Monday Sinks on Demand, Tuesday Surges on Supply

Posted by Kelly Burke on Nov 3, 2015 3:22:33 PM

Man grasping his head while looking at computer screens

Yesterday we saw the beginning of a reversal of last week's rally on more bad economic news from China that came out over the weekend. Specifically, manufacturing dropped again, remaining under the level that is seen as official contraction. Once again, this impacts the oil markets because we're counting on their demand remaining high, or even increasing. That doesn't happen when your manufacturing slows down. Monday settled down marginally with the exception of gasoline. (Crude at 46.14, ULSD down -.0098 to 1.5069 and Gas up 37 points to 1.3753).

Today however, was an entirely different story. At the close, ULSD settled at 1.5660 (+.0591), Gas was up (+.0702) to 1.4455, and Crude was up almost 4% to 47.90, with Brent settling up 3.5% to $50.51.

 What Happened?!

Bloomberg & The Wall Street Journal are reporting that in yet more infighting between Libyans and militia factions, Libyan Oil Ministers announced the indefinite closure of a major port by force majeure after the port came under control of "an armed militia". No word yet on who that militia was. The closure will drop Libyan production/export by approximately 70,000bpd. As discussed before, Libya was a major exporter historically, with a capacity of about a million and a half barrels per day but since the country essentially went into a tailspin, that's been dropping. This latest closure brings them down to under half a million barrels a day - less than a third of their capacity.

In Brazil, oil workers began striking Sunday, and reportedly have already dropped State run Petrobras' output by approximately 25%.

So today obviously jumped on supply disruptions - but globally, we are still looking at a supply glut, especially when we look at Chinese economic data and Iran's announcement that they are working towards another half a million barrels a day coming online.

Barring extreme scenarios, one would assume prices would back off some, or stabilize on supply, rather than continue to surge on it. A big mover tommorow could be the EIA Inventory report, and later this week we're looking at more Fed talks. Also, the October Jobs report out on Friday will undoubtedly move Wall Street, but we will have to wait and see how that may or may not impact the NYMEX. 

Stay Tuned!

 

 

 

 

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Topics: Libya, WTI Crude, china, brazil

NYMEX Continues Losing Streak Despite New Middle East Concerns

Posted by Kelly Burke on Jul 9, 2014 2:59:42 PM

Line charts depicting the stock market scattered on a table

By the Numbers:

Monday marked the 7th straight session oil futures dropped, which is the longest we had seen since December of 2009. Tuesday accelerated the drop off, with ULSD closing down -.0409 and RBOB dropping -.0161 to 2.9729. 

This morning it appeared US Crude may erase some of the drop off over Israeli/Hamas fighting that has erupted this week, but the downward trend has continued - albeit less rapidly. ULSD closed off 25 points to 2.8711 and RBOB closed down -.0352 to 2.9377

Whats Going On:

The spikes we saw in June mainly stemmed from concerns about the Iraqi/ISIS conflict and subsequent fears of interrupted supply. So far though, exports from Iraq have remained stable and uninterrupted, which has let prices ease off. Even European Brent Crude has gone back to pre-Iraqi tension levels. 

Also - remember those Libyan ports that were seized by rebels last July and have remained offline since? Well it looks like they will finally be coming back online, which could up Libyan exports by up to 800,000 barrels per day. The caveat here though, is prior discussions on moving Libyan exports back up have fallen through, so theres no guarantee on what production levels they'll actually hit.

What to Watch For:

The potential storm cloud on the horizon is the Israel vs. Hamas situation unfolding. Palestinian officials are reporting over 35 killed and 300+ wounded in Gaza  as a result of Israeli airstrikes. The strikes have reportedly hit over 450 locations in Gaza, while Hamas has launched rockets far deeper into Israel than before - hitting tech centers, Tel Aviv and northern counties. Israel is reporting that since Monday afternoon, over 200 rockets have been fired at the country, in addition to over 50 that were shot down by drones before impact.

Israeli Prime Minister Netanyahu has reached out to the UN & US to condemn the Palestinian action, while some newspapers are reporting that Palestinian President Abbas has reached out to the Egyptian President to moderate discussions for a cease fire. 

