CRUDE Rallies Despite Record Inventories

Posted by Kelly Burke on Feb 3, 2016 4:12:50 PM

Oil barrels imposed over a line graph

Another wild week!

Friday we saw March diesel settle at $1.0787 (a far cry from last Mondays $.09353!), and gas closed out at at $1.1031. Crude settled at $33.62/bbl, a rebound of nearly 25% from the prior week's 12 year lows ... but at the close yesterday, compared to Friday's numbers, diesel had shed $0.0678, gas was off $0.1023 and Crude settled below $30 once again, at $29.88.

Today we saw almost a full reversal on Crude and Distillates, with diesel back up within .0001 of Friday's number at $1.0786 (+.0677) and Crude back up to $32.28. Gasoline had a modest bounce back to 1.0137 (+.0129) after yesterdays $0.0822 tumble. 

What's interesting about today's rally is that, at least in my humble opinion, it's essentially the rally that shouldn't have been.

Why? Because the EIA report this morning indicated builds that set inventory records for Crude and Gasoline. Crude inventories built 7.8mmb to 502.7mmb for the week ending January 29th. Gasoline was projected by analysts to build 1.7mmb but instead jumped a whopping 5.9mmb to 254.4mmb. Distillates drew down 777K barrels versus the 1.1mmb projected.

Most of the analyst chatter pegs today's gains on the weakening dollar (off almost 1.5% today as of writing), which can make commodities in general a more attractive proposition - generally speaking the two work opposite each other, when one goes up the other goes down. However, factoring in the last year, it's unlikely a non-precipitous drop on the dollar supports a rally of today's magnitude. 

Another factor at play is the continuing rumors about OPEC and non-OPEC countries coming to agreements on supply cuts to bolster prices. Russia has indicated it would be willing to cooperate with the Saudi's on a coordinated approach, as has Iraq.

However, all of the production talk is just that - talk - which has worked for these countries in terms of short term price bumps, but until there is an actual meeting and agreement it's unlikely to have a long term impact.

U.S. Production is also down thus far in 2016, which may be a factor, since with OPEC keeping production ramped up, we become a "swing player" in terms of global (over)supply. The drop in production last week according to the EIA was 7,000 barrels per day however, not really a significant decline in the big picture. 

Long story short, there are multiple factors that multiple sources are hanging their hats on to explain today's rally (myself included) but the overall market is likely to remain bearish, given inventory levels, weak global demand, and the lack of any real concrete indications that production cuts from oil producing nations are actually forthcoming. 

Stay tuned!

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Topics: Dollar falls, CRUDE, OPEC, russia, EIA Inventories

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

Monday Puts the Brakes on Friday's NYMEX drops

Posted by Kelly Burke on Oct 6, 2014 3:06:28 PM

It's Monday :( overlaid on asphault

Monday strikes again!

Friday saw Brent Crude drop to almost a 27 month low, dropping to $92/bbl, and WTI for November trading at its lowest level since April 2013.

Today we started with ULSD trending down and gas up slightly, and gas continued to climb through the early afternoon. At the close, ULSD settled up 50 points to 2.6213 and gas shot up +.0347 to 2.4132. Thanks a lot, Monday.  

The dollar continued to strengthen throughout last week, and an unexpectedly good (a relative term) jobs report for the US Friday provided further evidence that the economy is stable to moving forward. The dollar continues to soften commodity futures generally, despite the current geopolitical atmosphere.

Today stocks pushed lower in the US on concerns that the dollar (which actually dropped slightly today) and continued good economic news would push the Fed to raise interest rates. The Fed minutes are due out Wednesday, which should give investors a better idea on the timeline. 

Additionally, supply remains strong and is surprisingly mitigating the factors we almost always see a surge in premium and volatility with. 

There is concern among some analysts slash talking heads that a drop to below $90 per barrel on Brent will spook OPEC into pressuring the Saudi's to cut demand. However, OPEC production hit a 2 year high in September (31 million bpd) and thus far, as discussed, the Saudi's have vowed to hold production targets. We also saw rising production in Russia and Libya, so despite a potential benchmark issue there appear to be no issues on the horizon on the supply side (knock on wood).

