Commodity Slide Continues Into 2015

Posted by Kelly Burke on Jan 8, 2015 11:32:11 AM

Barrel of oil with dollars falling around it

2015 is off to a wild start, with Crude dancing around and then dropping below $50/bbl. Wednesday (the 7th) Crude closed out at $48.65, yet another 5 year record. Gasoline and distillates have closed down every day this week, so it looks like the 2014 slide has no intention of stopping.

The inventories published this week showed:

  • Crude: 3.1 mmbbls draw
  • Distillate: 11.2 mmbbls build
  • Gasoline: 8.2 mmbbls build

Weakened demand pushed up distillate and gasoline inventories, as did a drop in import levels so we saw a build despite a concurrent drop in production. 

Interestingly, Bloomberg is reporting today that the U.S. exported a record amount of Crude oil in November of 2014 - the highest amount exported in fact, since record keeping began in the 1920s. This puts the U.S. into the 17th largest exporter spot. (You can read the full Bloomberg story here: "U.S. Oil Exports Jump to Record as Shale Production Booms )

Continuing builds and a ramp up in exports may be the future for domestic production, and long term this could in theory keep prices stable at a lower level. However, a lot depends on how the economy rebounds (or doesnt) both here and globally. Without a ramp up in demand, continued excessive production will continue to drive prices down but without tangible economic returns. 

Last week the stock market got crushed on dropping oil prices, but it closed up sharply Wednesday, and today all 3 major indexes are in strongly positive territory. 

At writing, FEB ULSD is trending up .0154, and RBOB is essentially flat, up .0005, with Crude trending up .22

Outer months August and beyond are all trading in the red for all products at the moment, though. 

We should see this week if the ups and downs get tighter than they have been (ie swinging a penny versus 6) if we start to settle into a new benchmark low, or if the slide keeps going strong. 

 

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Topics: Commodities, US Crude Exports, EIA Inventories, stock market, shale

Commodities Rally after Record Drops, up 3% on Crude

Posted by Kelly Anderson on Dec 1, 2014 2:57:56 PM

Stock market numbers on a digital board

After the mulityear lows hit last week, oil started to rally today.

We're still lower than prior to the OPEC production announcement, but today saw ULSD up +.0512 to 2.2124 at the close, and Gas rallied up +.0534 to 1.881 at the close. WTI Crude closed up 2.99 to 69.00/bbl

Analysts are hopeful for an equilbrium price level between $70 and $75 so we're at least much more comfortably close to maintainence levels than we were on Friday. However, even at $70, shale production isnt terribly profitable, so on that side it wouldnt be the greatest benchmark. However, on the consumer level $60 sounds better than $70/bbl when you fill up your car. 

(And yes, the analysts are hoping for $70 while panicking about $40. C'est la vie, right?)

So why did we go up? 

The dollar weakened some, which almost always gives commodities a little bump. 

Most likely though, its just a pull back from an overreaction in selling off on Friday. 

Time will tell. The next few market days should be interesting to watch, especially with the inventory numbers out Wednesday. 

Stay Tuned!

 

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Topics: Commodities, Dollar falls, OPEC, WTI Crude, ulsd

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

IMF News, Germany, and the Dollar Pushing Markets Down

Posted by Kelly Burke on Oct 7, 2014 12:24:05 PM

Magnifying class showing the Internation Monetary Fund logo

The International Monetary Fund (IMF) announced this morning it was downgrading its outlook for Global growth in the wake of disappointing growth in the Euro Zone and Japan. This is the third time this year the IMF has revised its outlook down (this time to 3.3% from 3.8%) and out of the last twelve forecasts in the past 3 years, they've revised 9 of the estimates down. According to Fox News, the IMF consistently has based projections off of an assumption that wealthier nations would be able to reverse their high debt, high unemployment environments a lot faster than they have been.

The IMF's gloomy outlook on the Euro Zone and bleak projections for growth potential in emerging markets has been another force behind the rally of the US dollar, as the US economy has started to stabilize versus other major nations, especially France and Germany. Germany hit a record 5 year low on industrial production, not good considering they are one of the critical economic players in the zone. 

