Crude, Refined Products Jump on Tariff Delays

Posted by Kelly Burke on Aug 13, 2019 2:46:30 PM

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NYMEX shot up today on news that the Trump Administration would be delaying the onset of tariffs on some Chinese made goods (including most electronics) to December, rather than September when they were supposed to take effect.

The other half of the headline is that trade talks will reportedly begin again informally in "two weeks" - prior to the announcement, no talks were expected until after the tariffs hit. This seems to be giving hope that the issue may be resolved ahead of the September deadline, although whether that happens that remains to be seen. 

WTI & Brent were both up over 3% on the announcements and refined products followed suit, jumping an immediate .05 and remaining high throughout the trading day. At the close - ULSD was up .0715 to $1.8773 and RBOB climbed .0712 to $1.7364, with Crude settling at $57.10/bbl. 

The other supports in place today are the API report due this afternoon which is expected to show draws in US inventories. (They are expecting 2.8mmb draw, but we wont have the "real" numbers until the EIA report on Wednesday)

Additionally, OPEC is vowing to keep production caps, if not expand them aggressively, according to a statement by the Saudi Oil Minister who indicated Saudi Arabia would keep September levels below 7mm bpd to keep down global levels.

Saudi Aramco is reportedly considering going IPO, so the thought is they will be doing whatever it takes to prop prices that is needed, particularly in the short term. 

All of this of course, could reverse on inventory data (or maybe some tweets) tomorrow, so stay tuned!

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NYMEX Drops Again on EIA Data

Posted by Kelly Burke on Aug 7, 2019 3:27:57 PM

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Markets dropped again today on continued news of both upticks in supply, and drops in demand. 

The EIA report this morning showed a 2.4 mmb build in Crude, 4.4 mmb build on gas, and 1.5 mmb build on distillates.

The API & other analysts had expected another draw (in the neighborhood of 3.5mmb on Crude), which appeared to be priced into yesterday's trading. Today however, Crude plummeted 2% on the report's release, and refined products dropped steadily throughout the day.

At the close, Crude settled out at $51.09, ULSD was down .0708 to $1.7532, and gas dropped .0670 to $1.6203. 

For the second half of their one-two punch, the EIA also revised down its 2019 World Oil Demand forecast by 70,000 bpd. The 2020 number was not revised down, which is good, but the current year revision is still a worrying signal regarding economic growth, and therefore, longer term demand. 

The Bank of America report from Friday continues to weigh on prices as well, as the ongoing tension between the US and China is being watched carefully. Slowdowns in the Chinese economy are a huge factor for global demand on one hand, but robust growth supplied by (sanctioned) Iranian oil would be perhaps an even worse outcome in terms of market stability and general international relations - both between the US & China, and within the Middle Eastern region.   

It pays to keep in mind that despite how clear cut the drops may seem when looking at supply & demand factors alone - we also have a developing situation in the Middle East, specifically Iran. Sanctions are in play against Iran, and their economy is struggling which promotes civil unrest (as we have seen). Oil tankers are being seized in the Strait of Hormuz, while other vessels smuggle sanctioned oil to unscrupulous buyers, drones are being shot down, and so on.  It's not difficult to imagine that situation spiraling out of control and becoming a serious international crisis far beyond the impact it would have on markets. All of which is to say - it's never a great idea to assume the future is certain for the markets (or anything else). 

Stay tuned!

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Topics: weekly inventory numbers, Chinese Currency, EIA Inventories

Markets Tumble on Trade War Tensions

Posted by Kelly Burke on Aug 5, 2019 3:49:12 PM

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The NYMEX tumbled back down today, erasing Friday's rally. At the close, ULSD shed .0546 to $1.8356, and RBOB dropped .0635 to $1.7180, with Crude closing at $54.69, which puts us back in the territory we saw on Thursday, essentially. (We were $1.8529, $1.7499 and $53.95 at the close Thursday after record slides).

The NYMEX wasn't the only market down today, as global stock markets slid on US/China trade war tensions.

