The Bears Have It - EIA Report Slashes Tuesday's Gains

Posted by Kelly Burke on Nov 4, 2015 3:22:39 PM

Downwards aiming arrow with the terms WTI, Oil and Brent inside of it

Today's EIA Inventory Report indicated that Crude Inventories were up 2.8 million barrels for the week ending October 30th, and the market reacted accordingly. API had forecast a build as well, so prior to the EIA release we were trending down about 1%, which accelerated to over 3% once the official numbers came out. 


A few interesting notes about the build - it occurred due to a domestic production increase of 48,000 bpd to 9.16 million bpd. This increase happened despite the Baker Hughes announcement that rig counts dropped another 16 to the lowest level since 2010, and despite US imports falling to their lowest weekly level since 1991. (Down to 6.4 million barrels per day, if you're keeping score at home.)

It also happened despite the fact that every single issue that spiked the market yesterday is still very much in play. The Libyan port is still closed under occupation. The Brazilians are still on strike at PetroBras. The Colonial pipeline's Houston facility is still flooded and not allowing any deliveries or originations to occur. (You can get a recap of yesterday here: Monday sinks on Demand, Tuesday Surges on Supply )

And yet here we are, narrowly missing a complete reversal of yesterdays surge across the board. 

Gasoline was projected to show a 1 million barrel drop, but instead dropped 3.3 million barrels - yet RBOB settled down -.0536, not quite erasing yesterday's 7 cent jump but coming close, considering the drop in inventory should in theory have pushed gas further ahead. 

Distillates did the reverse of gasoline stocks - they were projected to drop 1.8 million barrels, but instead dropped 1.3. ULSD closed down .0625 to 1.5035, more than erasing yesterday's jump of just under 6 cents. 

The October Jobs report is likely the next major news for the market, due out Friday. Maybe we will get lucky and get a breather tommorow. One can always hope. 

 

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Topics: RBOB tumbles, CRUDE, EIA Inventories, oil glut, Jobs Report

Crude Reverses Early Gains on Surprise Inventory Data

Posted by Kelly Burke on Oct 7, 2015 3:57:52 PM

Abstract image of an oil rig, cash and a calculator

Today once again started in positive territory, with Crude up almost 2% and refined products creeping higher, but we saw a quick reversal mid-morning when products dropped into the negative, where they would end up settling at the close. (Crude ended up settling down to $47.81, ULSD was down -.0319 to $1.5796 and Gas dropped -.0462 to $1.390)

What happened?

Early in the day products were up on the EIA announcement that they are projecting demand for Crude would hit its fastest pace in 6 years in 2016, even as US production is expected to decline.  This implied further easing of the so called oil glut, which could keep a stable pressure on prices going up, in theory.  

Additionally, API projected yesterday that Crude stockpiles would show a draw of 1.2mmb.

Consequently, WTI hit a brief intraday high of 49.71, just under the $50 psychological benchmark.

However, gains were pared quickly when the EIA Inventory Report showed a build in Crude stockpiles of 3.1mmb to 461mmb, higher than any analysts had predicted. That puts Crude and petroleum product stockpiles at a high of 1.3 billion barrels. So much for a slow-down of the oil glut, eh?

Another bearish signal is that thus far into hurricane season, we have not seen any major supply delays, or refinery damage/shut downs, which are usually cause for temporary price jumps this time of year.  There is also still the looming question about what happens to global pricing when Iranian exports come back online at full capacity.

Some analysts are cautioning that traders and speculators are taking the proposed Russia/Saudi Arabia meeting too seriously, in that they don’t see them coming together on any type of agreement on raising prices by cutting supply. That would seem to be supported by the recent Saudi price drop for exports. It’s also worth remembering that Russia and Saudi Arabia are diametrically opposed in terms of the war in Syria, which may not bode well for any sort of collaborative action.

Stay Tuned!

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Topics: CRUDE, Syria, russia, WTI Crude, EIA Inventories, saudi arabia, oil glut

Fed Holds Interest Rates, Oil Drops after Wednesday's Gains

Posted by Kelly Burke on Sep 18, 2015 3:14:46 PM

Line charts depicting the stock market scattered on a table

Oil prices continued to tumble early this week - that is until the Wednesday EIA report came out and spiked prices on Crude up 6%. The report showed that Crude stockpiles fell by 2.1mmbbls for the week ending September 11. Additionally, Distillate stocks dropped by 3mmbbl, and gasoline dropped 2.84mmb. That explains Wednesday, when we saw Crude jump up to settle at $47.15 (Tuesday's close was $44), ULSD jumped .0414 to $1.5414, and RBOB jumped .0492 to $1.3821 (it could have been worse - intraday highs were over 5 up on diesel and 6 up on gas!).