 

 

 

 

 

 

 

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Topics: Futures, Dollar falls, Jobless numbers, OPEC, 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

Futures Rise as Cliff gets Less Steep and DOE's Draw

Posted by Mark Pszeniczny on Dec 19, 2012 5:40:00 PM

Overnight trading set the tone for much of todays session as early markets were up well over two cents on both products. News out of European Markets showed that Greece's credit rating had been upgraded along with an unexpected increase in the consumer confidence among Germans had pushed the US dollar lower. Commodities were the unfortunate collateral damage in this scenario. More importantly, it appears that some movement by GOP leaders to increase taxes on those Americans making over $1 million a year (Phew, I'm safe!) has been seen as a major concession in the stalled talks. Again, Bullish on Commodities. Lastly, the DOE's released the weekly numbers that showed draws in distillates and Crude, -1.1mbl and 949k respectively, with a modest build in gasolines, +2.2mbl. The report was viewed as Bullish by most even with Crude missing the expectations of a 1.3mbl draw, evidence of the mentality of the day already given up to higher prices. Look for action to continue higher as a historical light trading week winds down and HO stays well within the 2.90 to 3.10 range we have been in for the last 90 days. At the close, Crude gained $1.58 to $89.51, Heat added .0391 to $3.0356 and RBOB led gaining .0522 to $3.7431.

 

DAILY HEATING OIL CHART

heat map

 

RBOB CLOSE
CLOSE CHANGE
 
JAN 27431 +.0522
FEB 27338 +.0496
MAR 27412 +.0495
APR 28792 +.0582
MAY 28719 +.0499
JUN 28406 +.0486
HEAT CLOSE
CLOSE CHANGE
JAN 30356 +.0391
FEB 30313 +.0374
MAR 30176 +.0353
APR 29965 +.0355
MAY 30258 +.0352
JUN 30077 +.0345
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Topics: Fiscal Cliff, Dollar falls, DOE, Crude draws, Tax Increases

NYMEX rebounds with Bullish Inventories

Posted by Mark Pszeniczny on Aug 10, 2011 5:39:00 PM

We continue the "new normal" roller coaster ride as NYMEX values once again turn sharply positive on the the heels of a very bullish Inventory report.  Not helping the cause was the FED announcing yesterday that they will hold rates very low for the next two years.  It was the first such comment that actually put a timeline on Interest rates.  Furthermore, the comments are a complete 180 degree turn in approach from the usually vague board.  With the greenback being pushed lower, Commodities surged higher beginning just after yesterdays close.  DOE numbers showed a staggering 5.2mbl draw in Crude, while most expected a 1.7mbl build.  Gas fell 1.6mbl vs a 700k expected build and distillates drew 737k while analysts expected a build of 1.25mbls.  All this while the DOW continues its own seesaw as our 401k's become 201e's!  Currently down over 300 points, the EIA just recently reported that it sees "significant downside risk" should current financial market concerns become more widespread.  Either way, we are above that magical $2.80 number again on HEAT as it closed up .1005 to $2.8653, RBOB gained .1149 to $2.7825 and CRUDE added $3.59 to $82.89. 
 
heat chart
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27825       +.1149
OCT    26312      +.1104
NOV    26022      +.1074
DEC   25902       +.1046
JAN    25946       +.1043
FEB    26076      +.1038
 
HEAT CLOSE
          CLOSE    CHANGE
SEP    28653     +.1005
OCT   28751      +.0988
NOV    28863      +.0960
DEC   28970     +.0933
JAN   29083       +.0909
FEB   29079       +.0886
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Topics: Commodities, EIA, Bernanke, Dollar falls, S&P Downgrade, Inventory Draws, Crude draws

Crude Rises as Products Fade in Late Sell Off

Posted by Mark Pszeniczny on Jul 21, 2011 9:03:00 PM

Crude once again danced above the $100 a barrel mark today as many speculated that the economy is showing signs of improving.  Furthermore a marathon meeting session on Greece of European Leaders ended with a consensus that they will throw more money into the debt strapped country.  The Euro rose on the news as the dollar fell, thus pushing money into Crude.  The products failed to follow the rally.  RBOB slipped .0475 to $3.0995 while HEAT lost .0192 to $3.0992.  All while Crude managed to gain .73 to close at $99.13, more than a full buck off its high of $100.16.  Holding down products appear to be the fact that demand is still soft, and retail gas stations are still in the high $3 range.  Additionally, our friends at the IEA stated that they are willing to release more product to the market to stave off any spike in futures.  HEAT remains in a congested selling pattern and looking back over the last few months, you have seen healthy corrections after these periods.  In laymen terms, nobody is willing to make a move either way until an event pushes us too.  This event will likely be in the form of how the US debt ceiling issue is resolved, meaning we probably have another week of sloppy back and forth days

heat chart

RBOB CLOSE
                 CLOSE       CHANGE 
  
AUG    30995       -.0475
SEP    30567      -.0379
OCT    29285     -.0277
NOV   28959       -.0235
DEC    28801       -.0215
JAN    28832      -.0200
HEAT CLOSE
          CLOSE    CHANGE
AUG  30992     -.0192
SEP   31129       -.0191
OCT    31273      -.0188
NOV   31437       -.0191
DEC   31600       -.0191
JAN   31753       -.0190
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Topics: Greece Bailout, Dollar falls, government shutdown, CRUDE