The news from the IMF pushed US stocks down at the open this morning, understandably. A related factor in the downwward push was the IMF warned that increased interest rates by the US Fed could stall progress in the US - and since essentially they are reporting that the US and Britain are holding everything afloat outlook wise - thats really not good economic news for anyone. 

Commodities are pushing down today, with Germany's abysmal output pushing the dollar higher. The stronger the dollar, the higher relative cost to non-dollar currency becomes, which would push demand even lower in Europe, especially in tandem with a slower economy overall. 

This week will see reports out from the US Energy Information Agency (EIA), the Organization of Petroleum Exporting Countries (OPEC), and the International Energy Agency (IEA) -- all of whom are expected to project lower demand as well. 

As of noon, CRUDE is trending down -.97, ULSD is down -.025 and RBOB is down -.0404 with all looking like the trend will continue throughout the afternoon. 

Stay tuned!

 

 

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Topics: Commodities, European Economy, CRUDE falls, Dollar Strengthens, IMF

International Issues Increase, but Positive Domestic News Keeps Futures Stable

Posted by Kelly Burke on Jul 23, 2014 4:42:01 PM

Line charts depicting the stock market scattered on a table

 

Futures ticked down yesterday on positive domestic economic news, even as international turmoil escalated. Inventories were expected to show draws, but other economic data out indicates the economy is continuing to recover. The CPI (consumer price index) was up 0.3%, and existing home sales came in up 2.6%, both of which are good indicators. Today, gasoline continued downward, closing down -.0206 but ULSD inched up a little to 2.8754 (up 0.0212 on the day). Not too shabby considering all the insanity internationally. 

Here's a quick rundown of the international issues that could play out in the markets in the coming days:  

In the wake of the tragic Malaysian aircraft crash, tensions between Russia and the West have hit almost Cold War proportions. Russia and Ukraine both wasted no time blaming the other for causing the crash, and the US jumped in and immediately implicated Russian Seperatists in Ukraine for launching the fatal missle. France and the US are proposing further sanctions, with the US sanctions targetting financial and energy companies by way of denial of bonds with a 90 day plus maturity. 

Today, two Ukrainian fighter jets were shot down by Russian seperatists, lending creedence to the theory that seperatists downed the Malaysian jet, and perhaps implying that sanctions against Russia may be escalated, which could potentially have an impact on markets.

Israeli ground troops invaded Gaza earlier this week after a ceasefire agreement was violated by Hamas in under 4 hours. Tuesday afternoon the FAA grounded all US flights to or from Israel for at least 24 hours on concerns of a Malaysian like incident after a rocket struck within a mile of Israels largest airport. Israel called the US flight cancellations a "coup for hamas", at least on a PR level, which isnt helping urge reconsideration of a cease fire on either side.

Hopefully, in addition to international crises being negotiated, the Domestic news will continue to suggest a strengthening economy and mitigate price spikes.... Stay tuned! 

 

 

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Topics: Commodities, Futures, russia, ukraine,, Hamas, Israel

"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: Commodities, natural gas, NYMEX

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

NYMEX Tumbles as Markets eye Italian Election

Posted by Mark Pszeniczny on Feb 26, 2013 5:08:00 PM

Bears were out in full force today (actually saw them hit after the close on Monday) as all eyes were watching election results in Italy.  No clear cut winner has been announced thus casting doubt and uncertainty on recently passed austerity measures.   The effect saw the US Dollar rise against the World basket forcing Commodities to fall harder than Tom Brady's Agents Commission check.  Adding to the sell off was increasingly better news from the housing market with December values showing a .2% increase and 6.8% increase year on year.  All this and as I walked into a lunch saw Fed Chief Bernanke on a big screen TV saying the economy is far better off than in recent years and that the FED is currently looking at ways to end its quantitative easing policies.  Today had a flurry of news to push pricing down, but I still hang my hat on  the saying "high prices is the cure for high prices"  as we exit the heating season in the Northeast and some retail stations above $4.00 a  gallon,  some would say the US economy would struggle to support these energy costs.  At the close, Crude lost .48 to $92.63, HEAT fell .0672 to $3.0317 and RBOB tumbled .0795 to $2.9816. 