Today is trending down like yesterday, with ULSD down .0390 to $1.4907, and gas down .0198 to $1.3562. WTI closed out at $44.68.

The Federal Reserve announced late Thursday that it will not be increasing interest rates at this time, based on concern about global economic growth. This has pushed oil prices down, because global concern means we're unlikely to see a spike in demand that would ease concerns about the oil glut we've been dealing with. As you'd expect, there's been some demand/use increase because of the lower prices we've been seeing, however its simply not robust enough to really make a sizeable dent in the oversupply. 

The issue with the Fed's statement outside of the grim outlook is they are still suggesting a rate hike this year, probably December. That means we will probably see the same up and down volatility with stocks and oil prices as we have seen over the past few months while waiting for this now-passed deadline. 

Rig counts are down in the US again, according to Baker Hughes' report, which may stem some production, but again, not likely to be a huge mover one way or the other. Refineries will be going on scheduled maintainence soon which may lower Crude stockpiles for a while, we'll have to wait and see on what impact that has. Across the globe, OPEC is still maintaining they will not be stemming production, and Iran has stated they intend to come fully back online as soon as sanctions no longer suppress their output. 

On the political side - the House Committee on Energy voted this week to move a bill proposing the repeal of the Crude Export Ban to the floor for a vote. Obama is likely to threaten veto, and its unclear if it will even get through the Senate to force said veto, but it is a potential bright spot for US producers and refiners that the bipartisan bill is moving to the floor.

(If you want to brush up on some of the issues regarding the Crude Oil Export Ban, you can do so in these articles: "Is it Time to Overturn the Crude Export Ban?" and "Energy Security, Not Independence, Should be the Goal" )

Stay tuned!

 

 

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Topics: US Crude Exports, FED holds interest rates, CRUDE, OPEC, EIA Inventories

Stocks Officially in Correction, Oil Trades Under $40

Posted by Kelly Burke on Aug 21, 2015 4:19:50 PM

Line charts depicting the stock market scattered on a table

WTI crashed below the $40 level this afternoon in trading, and clung right to the $40 line at the close, settling at $40.45. (ULSD was off -.0556 to $1.4624, and RBOB dropped -.0143 to $1.5449)

As discussed yesterday, domestic inventories going up pushed prices down towards $40. Today Baker Hughes announced more rigs going back online, for the fifth week in a row, which seems to be the proverbial straw that broke the camel’s back.

Stocks haven’t taken the news easy, either. US stocks hit their lowest point in a year, on oil price panic and deepening fears about the Chinese economy. The Dow Jones was down over 450 points as of 3:30pm – and over 530 points at the close. The bad news is that makes it in official “correction” territory which could further more panic selling on Monday. The S&P was down over 2% this afternoon - which pales in comparison to the market in China which dropped over 4%. Long story short, everyone’s stock positions got hammered today.

Another factor of a quick price drop on oil like we’ve seen since last June that is rarely discussed is the impact on jobs. This is kind of another anvil hanging over the economy’s head that could drop if oil gets to a critical low price. According to The Guardian's reporting, close to a quarter million people globally have lost their oil and petroleum related jobs, including approximately 35,000 in the US. Shell announced this week that it would lay off 6500 employees worldwide. Then there’s the financial cost. Their article on this portion of the equation is fantastic and thorough, you can read it here: The Guardian

Earlier this month we saw Venezuela and others pushing for an OPEC meeting to discuss changing supply to offset the crushing blow to their economies that the continued low pricing has been having. Yesterday, according to Reuters and the Wall Street Journal, the Algerian Oil Minister sent a letter to OPEC arguing the price has dropped significantly since they agreed on production levels, and is pushing for another meeting to reassess. So far, Saudi Arabia et al have stood firm, but it may be that they are forced to reverse at some price level as-yet-undetermined.  (You can read about that letter and OPEC in depth here: WSJ )

Hopefully we have some better news tomorrow - but it doesn't look good out there, folks. 

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Topics: OPEC, EIA Inventories, stock market, wti

Inventories & Iran Continue to Pummel Crude Prices

Posted by Kelly Burke on Aug 20, 2015 1:59:15 PM

Man grasping his head looking at computer screens

Oil prices are continuing their tumble - and it doesn't look likely they'll rebound in any significant way any time soon.

