remains comfortable trading in the wide range of 2.85 to 3.05, with small breakouts to either side.  One would expect RBOB to get more volatile as global demand expectations have recently been revised higher and the current values appear to be relatively inexpensive.   

At the close, Crude gained .84 to $93.88, RBOB closed up +.0416, and HEAT settled out +.0445

 

RBOB Close
                      CLOSE     CHANGE            
DEC   2.6280         +.0416
JAN   2.6131         +.0387
FEB    2.6180         +.0359
MAR    2.6304         +.0337
APR    2.8004         +.0323
      MAY   2.7990         +.0344      
HEAT Close
      CLOSE            CHANGE
DEC   2.8977        +.0445
JAN   2.9014        +.0434
     FEB    2.9041        +.0419     
 MAR   2.9024        +.0405 
APR   2.8988        +.0393
 MAY   2.8955        +.0386 

heat chart 2013 november

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Topics: Brent Crude, Jobless numbers, Libya, Market analysis, CRUDE, RBOB

Futures Continue to Rebound After Early Week Sell Off

Posted by Mark Pszeniczny on Sep 26, 2013 5:00:00 PM

Front month Heat continues to find comfort above the 2.95 level as traders weigh the recent barrage of news.  Earlier in the week, many feared an almost inevitable Government shutdown, but those fears were erased late Wednesday as a House Bill passed that would fund activities for the next several weeks.  While Inventories were in my opinion somewhat Bearish, the news didn't take so well yesterday and pushed futures up slightly ahead of today's report that showed the US economic growth rate fell in line with expectations with an increase of 2.5%.  Additionally, new applications for unemployment benefits fell by roughly 5000 to 305,000.  The Bullish overtures of a growing economy almost always will spur a rise in Commodity futures.  The Syrian problem continues to drag on in a political stalemate as Russia successfully blocked a UN resolution which would have authorized military strikes.    While news may be what most are pointing to as the driver, one must give the technical analyst his due.  The Failure of front month HO to settle below the 2.95 mark has spurred buying over  the last two sessions.  This level continues to be a huge support area.  At the Close, Crude gained .37 to $103.03, RBOB added .0321 to $2.7050 and HO settles up .0306 to $3.0037

RBOB Close
                      CLOSE     CHANGE            
OCT   2.7050        +.0321
NOV   2.6887        +.0318
DEC   2.6647        +.0286
JAN    2.6557       +.0276
FEB     2.6583      + .0272
              MAR    2.6675      +.0269                 
HEAT Close
      CLOSE            CHANGE
OCT  3.0037        +.0306
NOV   2.9993      +.0280
    DEC     2.9930    +.0272     
JAN     2.9885     +.0265
FEB    2.9824    +.0251
MAR  2.9689     +.0234


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Topics: unemployment benefits fall, government shutdown, Futures, Syria

Markets React to Syrian Conflict and Implications of US Intervention

Posted by Mark Pszeniczny on Aug 28, 2013 3:42:00 PM

As news continually breaks on developments on the Syrian conflict and the potential implications of US or other world power intervention in the region, stocks are dropping and commodities are going through the roof.

US Secretary of State John Kerry announced this week that there was “undeniable” evidence that the recent chemical weapons attacks in Syria were perpetrated by the Assad regime. The announcement in tandem with the presence of UN Weapons inspectors being fired upon in the country prompted speculation that the US may intervene with military action. Additionally, the
recent attacks cross the “red line” declaration issued by the Obama administration several months ago regarding chemical weapons.

The threat of US intervention has prompted Global Markets to react heavily to the news. In the US, the Dow fell Tuesday by over 170 to hit a two month low of 14,776.13 and the Nasdaq fell 78.13 points to 3579.44. Stocks took a hit while commodities shot up, notably gold in both the US & Canada. Brent Crude hit a six month high on Tuesday in the wake of the rumors of
military action, and US Crude rose over 3 dollars as well. Oil Prices have risen 15% over the past 3 months on concern over violent civil war in Egypt, and now conflict in Syria is pushing them even higher.