The situation arose from three Israeli teens being kidnapped and murdered last week - which Israel blames Hamas for, and the subsequent murder of a Palestinian teen, which Hamas claims was retaliatory action by the Israelis.

As we've seen a thousand times before - violence escalation in the Middle East almost always causes fear based price increases. Luckily, we saw no such movement today, as the market continued decline. Markets aside, hopefully the situation comes to some sort of resolution soon - preferably a long standing agreement that will stop the unecessary violence in the area.  

 

 

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Topics: RBOB tumbles, Libya, Iraq, ISIS, Hamas, Israel

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

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

Market Tumbling Update

Posted by Mark Pszeniczny on Jun 23, 2011 12:42:00 PM

The International Energy Agency said it will release 60 million barrels of oil from emergency stocks in the next 30 days to alleviate supply problems caused by the shutdown of Libyan crude exports due to the civil war.

 

The IEA, which represents major energy-consuming nations, said the tight supply situation was becoming a threat to a fragile global economic recovery. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy," IEA chief Nobuo Tanaka said.

 

The U.S. Department of Energy said it would release 30 million barrels a day as its contribution toward the measure.

 

The unexpected announcement drove crude-oil futures lower, with the Nymex contract for August delivery down 4.5% to $91.13 a barrel.

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Topics: IAE, Libya

Market Finally Falls after Calm Weekend

Posted by Mark Pszeniczny on Apr 11, 2011 9:58:00 AM

Futures tumbled today after seeing double digit increases in the HEAT pit on Friday as fear of prolonged unrest overseas and the possibilty of a Governmental shut down loomed.  At the eleventh hour a deal was struck to keep the U.S. Government running with both sides claiming victory.  New reports this morning had Libya tension cooling as a proposed peace deal is on the table.  The problem is, the deal calls for Gadhafi to remain in power.  As one would expect, the deal has been accepted by the current regime but rejected by rebel forces.  It was somewhat relieving to see our first down day in the last nine sessions.  We are all looking for a healthy correction of the speculative buying that has pushed HEAT higher by almost 20 cents in the last 10 days.  With warm air finally making its way into the Northeast, we should see some length get pulled out of the HEAT pit.  At the Close, CRUDE fell $2.87 to $109.92, RBOB lost .0602 to $3.2005 and HEAT tumbled .0672 to $3.2525.  As we have said many times, one day does not make a trend, but it would be nice if this was the start. 

 
Daily Heat Chart
heat map
RBOB CLOSE
                 CLOSE       CHANGE MAY    32005       -.0602
JUN    31867        -.0595
JUL    31741        -.0590
AUG    31562       -.0589
SEP     31305        -.0597
OCT    29909        -.0625
HEAT CLOSE
          CLOSE    CHANGE
MAY    32525       -.0672
JUN    32647       -.0645
JUL    32784       -.0620
AUG    32931        -.0591
SEP    33085       -.0571
OCT    33230        -.0556
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Topics: HEAT, government shutdown, Libya, Market analysis

Bulls remain in control ahead of Inventory Data

Posted by Mark Pszeniczny on Apr 5, 2011 1:02:00 PM

What appeared to be a solid retreat this morning turned into another solid up day for the NYMEX.  The early morning session had both pits down over two cents in electronic trading as word of a Chinese rate hike hit the wires and a possible slow down in demand for the worlds second largest consumers.  Additionally minutes from last month FED Reserve meeting realeased today noted several members voicing concern over the rapidly rising energy costs and the effects that would have on the growth pattern of the country.  But by mid morning, sentiment had changed with news once again surfacing that the oil port town of Brega in Libya was back in control of loyalist forces.  Intensified fighting between France and Ivory Coast over the areas rightful President also pushed prices higher as the growing fear of worldly strife has many investors searching for the one investment that is insulated.  At the close, Crude actually fell .13 to $108.34 while RBOB jumped another .0325 to $3.2013 and HEAT topped out at $3.1850 up .0136.

