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

Surprise CRUDE Inventory Drops Catch Analysts Off Guard - but NYMEX Holds on to Week's Losses

Posted by Kelly Burke on Apr 2, 2014 3:01:39 PM

Line charts depicting the stock market scattered on a table

The EIA Inventory data out today showed that US Crude stocks unexpectedly fell 2.38 million barrels last week - if you remember, earlier this week, analysts were expecting roughly that amount of BUILD to be reported. Gulf Coast inventories had been expected to show a huge build but instead dropped by over a million barrels. On the other side, gasoline inventories dropped essentially in line with expectations, falling by a little over 1.5 million barrels. 

So what happened on Crude?

Consensus seems to be the main factor was the Houston shipping lane closure we discussed last week - the interruption likely caused higher draws than anticipated, primarily because it impacted imports to the Gulf during the shutdown, forcing refineries to pull off existing stock. This makes sense, as we saw a much larger reversal in inventory actuals versus expectations in the Gulf Coast region than generally.   

Despite the surprise inventory numbers, NYMEX futures are still trending down today. 

Interestingly, RBOB prices continue to trend downwards (although it pulled in mostly by the close) despite sustained and growing issues with ethanol supply, and a dramatic increase in its cost. Bloomberg reports that ethanol climbed 81% over the quarter, so even though RBOB is dropping on the screen, it's very unlikely consumers will see any real relief at the pump any time soon - at least until the supply and logistics issues spiking the price of ethanol subside.  

At the Close - ULSD settled -0.0212 to 2.8666, RBOB settled -0.0029 to 2.8668, and CRUDE settled out -0.12 to 99.62 

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Topics: EIA, Ethanol, CRUDE, NYMEX, Inventory Draws, Crude draws

"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

Different Day, Same Headline as Futures Retreat

Posted by Mark Pszeniczny on Dec 11, 2012 8:23:00 AM

Once again the NYMEX started off the session well into positive territory with a strong Sunday night open. Much of the gains were attributed to Chinese data released Sunday that showed its Industrial Output rose year over year, signaling stronger demand. But as the day wore on, continued worries about Europe, as the Italian Prime Minister abruptly resigned, appeared to be entering into Traders minds. That fear turned inward as the real concern centers around US distillate demand. Its Common knowledge that inventory levels of distillates are on the very low end of the range, so in the minds of most, the lack of demand is overshadowing the lack of product. Others point that this is just the season to book some profits as traders square up the quarter. I'm pleasantly surprised that we have maintained HO below the $2.95 level, a clear level of support is difficult to define at this time. At the close, Crude fell .37 to $85.56, RBOB was up only 7 points to $2.5981 and HEAT led the charge lower falling .0191 to $2.8962.

Heat map

 

RBOB CLOSE
CLOSE CHANGE
 
JAN 25981 +.0007
FEB 26071 +.0024
MAR 26266 +.0034
APR 27758 +.0041
MAY 27705 +.0035
JUN 27437 +.0020
 
HEAT CLOSE
CLOSE CHANGE
JAN 28962 -.0191
FEB 29056 -.0184
MAR 29043 -.0178
APR 28923 -.0157
MAY 29227 -.0138
JUN 29095 -.0124
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Topics: Prime Minister Resigns, US Distillate Demand, NYMEX, Chinese Industrial Output

NYMEX surges to new highs

Posted by Mark Pszeniczny on Jan 26, 2011 10:06:00 PM

Futures skyrocketed higher today hitting fresh highs on the heels of optimistic feelings about the economy.  After the feel good State of the Union speech, a speculative rally ensued early on and never looked back.  All this amid a very bearish Inventory report that totally contradicted the API’s and most estimates. Crude supplies added 4.8mbls, gasolines rose 2.4mbls and distillates fell only 140k, a stark contrast to the 5mbls projected by the API’s.  The rally carried over into the equities as well that saw the DOW crest above the 12,000 mark for the first time in almost two years.  With the FED saying the economy needs a $600 billion bond buying program; it was somewhat surprising to see the rise.  Ultimately the pressure put on the dollar today appears to be the underlying fuel for the speculative run.  As New England braces for another round of snow and cold, I would not expect to see any decisive moves in either direction in the short term.  At the Close, Crude added $1.14 to $87.33, RBOB soared .0879 to $2.4306, erasing yesterdays losses and HEAT jumped .0769 to $2.6698.

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Topics: The Market, API report, NYMEX

NYMEX finds strength to move higher

Posted by Mark Pszeniczny on Jan 18, 2011 10:04:00 PM

As many New Englanders try to find meaning of our meager existence without any football to watch for the next month, reality got slightly worse as we all tried to commute this morning in snow, sleet and rain. The market reacted strongly early on in the session pushing values up over two cents. As the day progressed, eyes shifted towards this week inventories. While Crude is expected to show slight draws, the products are expected to show moderate builds. The news appeared to be just enough to keep values from soaring to 18 month highs. Somewhat surprising was that the reopening of the Alaskan pipeline did not have the same downward effect as the shutting down did to the upside. Bulls appear to be in control for the short term, as the 15 cent jump in value in the last week exemplifies. We thought we peaked out at the 2.55 level on HEAT, only to move higher. Is 2.75 in the cards? The mixed close suggest otherwise, but we heard that song before. Crude closed down .16 to $91.38, RBOB lost .0154 to $2.4792 and HEAT rose .0007 to $2.6459.