The issue with Syria is complex – Syria itself is not a major exporter. The issue is essentially concern that US intervention in Syria will spark regional unrest as well as create increased tensions with other major world powers, specifically Russia and China. Consensus seems to be that the major issue with intervention in the conflict could interrupt export and production schedules, particularly those in Iraq and Libya, according to cbc.ca.

It’s estimated that about 1% of global oil supply runs through the bay of Iskenderun in Turkey, only a few miles off the Syrian border, and tensions in Syria could threaten this export route, according to Olivier Jakob of Petromatrix in Reuters on Tuesday. Disruption of this supply
route would have a deep impact on European and Asian markets, particularly if tension spreads throughout the Middle East, which produces over 1/3 of Global Oil supply.

 

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Topics: rising gas prices, CRUDE, European Economy, Eygpt, Syria

NYMEX Futures End Positive for Fifth Straight Session

Posted by Mark Pszeniczny on Aug 15, 2013 4:23:00 PM

All news today was nothing but feed for the Bulls that have been in control of the pits over the last week.  After HO dipped below 2.95 late last week, buying has come back with force.  Today was strong out of the gate and while RBOB was tamed slightly, HO kept right on rolling.  NOAA models now show Tropical Storm Erin churning in the mid Atlantic with an expected path set on Puerto Rico for sometime late next week.  First storm of the season always brings the buyers out.  Data on the economic front showed the US had the lowest unemployment claims in just over six years.  While this is good for the economy, not so good for Future pricing.  Along side that, most now expect the FED to significantly slow down their Bond buying program over the next sixty days as the economy shows signs of improvement.  Finally, the continued and recently heightened unrest in Egypt, has many concerned over the regions safety.  Egypt largely controls the Suez canal which is a vital shipping lane for Crude barges, anything that can remotely affect Crude shipments will push futures higher.  Still optimism remains as RBOB shrugged off the news and was only able to muster a 15 point gain to close at $2.9845, while HO jumped another .0250 to $3.0728 ( the high end of the wide range  we have been in) .  Crude added .48 to $107.33.  I stay optimistic for lower prices coming as the semi mixed close is always a key point to momentum swings.

 Daily Heat Chart
Daily heat chart
RBOB Close
                      CLOSE     CHANGE            
SEP   2.9845         +.0015
OCT  2.8562        +.0068
NOV   2.8118        +.0101
DEC    2.7813      +.0116
JAN     2.7646     + .0117
                  FEB    2.7599     +.0119               
  
HEAT Close
      CLOSE            CHANGE
SEP  3.0728        +.0250
OCT  3.0795      +.0255
 NOV  3.0823      +.0250   
DEC  3.0808     +.0246
JAN   3.0791    +.0240
FEB  3.0692     +.0243

 

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Topics: Eygpt, Tropical Storm, CRUDE, FED rates

Don't Forget! MA Gas & Diesel Tax Rate Change Effective Today!

Posted by Kelly Burke on Jul 31, 2013 11:04:00 AM

The State of Massachusetts, as part of the Transportation bill, has voted to increase the state excise tax on gas & diesel. This increase will be tied to inflation and increase annually. The increase this year, effective today, July 31 2013, is $0.03, which raises the excise tax to $0.24 per gallon.

 

 

The current breakdown of taxes on over the road fuel products in MA is as follows:

 

Diesel

Federal Excise Tax: .243

Federal Lust: .001

Federal Oil Spill: .0019

MA State Excise Diesel: .240

MA URP: .0119

MA UST : .025

 

Gas:

Federal Excise Tax: .183

Federal Lust: .001

Federal Oil Spill: .00171

MA State Excise: .24

MA URP: .00119

MA UST: .025

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Topics: MA Excise Tax, Gas Tax

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