Daily HEAT Chart
heat chart
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Topics: CRUDE falls, Libya, Bull Market, Daily Heating Chart

NYMEX rises on jobs and overseas risk

Posted by Mark Pszeniczny on Apr 4, 2011 12:55:00 PM

RBOB spent much of the day bouncing back and forth from positive to negative before finally ending stronger.   Heating Oil never broke negative but did tease with it about mid day.  Depending upon which news wire you read, Libyan rebelshave either lost control of a major oil port city or regained full control.  The lack of credible reports coming from the crisis is playing into the risk premium.   New data was released this morning that shouwed the economy grew by 3.1% in Q4, slightly above the expected 3.0%.  Also psuhing values higer was data showing the economy created an addtional 31k jobs in the last month.  How much of that is seasonal workers is yet to be determined.  The rosey view and geopolitical risk that continues to spread over northern Africa and the Mid East has pushed HO above the $3.14 level, closing up .0369 to $3.1714.  RBOB moved higher by .0175 to close at $3.1688.  Crude reached an 18 month high before closing up .53 to $108.47.  We had said that the market appears to fade after HEAT touched $3.14, the breakthrough of that resistance level today lends to higher prices in the future. 

Daily HEAT Chart:
heat chart
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Topics: Jobless numbers, Libya, Daily Heating Chart

Markets find strength ahead of Spring storm

Posted by Mark Pszeniczny on Mar 31, 2011 10:47:00 AM

With what appears to be a cruel joke by Mother Nature, sending us another 6 to 12 inches of snow for Friday, markets got the fuel they needed to push higher today.  While the winter weather may be a simple coincidence, the real driver today appears to the ongoing unrest in Libya.  After the President adressed the Nation Monday night, and all but assured us that NATO forces would take command and ground troops would not be committed, that plan is begining to look suspect.  Over the last few days, Rebel forces have made little if any ground against the Gaddafi regime.  Their reliance upon US and NATO air strikes to make any advances has put their chances of an overthrow in jeapordy.  This, even on the heels of a long time supporter of Gaddafi defecting.  Overnight the Lybian Foriegn Minister sought refuge, signaling to the West that the power appears to be fracturing.  However, with the President authorizing use of covert operations, many point to this as the first step in a drawn out conflict.  With Lybian product shut in, and Japaneese demand expected to pick up, we cant be all that surprised to see the bumps.  The key will be in how long it will take for the jump to be peeled off.  Speculative money appears in control for the time being and the slight drop in jobless claims is not facilitating a sell off by any means.  At the close, Crude rose $2.45 to $106.72, RBOB jumped .0436 to $$3.1076 and HEAT led the charge adding .0502 to $3.0898.
heat map
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Topics: HEAT, Libya, CRUDE, RBOB, Ghaddafi

Rally pushes on as strife continues

Posted by Mark Pszeniczny on Mar 1, 2011 10:09:00 PM

Futures soared higher again today as all eyes continue to be focused on the Mid East and Northern African Nations and the wave of civil unrest that has gripped that region.

Only a week ago it appeared that the Libyan crisis was cooling with a possible quick exit by its Leader. That was 7 days and 25 cents ago….  As Iran has been said to clamp down and imprison opposition leaders and with Algerian news outlets reporting some growing protest, the main fear is that demand will outpace the supply. With the Saudi’s announcing they will foot the bill for any excess barrels left on the table, who wouldn’t want to be investing in Saudi Arabian refineries right now! Crude goes up $2.66 today to $99.63, jackpot! From the “ No Duh” file, FED chairman Bernanke spoke today and did little for the cause as he declared rising commodity prices would hurt the economy, but not produce massive inflation. More likely a short term rise in consumer gas prices.

With Funds bow controlling roughly 23% of the long positions in the Market; it will be interesting to see where the selling will start, and yes, it will happen. It was interesting to note that a gasoline demand report by Mastercard showed a 3% increase in demand last week, but some of that can be attributed to panic buying as consumers tried to beat the next price increase.

At the close, HEAT jumped .0846 to $3.0235 and RBOB soared .0907 to 2.9834. Let’s hope to find some relief in Wednesday’s DOE report.

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Topics: Libya, The Market, rising gas prices

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