Wednesday's EIA Inventory Report showed a Crude build of 2.6mmb, bringing US Crude stockpiles to 456.2mmb. Analysts had forecast (hoped for?) a decline of 1.2-2.3mmb, depending on which group you looked at. 

Wednesday's trading saw WTI plunge 4% to below $41/bbl  - the lowest it's been in over 6 years. It settled out at $40.80 for September, and $41.27 for October. Brent lost 3.4% as well to settle at $47.16 for October.

$40 is a fairly significant benchmark, both psychologically and because it touches on production cost for some producers, which means it becomes essentially unprofitable to produce if oil goes any cheaper than $40. 

WTI may bounce some today as September trading closes out, but with refineries going offline in the fall for scheduled maintenance and no reason to think Crude stockpiles will suddenly plummet - it's likely that the decline will continue further. The only real question is what the bottom will be. 

Additionally, the pending Iran Nuclear deal if approved (which is essentially guaranteed) would lift sanctions in Iran, which would allow them to export more oil. They currently export around 1 million barrels per day from their 2.7 million barrel production. Reports say they are capable of about 4 million barrels of production, but its unclear how much of that they would be capable of exporting. 

Regardless, the EIA has revised its projection for oil prices throughout 2015. The new numbers put WTI at below $50 dollars ($49) for the remainder of the year, and only project WTI at $54 for 2016. EIA also cautioned that the numbers may be revised again, depending on Iran's ability to put new oil produced up for export. 

OPEC has maintained they will not be reducing supply regardless of the slide - it remains to be seen whether they reverse that stance if oil continues well below the $40, or even $30 dollar benchmarks as some think it may. 

Back to today- US stocks are getting crushed from fears about oil prices and the lack of foreseeable demand increases, the Chinese economy, and employment. The most recent jobs report showed an increase in unemployment claims - the fourth week in a row it both increased and beat estimates of how much it would increase. Unemployment ticking up, and the Fed signaling that the economy may not be strong enough to withstand an interest rate increase yet (according to their recent meeting notes) have for obvious reasons, not inspired confidence. 

Stay Tuned!

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Topics: Iran, Iran Sanctions, CRUDE, OPEC, EIA Inventories, wti

Chinese Currency Devaluation Slams Stocks, Boosts Commodities

Posted by Kelly Burke on Aug 12, 2015 6:35:00 PM

Line charts depicting the stock market scattered on a table

 

Stocks got hammered on Tuesday when the Chinese yuan was devalued 1.9% by the Central Bank. In a move that clearly shocked the hell out of traders - today the market tanked again when the currency was devalued another percent. Twice in two days - literally no one saw that coming. 

The move is to boost exports - reporting showed Chinese exports dropped 8%, and devaluing the yuan puts Chinese exports at a price advantage which in theory will boost them. Industrial production in China fell 6% as well, and a ramp up of exports could help boost that number as well. 

On the commodities side, high drops in inventory were predicted on the EIA's Inventory Report this morning, which initially bumped up prices. However, while we saw draws, they weren't as deep as projected, causing some of the earlier-in-the-day spikes to be backed off of. Brent reversed earlier gains to essentially trade flat, and WTI backed quickly off intraday highs. 

On the report we saw draws of 1.7 mmb on Crude (forecast was 1.9mmb), Gasoline was down 1.3mmb (1.6 forecast), and ULSD showed a build of 3mmb (600k was forecast).

At the close, WTI settled out to 43.30,  ULSD closed up .0240 to 1.5869, and RBOB closed up .0698 to 1.7635

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Topics: Chinese Currency, EIA Inventories, stock market

NYMEX reacts to Projected Crude Draws

Posted by Kelly Burke on Jun 17, 2015 10:36:59 AM

Line charts depicting the stock market scattered on a table

Oil was rising this morning ahead of the EIA inventory report's release. Analysts are expecting to see draws in both Crude and Gasoline. Crude is projected to drop between 1.7 and 1.8mmb. Supplies are still at historically high levels, but the drawbacks are a bearish signal for the market. Just prior to the reports release (10:30am) ULSD and RBOB have both jumped up over 5 cents (.0554 and .0526, respectively.)

Overnight trading was mixed on some fears about supply disruptions due to Tropical Storm Bill, as well as a stronger dollar. 