NYMEX futures end mixed as concerns loom

Posted by Mark Pszeniczny on Apr 28, 2011 8:23:00 PM

What is funny about Todays title is that it seems that I have used it several times over the last month!  Another Groundhog Day with the Market up strong on the overnight, falling into negative ground late in the day and ending as a mixed bag at the close.  Investors were eager to jump in overnight as many weighed the FED Chairman's comments and the reluctance to raise interest rates.  The decision to keep rates extremely low signals to investors that the US economy still has some hurdles to jump before we are all fat and happy again.  That policy is weighing heavy on the greenback, pushing it to a 33 month low.  We all know the corollary is the high Crude and product prices as inflationary hedges from investors.  The news the economy only grew 1.8% last quarter while most were expecting a 3.1% increase did little to ease rising NYMEX prices.  Yet around mid session a sell off materialized that had both products negative for some time.  HEAT was able finish in the red as it fell a mere 18pts to $3.2316, RBOB keeps pushing higher as it gained .0104 to $3.4298, while CRUDE gained .10 to $112.86.  With $28 crack spreads on gas, it is not hard to see how Exxon posted 69% Q1 profits.   While it is easy to point to middle eastern unrest as the cause of this surge, it is tough to defend as supplies in the US are still at very healthy levels.  End result is that this bubble has to burst.  Hopefully soon. 

 

heat chart

 

RBOB CLOSE
                      CLOSE       CHANGE
 MAY    34298       +.0104
   JUN    33696       +.0114
     JUL    33230        +.0117
  AUG    32831       +.0100
  SEP     32443       +.0075
  OCT    30856        +.0062
HEAT CLOSE
          CLOSE    CHANGE
MAY    32316       -.0018
JUN    32459      -.0022
JUL    32619      -.0027
AUG    32785        -.0031
SEP    32951       -.0036
OCT    33103        -.0043
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Topics: FED holds interest rates, Bernanke, Dollar falls

Jobs data, Inventories and Dollar lead to mix day

Posted by Mark Pszeniczny on Apr 21, 2011 3:43:00 PM

Another mixed end to another volitile session that saw both RBOB and HEAT finish on opposite sides of par.  Solid early morning gains built on Wednesdays DOE report that had all products reporting substantial draws, much higher than expectations, eventually gave way to news of yet another dismal Job report.  The number of Jobless claims missed analysts expectations by about 10,000 claims that sent the pits down at the Opening Bell.   Heat and RBOB were down almost .04 each as Crude remained strong on a falling dollar.  The Dollar continues to  hover around a 2 1/2 year low.  While strife continues abroad, the threat of barrels off the market appears to be taking a back seat.  The Saudi cartel have stated that there is no need for excess production as buyers appear to be limited.  As we mentioned, the volitility from day to day has remained with a downward bias.  The hope amongst peers is that at somepoint it falls off the shelf.  As a reminder, the NYMEX is closed Friday in observance of Good Friday.  At the Close Crude added 81 cents to $112.29, RBOB jumped .0313 to $3.3086 and HEAT fell .0222 to $3.1992.

DAILY HEATING OIL CHART

chart

 

RBOB CLOSE
                 CLOSE       CHANGE MAY    33086       +.0313
JUN    32723       +.0239
JUL    32425        +.0186
AUG    32141       +.0144
SEP     31848       +.0124
OCT    30337        +.0108
HEAT CLOSE
          CLOSE    CHANGE
MAY    31992       -.0222
JUN    32162       -.0197
JUL    32352       -.0181
AUG    32535        -.0169
SEP    32711       -.0157
OCT    32880        -.0150
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Topics: Dollar falls, Jobless numbers

Seesaw action ends with mixed day, blame Chinese currency fluctuation

Posted by Mark Pszeniczny on Jun 20, 2010 9:35:00 PM

Late Sunday night I was surprised to see values up over 2 cents because after Friday’s movement I would have expected some sharp drops. That is until I saw China announced that their currency would be allowed to fluctuate against other currencies. This would/should weaken the dollar to Chinese investors thereby making Crude and its products more affordable. Thus Crude now becomes a safe haven against a falling dollar for other investors, pushing values higher. Additionally, all goods become cheaper to China spurring US manufacturing rates and another economic boom is on the horizon! That was 7pm last night, as of 3pm today, eh … not so much. Profit taking ensued pealing values all the way back to zero and RBOB actually finished negative on the day, down .0048 to $2.1428, HEAT stayed positive closing at +.0170 to $2.1459. CRUDE mustered up enough strength to close up .64 to $77.82. I wish I can say this is the last of the recent rally, but that can only be determined after a few mixed sessions like we saw today. With month end and quarter end quickly approaching, expect some more downside as the big guys looks to book profits.

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Topics: Dollar falls, The Market, NYMEX, Profit taking, Chinese Currency

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