Italian heat chart

RBOB CLOSE
                 CLOSE       CHANGE 
  
MAR       29816       -.0795
APR        31988      -.0648
MAY      31617      -.0625
JUN         31035      -.0604
JUL          30450       -.0583
AUG        29872        -.0560
 
HEAT CLOSE
          CLOSE    CHANGE
MAR        30317      -.0672
APR        30268      -.0713
MAY       31139     -.0672
JUN        30862      -.0645
JUL        30704        -.0622
AUG       30576     -.0594
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Topics: Commodities, Italian Election, RBOB tumbles, Dollar Strengthens

NYMEX Collapses as Last Weeks Gains Erased

Posted by Mark Pszeniczny on Sep 17, 2012 5:45:00 PM

What a difference a week makes! Last Monday we were gearing up for a strong week ahead of QE3. Today saw the entire weeks gains in the Heating Oil pit get erased, finishing slightly below last Mondays close down .0761 to $3.1634. That is after the pit pulled back some even more robust losses that at about 1:30 had HO down .12 and RBOB down just over .11 cents. We said the 3.25 level on prompt month HO was a pretty strong resistance area and today's OCT HO high just happened to be 3.2500. Technical- schmechnical, it appears as though rumors abound that there was an SPR release of gallons happening. To which is still do not fully understand, if the Government has to maintain required levels in the SPR, are they not just selling high and replacing at a lower price later? To be clear on QE3, of which the Fed is buying back some $4 billion in mortgage backed securities, this had and still has the potential to be bullish for commodities should the dollar fall. But lets live for today and be happy the market fell today. Crude finished down $2.38 to $96.62 and RBOB lost .0723 to 2.9433.

Daily Heat Chart

heat chart

RBOB CLOSE
CLOSE CHANGE
 
OCT 29433 -.0723
NOV 28596 -.0719
DEC 28050 -.0712
JAN 27798 -.0714
FEB 27965 -.0710
MAR 27868 -.0706
HEAT CLOSE
CLOSE CHANGE
OCT 31634 -.0761
NOV 31644 -.0741
DEC 31633 -.0718
JAN 31594 -.0694
FEB 31472 -.0671
MAR 31259 -.0646
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Topics: Commodities, QE3, SPR Gallon Release

Morning Losses Erased with Jobs News

Posted by Mark Pszeniczny on Apr 26, 2012 5:50:00 PM

For the second day in a row, early session losses were erased with strong closes. Todays bullish action came on the heals of a surprise increase in jobless claims and some cautiously upbeat comments the Federal Reserve. Commenting on the role of the Fed, Bernanke said ultra low rates would remain in effect through 2014 and did not rule out additional measures to pump up the economic situation. Commodities are the collateral damage of such news as the dollar again took a hit and caused the pits to show strong gains as the day wore on. Crude settled at $104.55 up .43, RBOB added .0276 to close at $3.1833 and HO took the lead gaining .0333 to $3.1944. Heat has come back with vengeance after touching 3.09 on the prompt month just over a week ago. There is fair amount of commentary out there that we should see substantially lower numbers in the coming sessions. Support for HO looks to be at the 3.15, then a 3.05 level.

Daily Heating Oil Chart

Heat map

RBOB CLOSE
CLOSE CHANGE
 
MAY 31833 +.0276
JUN 31328 +.0137
JUL 30852 +.0066
AUG 30435 +.0028
SEPT 30043 +.0004
OCT 28602 -.0006
HEAT CLOSE
CLOSE CHANGE
MAY 31944 +.0333
JUN 31984 +.0315
JUL 31982 +.0292
AUG 31985 +.0269
SEPT 32006 +.0259
OCT 32038 +.0245
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Topics: Commodities, Jobless claims rise, Jobless numbers, CRUDE

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