The Fed concludes its two day Open Market Meeting today as well, and Fed Chairman Janet Yellen is slated to have a press conference at 2:30 this afternoon to discuss the meeting and give an indication on where the Fed stands on raising interest rates. Its unlikely they will raise them now, given some weaker economic data out over the past few weeks, but expect to see the stock market jump around, regardless. 

Stay tuned for how the market reacts once the EIA eport is officially released.

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Topics: NYMEX, FED rates, EIA Inventories

NYMEX See-Saws on Inventories and Profit Taking

Posted by Kelly Burke on May 22, 2015 12:43:10 PM

Line charts depicting the stock market scattered on a table

 

We enjoyed a little easing on NYMEX pricing for the beginning of this week, with a Goldmann Sachs prediction that oil prices could drop to $45/bbl. Additionally, it was reported that Saudi production for March hit 10.3mmb/day, a new record for them, which kept the market bearish.

That is, until the domestic inventory speculation talk started.

The API report for last weeks inventories predicted a 5.2mmb drop on Crude, and a 1.2mmb drop in gasoline supplies, and that, combined with the actual EIA reported draws pushed up the market. 

Wednesdays EIA report showed actual drops of 2.67mmb on Crude, and a 2.8mmb drop on gasoline. Consequently, as we saw, the market jumped up.

Crude and ULSD backed off Wednesday's intraday highs with ULSD closing up .0168 to 1.946, but RBOB settled out up .0461 to 2.0411. Yesterday the trend continued, with ULSD jumping up .0399 and RBOB closing up .0413 to 2.0824. 

Today the NYMEX has backed off, by noon ULSD was trending down -.0354, with RBOB following suit at -.0396 on profit taking from the weeks earlier gains. 

A bright spot for Memorial Day Weekend - retail gas prices are at their lowest in 6 years. Have a great long weekend, everyone!

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Topics: Goldman Sachs, EIA Inventories, retail gasoline

RBOB Heats Up on EIA Inventory Shortfall

Posted by Kelly Burke on Apr 22, 2015 2:53:16 PM

Line charts depicting the stock market scattered on a table

Today's EIA Inventory report for the week ending April 17th showed a build of 5.5mmb on Crude, but a drop of 2.1mmb on gasoline. Interestingly, even though analysts had projected a mere 2.6mmb build in Crude while the actuals were more than double that, Crude ticked upwards along side RBOB and ULSD initially before settling back down.

Stocks were up across the board basically today as well, on positive economic signs - 71.9% of S&P companies who have reported earnings have reported earnings above analyst expectations. Additionally, housing sector reports indicate a jump in existing home sales of over 6% for March versus February, which is also an 18 month high - a good sign for the economy and also a factor in pushing todays stocks up. 

On the negative side, bombing resumed today in Yemen, precisely ONE day after peace talks, which may or may not impact the markets tommorow.

At the close, gas retreated from the intraday high of +.0424 to close out at 1.9245 (+.0364) and ULSD closed up +.0176 to 1.8708, with Crude closing off -0.45 to 56.16.

Stay tuned!

 

 

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Topics: EIA, RBOB, EIA Inventories, stock market, yemen

NYMEX Slows Acceleration after Yesterday's Spikes

Posted by Kelly Burke on Apr 16, 2015 3:51:34 PM

Line charts depicting the stock market scattered on a table

Today the NYMEX settled out much more reasonably than yesterday, with ULSD finishing off up .0192 to 1.908, and RBOB settled down 6 points to 1.9354. 

Yesterday was another story however, with prices shooting up on the lower than anticipated stock levels in this weeks EIA storage report. Crude was up over 3% shortly after the report, a little before 11am. At the close, ULSD ticked up .0871 to 1.8888 and RBOB shot up a solid dime to 1.936. 

In addition to the EIA report, there's been more grumblings on production cut backs from OPEC, although as usual the Saudi's are holding firm. The Saudi position is starting to seriously impact US production - hence the lower than anticipated numbers on the EIA's report, and the resultant market freak out. 

As of last week the US Crude inventories were at their 80 year high, so the reaction seems somewhat extreme. However, the actual numbers were about 30% of the projected increase so that obviously caused some concern about how hard the impact from another huge OPEC production month really is. Also, once again these events coincide with rumblings from the Fed on economic policy, specifically the interest rate level as well as continued problems in Yemen.

Deja vu all over again. 

Stay Tuned!

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Topics: NYMEX, FED rates, EIA Inventories, yemen

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