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Topics: The Market, NYMEX, Alaska Pipeline

Trade jumps for second day in a row

Posted by Mark Pszeniczny on Jan 11, 2011 10:03:00 PM

Last Friday we were all excited that the NYMEX appeared to be on the verge of its January thaw. Well, a small pipeline leak on the Alaskan north slope over the weekend turned that jubilation into disappointment. Based on reports, a 5 to 7 barrel leak (yes, that’s 210 to 294 gallons) leaked from the pipeline causing the entire line to be shut down. With normal flow rates expected in the next day or so, early morning action had profit takers pushing the pits down almost 2 cents in electronic trading. The forecast for a crippling mid week snow storm in the Northeast had buyers out in full force and turned the session around at the open. Bulls jumped on when reports of diesel demand surged in December, up over 2%. An indicator to some that our economy is moving in the right direction and business can afford the higher prices seen in the last few weeks. All that was lost in value last week was taken back, and then some, in the last two days. Look for Wednesday to be heavily influenced by the Inventories that again are expected to show Crude levels to fall and products to rise. At the end of the day, Crude jumped $1.86 to $91.11, RBOB added .0241 to $2.4784 and HEAT gained .0527 to $2.6088.

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Topics: The Market, NYMEX, Alaska Pipeline Leak

DOE’s push NYMEX lower

Posted by Mark Pszeniczny on Dec 30, 2010 10:01:00 PM

With much of the Industry expecting large draws in Crude and distillates due to year end and a relatively cold week across the nation, the surprise build in distillates put immediate pressure across the pits.  With the Trade looking for some short term direction, it came in the way of Inventories.  Crude fell 1.25mbl vs estimates of a draw of 2.85mbl (bearish) Gasolines fell 2.3mbl vs estimates of a build of 1.5mbl (bullish) and Distillates increase 245k barrels vs estimate of a draw of 625k barrels (bearish).  With Bears taking two out of three it was enough to sink the Heating oil pit far enough down  making comeback towards the end of the day almost impossible.  Interestingly enough,  RBOB did make a comeback, after trading down over 3 cents the Front month was able to finish the day marginal positive.  Gasoline gained support with the jump in demand figures as well as the drop in jobless claims last week.  It will be interesting to see how Friday will play out as the focus again shifts to the economy and how much of an impact the northeast storm had on the historically large shopping day of after Christmas returns and gift card redemptions.    At the close Crude fell below the $90 mark dropping $1.28 to $89.84, RBOB added .0014 to $2.3918 and HEAT slipped .0361 to $2.4854

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Topics: The Market, NYMEX, Inventories Drop

Futures slip in light volume

Posted by Mark Pszeniczny on Dec 29, 2010 10:00:00 PM

Today’s NYMEX action could be characterized as being at a 4-way stop sign with every car staring at the other to see who is going to move first, and nobody moves.  What started out looking like a good down day after touching some yearly highs, and every news outlet letting us know, the market came back slightly and stayed relatively flat all day.  News was light today as the only market pushing piece was that December consumer confidence slipped slightly.  With Inventories set to report on Thursday due to the Holiday, expectations are again for draws in all products with support coming from colder weather across much of the nation and increase driving for the holiday.  Again, there is nothing earth shattering about this, just a simpletons answer.  The million dollar question remains do we move higher or lower from here.  Unfortunately most still have not forgotten December of 2007 when we were right around the same level before we skyrocketed $1.50 higher on HEAT to over $4.  At the close Crude fell .37 to $91.12, still above the psychological $90 line.   HEAT lost 28 points to $2.5215 and RBOB led the charge falling .0152 to $2.3904.  Remember Friday is a full trading day but expect little volume.

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Topics: The Market, NYMEX, Inventory Draws

DOE’s tempt Futures to sell off

Posted by Mark Pszeniczny on Dec 8, 2010 9:55:00 PM

You wouldn’t know it from looking simply at the closing figures that todays inventory report was initially viewed as wildly Bearish.  Confirming last nights API report with a draw of 3.8mbl in Crude, a build of 3.8mbl in gasolines and a build of 2.2mbl in distillates, pits tanked over 3 cents down around 10:30 this morning.  The losses were short lived however as others focused on demand numbers that showed some strength.  Additional reports of severe cold stretching from Northern Maine to South Florida fed the mid day rally that had HEAT pits dancing in  positive ground after lunch.  Again, on the surface, it appears the NYMEX wants to go lower, and the $90 resistance level of Crude appears to be holding.  But as to why we are not seeing the dramatic falls, like we saw the dramatic rises are beyond my explanation.   Even with the large draws in Crude, inventories are still well above last year and a lofty 25mbl over the three year average.  As I have said it appears Fundamental analysis is dead.  At the Close, Crude slipped .41 to $88.28, RBOB lost .0184 to $2.3046 and HEAT fell only .0095 to $2.4607, this after touching the $2.43 level earlier in the day.

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Topics: The Market, API report, NYMEX, Distillates Build

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