Libya, Labor Participation, & GDP Woes Keep NYMEX Positive Despite Projected Inventory Builds

Posted by Kelly Burke on May 20, 2014 2:26:19 PM

Line charts depicting the stock market scattered on a table

Analysts expect that the EIA report due out tommorow will show US Crude stocks hitting a new record high. So why isn't the market coming down?

For one, levels at Cushing (the NYMEX physical delivery point) have hit multiyear lows since the pipeline to the Gulf came online in January, which has an impact seperate from overall crude levels. WSJ cites some analysts who think Cushing could hit minimum operational levels, and thats keeping some skepticism in the market and supporting the price.

Secondly, international concerns are always a factor, and Europe is dealing with more than a few energy related headaches this week. Brent Crude is hanging in there at over $109, which is largely being blamed on the ongoing issues with Libya. Libyan production has been capped well below 2013 levels, and major oilfields remain closed down despite government promises they would be up and running by now.  Perhaps more of a dire sign for the area though -  France's major oil player in Libya, Total, has cut presence in the country down severely, and Algeria's Sonatrach has evacuuated their employees - both companies did so on security and safety concerns. Not good news for hopes that war torn Libya would be stepping back in as a major supply player anytime soon. 

Russia and Ukraine are still essentially in a standoff as well, with the usual reports of progress being made but none seeming to really materialize. 

On another note, Domestically, like we talked about before, the economic recovery picture is not looking particularly sunny. There is a lot of heated discussion about the "real" jobless numbers and the labor participation rate. At the start of the summer job season, the amount of people under 25 in the work force dropped almost half a million, and the unemployment rate for 16-19 year olds hit the second lowest number ever.  Additionally, the GDP is moving at a crawl, the Bureau of Economic Analysis estimated GDP grew 0.1% for Q1 of 2014 - not a great number in and of itself, but especially painful given that projections put it at a full 1%. Not very confidence inspiring, which tends to lend itself to higher commodities pricing (just ask a gold nut). 

 

 

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Topics: Brent Crude, Libya, CRUDE, russia, EIA Inventories

Commodities and Stocks See-Saw on Sanctions, EIA Numbers, Unemployment, and Tech Dissapointments

Posted by Kelly Burke on May 9, 2014 1:18:03 PM


Line charts depicting the stock market scattered on a table

Wednesday's EIA report showed that the API projected Crude drops come to fruition, falling 1.78 million barrels. As we all saw this pushed up Crude & ULSD prices on the day, with ULSD closing up .0398 to 2.9275, and Crude up to 100.81, once again hanging by the new (unfortunately) benchmark of $100 we've all been hoping to drop from for quite some time now. 

Brent ticked upwards this week as well on EU discussion of stricter sanctions on Russia. Putin had announced earlier this week that Russian troops had withdrawn from the border, but no such withdrawal happened according to everyone else in the area, so more sanctions are back on the table it appears. Economic sanctions on the world's second largest energy exporter are, unsurprisingly, not great for downward price pressure. 

In contrast to Crude - US Natural Gas inventory was up 94 bcf and prices dipped slightly. That sounds like good news after the supply crunch (not to mention spiking prices) of this past winter, and it is, but bear in mind prices are likely to remain relatively high for nat gas in the foreseeable future. Why? Because even with a build of 94 bcf, supplies are close to 45% lower than they were just a year ago today and the only demand control as supply limps back up is the price level, unfortunately. 

In the broader stock market, the S&P is poised for a weekly loss, largely due to drops in energy & utility shares. The DIJA dropped 4.1 percent in 5 days over tech stock dissapointments (ahem, Twitter & Groupon), and the Nasdaq dropped almost 2% as well. Last week stocks were up for the week minus a Friday drop off, which was a little unforseen because the weekly jobs report was strong (at least on the headline level).

April's Job numbers showed unemployment dropped to 6.3%, the lowest in 5 years. However, the margin of error for revision is pretty large on these reports of late, so there may be some hesitancy in the market until the "real" numbers materialize. Additionally, the work force participation rate dropped to 62.8%, tying the all time worst record from 1978 (also October and December of 2013).