So today, China threatened retaliatory action after the Trump Administration did not back down from tariff imposition threats. And then (stop me if you have heard this one before) Chinese currency hit suspicious new lows against the US dollar, which prompted renewed accusations of currency manipulation on the part of China by President Trump, which didn't sit well with Wall Street, who is looking for any sign of hope that tariffs and a potential full on trade war are not looming on the horizon....And then everything tumbled across the board, from the Dow Jones to the Nikkei. Phew. 

Bank of America also announced today that should China choose to purchase Iranian oil in response to US Tariffs, we could see oil tumble to "$20-$30/bbl" (although they did not revise their 2020 prediction of $60/bbl). The decision to purchase from Iran would serve to both weaken the impact of US backed sanctions on that country, as well as take a substantial amount of the impact out of the tariffs imposed on China. However, the move would not be without consequence, as Iran would be stepping outside the agreed upon production cut strategy in the region and that would likely not go over well with their neighbors (particularly Saudi Arabia) and would essentially force a heavier partnership than China may be interested in maintaining.

On the fundamentals, supply is still vastly outpacing demand, and economic indications continue to suggest that global demand will continue to soften. Whatever does or does not happen in terms of shorter news cycle events - seized tankers, trade disagreements, etc, the fundamental supply/demand levels will ultimately dictate a large portion of where crude & refined products settle out.... at least until another short term cycle event throws a wrench in the gears.

Stay Tuned!  

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Topics: Iran Sanctions, china, tariff, trade war

Markets Rebound After Thursday's Slide

Posted by Kelly Burke on Aug 2, 2019 3:54:34 PM

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Markets rebounded somewhat today from yesterdays massive slide.

Brent & WTI both closed up 2.7% today (to $62.07 & $55.40, respectively) after each saw the greatest single day slide in over three years on Thursday. 

At the close ULSD was up .0373 to $1.8902, RBOB up .0316 to $1.7815 and WTI at $55.40. 

So what's going on? 

Analysts are accounting today's rally to the idea that yesterday's sell-off was probably more extreme than was warranted, so some of the rebound is simply a re-balancing of sorts.

The other assumption is that the Trade War concerns brought on by yesterday's Presidential tweets and the potential impact of looming tariffs on the economy may have been an overreaction. Time will tell on that one. 

Overall it's a little hard to tell whether we are returning to range bound numbers or waiting for another shoe to drop, as a lot of the usual "leading indicators" are mixed.

The US economy expanded 2.1% in the second quarter, which beat analyst predictions - but also fell short of Q1 numbers.The jobs number was up - but not as strong as was hoped, and the unemployment rate is low - but unchanged from prior month. The economy expanded - but manufacturing activity and construction spending fell.

Oil production levels in the US are expected to surpass records, while OPEC cuts production to bolster prices. 

Each of the factors we usually consider is somewhat counterbalanced by another. 

It will be interesting to see how things begin to shake out.

Stay tuned!

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Topics: economic data, US Crude Production, tariff

NYMEX Plunges on Fed Rates, Supply, Tariff Tweets

Posted by Kelly Burke on Aug 1, 2019 2:58:38 PM

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Oil & Refined products all plunged today on a series of events. Both Brent & WTI were down over 3% this morning, and by 2pm refined products were down over 11 cents.

At the close, ULSD was down .1178 to $1.8529, RBOB shed .1129 to close at $1.7499, and WTI Crude was $53.95, down from $58.58 at the close yesterday.

Yikes.

So here's what appears to be going on in a very basic nutshell:

The Federal Reserve announced a single rate cut of 0.25% versus the series of cuts expected to be coming down the road. The interest rate cut was expected to begin a series of cuts to shore up the domestic economy against global economic concerns about general weakness but evidently will be a one shot deal. 

The dollar hit two year highs post Fed announcement, and oil crashed as a result. 

U.S. supplies were down for July and OPEC production hit record lows (below 2011 levels) as a result of the OPEC+ deal, which normally would serve to boost prices, or at least hold them steady. However, global supply & output levels are still very high, particularly from the United States, and additional influxes from former member nations who opted out of the OPEC+ production cut agreements. (When combined, that's an offset of around 12mmb per day against the cuts by OPEC countries) 

Finally, this afternoon, the Trump Administration announced abruptly that effective September 1, the US would impose a 10% tariff on an additional $300 billion dollars of Chinese goods. Not exactly helpful for allaying concerns about global trade, the global economy, or weakening demand, to put it mildly.