There's been a lot of contradictory indicators as of late from different segments -  real estate, manufacturing, labor participation, and Jobless claim numbers, for example, that make it difficult to get a good overall picture of the economy. As they say, the truth likely lies somewhere in the middle, but who knows where that is.   

 

 

 

 

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Topics: Brent Crude, Inventory report, Jobless numbers, Crude draws, russia, ukraine,

WTI Drops Big (Again) on Expected Builds

Posted by Kelly Burke on Apr 22, 2014 2:53:08 PM

Barrel of oil with a line chart aiming up

Last week as we discussed, the EIA reports for the prior week (ending April 11) saw inventory builds in US Crude supplies while gasoline inventories drew down. Crude Inventories actually hit their highest level since June 2013 and production hit its highest level since 1988. 

Platt's is estimating that this Wednesdays EIA report (on the week ending April 18th) will show inventory builds of  up to10 million gallons. As a result of the anticipated build, WTI has dropped more than we've seen in the previous 3 months. Brent Crude, the European benchmark, wasn't quite so lucky.

Compared to WTI's over 2% drop, Brent was down less than one percent on continued Ukrainian tensions (stop me if you've heard this one before...) and on the heels of Vice President Biden's speech this morning in Kiev, in which he expressed US support for Ukraine. The sentiment, though true, wasn't very helpful for the already fragile (read: falling apart) agreements with Russia to reduce friction in the area, especially coming one day after Secretary Kerry demanded that Russian Foreign Minister Lavrov control seperatist activity in Ukraine, with the Russians firing back that the US should intercede in to control "Ukrainian militia activity" in the region and today insisting that any agreements reached in Geneva "have nothing to do with us".  

The global headache that is Ukrainian/Russian/US relations at the moment would likely have resulted in a lot of market volatility and price spikes, but consistently increasing inventory levels have seemingly kept it at bay, particularly domestically. Hopefully that trend continues, and we start to see some progress towards resolution in Eastern Europe.

 

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Topics: EIA, Brent Crude, Brent vs WTI, Inventory report, russia, ukraine,, WTI Crude

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

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

European Zone Crisis pushes Futures Lower

Posted by Mark Pszeniczny on May 17, 2012 3:44:00 PM

For the last several days NYMEX values have been on the losing end of good Ol' fashion Donny Brook coming at the hands of the ongoing European debt crisis. With new Leadership installed in several countries, investors are not taking any chances and removing cash as quickly as possible. The latest round today had the European Central Bank preparing for Greece's exit from the Euro sending the currency to a four month low versus the US dollar. Commodities again were the collateral damage as money continues to exit the pits. Japans signs of economic recovery from their recent natural disasters, reports showed a 1% increase in their economy, along with an anemic Jobless claim report ( statically flat) could not stop the bleeding in the pits today. When prompt Heat was at 3.30,we noted the major support level to be at 2.75 with a few stop along the way and a key being 2.95. As those levels have been broken, it will be interesting to see where we stop. Interesting to note the seaway pipeline that runs Crude north to Cushing, OK has just finished a flow reversal that will allow product to move south from Cushing to the Gulf region for refining. Product is expected to flow this weekend, alleviating the glut of WTI in the US, should also play a role in reducing the Brent - WTI spread. At the close Crude lost .25 to $92.56, HEAT fell .0486 to $2.8490 and RBOB lost .0427 to settle at $2.8782.

 

Daily Heating Oil Chart

daily heat map

RBOB CLOSE
CLOSE CHANGE
 
JUN 28782 -.0427
JUL 28174 -.0477
AUG 27737 -.0494
SEPT 27354 -.0497
OCT 25962 -.0482
NOV 25643 -.0477
HEAT CLOSE
CLOSE CHANGE
JUN 28490 -.0486
JUL 28556 -.0483
AUG 28641 -.0478
SEPT 28723 -.0474
OCT 28804 -.0467
NOV 28889 -.0462
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Topics: European Economy, Greece, Brent Crude, Brent vs WTI, Euro Debt Zone

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