The announcement came out later in the day, so we will have to see how the markets shake out tomorrow - whether the demand concern seeming to dominate now holds out, or if we flip the markets the other way on overall economic concerns tariffs can raise. 

As always, stay tuned & feel free to reach out if you have questions. 

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Topics: OPEC, FED rates, tariff

Iran Seizes Tankers in Strait of Hormuz

Posted by Kelly Burke on Jul 19, 2019 3:28:18 PM

BREAKING - Iran's Republican Guard has reportedly captured 2 oil Tankers in the Strait of Hormuz this afternoon, one tanker being British and the other Liberian flagged.

News broke of the first  around 1:30pm EST, the second being just announced 3:15pm EST. 

So far the market is up but not sharply, but it's unclear that the impact of news of a second vessel has hit yet. The obvious fear with multiple seizures is that Iran plans to deliver on the perpetual threat of closing the Strait of Hormuz, although it is obviously entirely too soon to make any such prediction. 

CNN is live updating on the unfolding situation, you can follow those updates here:  CNN - Iran Seizes Tankers in Strait of Hormuz

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Topics: Iran, Straits of Hormuz

Inventories & Gulf Storm threat push NYMEX higher

Posted by Kelly Burke on Jul 10, 2019 2:54:12 PM

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Crude slipped past the looming $60/bbl benchmark this afternoon, as pricing surged over $2/bbl (~4%). Prices have been largely supported the past several weeks by looming Iranian-US tensions and price level support from the continuing OPEC+ production cuts.

Today's surge was the result of the perfect storm of, well, an actual storm, and unexpectedly high Crude inventory draws announced by the EIA. 

This morning several major oil producers announced they were beginning evacuations of rigs and halting areas of production along the Gulf of Mexico ahead of an impending tropical storm expected Thursday into Friday. (According to CNBC, who has a fantastic piece being continually updated with info on everything happening in the Gulf & the market impacts that you can read here: CNBC )

The EIA Inventory report this morning showed Crude draws of 9.5mmb, well above the anticipated levels (expectations were that draws would be around the 3mmb range, so they came in at over triple expectations, essentially). Gasoline drew down 1.5mmb, and distillates showed builds of 3.7mmb. Those distillate builds did little to slow the across the board impacts this afternoon, and refined products closed up right along side Crude. 

At the close, Crude closed out at 60.43, ULSD was up +.0804 to $1.9910 and gas settled up +.0783 to $2.0052

 

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Topics: OPEC, Crude draws, EIA Inventories

G20 Summit Answers Looming Market Questions

Posted by Kelly Burke on Jul 1, 2019 3:23:56 PM

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Prices surged this morning after a slow down on Friday, on news from the G20 Summit that Russia and Saudi Arabia have agreed to extend the OPEC+ production cuts by another 6-9 months. The agreement still needs to be ratified at the upcoming OPEC meeting, but that is essentially a formality at this point, given Russia & the Saudi's are in agreement. 

The demand side of the equation also got a boost from the announcement by President Trump that no new sanctions would be put in place on China, at least for now. Speculation on potential tariffs has been a cloud over trading for several weeks. 

Markets were up huge this morning, with gas briefly up over 5 cents and diesel not far behind, and Brent Crude up over 2%. It calmed over the trading day however, and at the close we saw ULSD +.0144 to $1.9538, Gas up .0339 to $1.9305 and Crude settled at $59.09

Looking backward, despite closing down on Friday, the month of June was up 9% on concern about Iranian-US tensions, Chinese tariffs, and the OPEC/G20 production discussions. Now that some of these have evidently been resolved, at least temporarily, it will be interesting to see what July holds for market moves. 

Stay Tuned! 

 

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Topics: Saudi Oil Minister, russia, china, G20 Summit, tariff

EIA Data, Refinery Closures & International Tensions Spike NYMEX

Posted by Kelly Burke on Jun 26, 2019 3:07:45 PM

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The NYMEX is up big this afternoon in the wake of surprise draws in inventories, ongoing international issues, and the potential closure of the largest gasoline refinery on the East Coast. 

Inventories: Crude was projected to drop ~2.5mmb but EIA data showed a surprise drop of a whopping 12.79mmb for the week ending June 21.

Gasoline & Distillates were both expected to show builds, but gasoline drew down 1 mmb, and distillates dropped 2.44mmb (projections were for builds of 0.29mmb & 0.52mmb, respectively).

Crude jumped over 3% on the news, and refined products shot up as well. Gas has been up over 8 cents most of the day, with diesel up .04-.05. 

At the close, Crude settled at $59.38, ULSD jumped .0479 to $1.9713, and Gasoline was up .0932 to $1.9704

International Tensions The ongoing tension between the US & Iran continues to make markets nervous as we wait to see what the next steps may be after the abrupt calling off of air strikes last week in response to Iran shooting down an American drone. 

Continuing concern about the ongoing saga regarding US-China relations and the potential ramifications of proposed tarriffs on Chinese manufactured goods is also serving to keep markets on edge. 

The G20 Summit is slated for this week, and all eyes are on reported meetings to occur between Russian President Vladimir Putin and the Saudi Crown Prince. The previously scheduled OPEC meeting for the end of this month has been postponed, purportedly in order to allow for Russia & Saudi Arabia to discuss the so called OPEC+ deal on production caps, and what the ongoing supply curbs under that deal may look like at the summit. 

Refinery Closures  In addition to inventory draw downs, the Philadelphia Refinery that suffered an explosion last week when a vat of butane ignited is reportedly seeking to shut down permanently. The site is the largest gasoline refinery on the East Coast, and the long term supply impacts of it's shuttering could be substantial.

Stay Tuned!

 

  

 

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Topics: Iran, East Coast Refineries, Refinery Closures, EIA Inventories, china

Refinery Explosion & Iran/US Escalations Push Prices Up

Posted by Kelly Burke on Jun 21, 2019 11:40:37 AM

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Gasoline spiked this morning, after a refinery explosion shook Southern Philadelphia. At around 4am, a butane vat exploded at the East Coast's largest  refinery, causing large fires and prompting an shelter in place order for the surrounding areas. There are no injuries reported, and CNBC is reporting the flames were relatively controlled with the SIP order lifted around 7am. You can follow this story here: Massive explosion at biggest gas refinery in East Coast 

We won't know how long term an impact refinery issues will cause, but looming larger on the horizon is the US/Iran tensions hitting crisis point. The market has jumped substantially this week in response to the escalations.

In lieu of the deep dive really looking into the Iran/US issues would require, the following is a quick synopsis of what's been happening in the past weeks' escalations: 

Tensions have been simmering since last May, when Trump withdrew the United States from the so-called "Iran Nuclear Deal" reached with that country & President Obama that would have capped uranium enrichment for Iran at 3.67%.
  • Last week, as discussed, oil vessels were attacked in the Gulf of Oman.  The Trump Administration has placed the blame on Iran for the vessel attacks, although it is unconfirmed still at this moment in time. 
  • Monday, Iran announced that by the 27th, they would officially breach the caps on uranium enrichment set by the "Iran Nuclear Deal"  As mentioned, the Trump Admin withdrew from that deal in 2018, but it is important to remember that the other countries involved did not withdraw, the deal was supposedly still in effect between Iran & several other European nations.
  • In response to the announcement about uranium, President Trump announced he would be redirecting 1,000 troops to the Middle East.
  • Thursday, Iran shot down an unmanned US drone. Iran claimed the drone was within Iranian airspace, while the US argues their coordinates show the drone within International airspace near the Strait of Hormuz (there is about a 9 mile variance between the coordinates cited by Iran and those cited by the US)
  • Thursday night, President Trump ordered retaliatory strikes on Iran, but held off at the last minute. According to him, he called off the strike because the expected casualty rate would be higher than what he considered proportional to the attack by Tehran, so it is unclear whether a different type of retaliatory strikes will commence in the next several days. (This is still developing, follow live updates here: "Trump confirms he called off retaliatory strike against Iran in last minutes" 

We will continue to keep an eye on developing news and how it impacts the market.

If you have questions regarding current pricing, or want to learn about the options for fixed prices or prompts available in the face of volatility in the market, please don't hesitate to reach out. 

Stay tuned! 

 

 

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Topics: Iran, Iran Sanctions, Straits of Hormuz

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