Kelly Burke

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US-China Trade Deal Keeps Markets Range Bound

Posted by Kelly Burke on Jan 16, 2020 3:05:48 PM

china-US trade deal

Prices have been somewhat up and down, but largely range bound over the past several days of trading.

It's not because there's nothing going on but because there is a lot happening but it's sort of up in the air which way everything will go. 

The ongoing US/China trade tension situation is both the major factor and a good example - "Phase One" of a trade agreement is in the books as of Wednesday, including a pledge by China to buy "at least 52.4 billion of US Energy products over the next two years" (although what that entails specifically was not clarified)... That sounds like news that should be pushing oil up substantially -  but we don't actually know if any trade deal will change demand forecasts, so it may be that pricing is largely unaffected. 

Some of the confusion is that this is "just phase 1" and the US has announced that they are not removing tariffs on billions of dollars of Chinese goods until phase 2 (whatever that is) is agreed to, but we have revised tariffs down substantially on 120 billion OTHER Chinese goods previously at a higher rate.

Essentially, no one is really sure what we can expect to see in terms of real impacts from Phase 1 -or how long Phase 2 will take. 

(You can read the details of Phase 1 in this article on MarketWatch: "Trump signs landmark China deal and says removal of tariffs would come in next phase"). 

Yesterday (Wednesday) The EIA inventory report for the week ending January 10 showed surprisingly huge builds on distillates and gasoline, 6.7mmb and 8.2mmb, respectively. (Analysts had predicted 3.3 on gas and 1.3 on distillates). Crude also surprised traders with a 2.5mmb decline (against a 1.1mmb speculated build). Wednesday's close reflected the report with a drop of .0324 ($1.8779) on ULSD, a drop of .0176 on gas ($1.6368) and a final number of $57.81/bbl on WTI Crude. 

Today we have been mixed most of the day as the trade deal news gets analyzed and digested, primarily. At the close, ULSD was down .0179 to $1.8600, RBOB gained .0180 to $1.6548 and Crude settled at $58.52, from $57.81 Wednesday.  

This week the EIA also revised its expectation for WTI & Brent crude for 2020, putting WTI at an average of $59.25, pretty close to where we have been trending the past week or so (1/8-1/16: 58.08-59.61/bbl)

Stay tuned! 

 

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Topics: EIA Inventories, china, US-China Trade Deal, Trump Administration

De-Escalation Walks Back Overnight Oil Gains

Posted by Kelly Burke on Jan 8, 2020 2:57:30 PM

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What a wild start to 2020 for the oil markets! 

Friday saw morning trading jump ~4% on the Pentagon's confirmation that the United States had launched airstrikes and taken out Iran's top commander in Iraq. Prices gave back about half their gains during trading on Friday with the settle at $63.05/bbl Crude, $2.0614 ULSD & $1.7488 RBOB. 

Gains continued to slowly pare off through trading Monday & Tuesday, for the most part.

That is until Tuesday night. 

After a few day's of relative quiet (outside of Twitter, anyway), last night Iran commenced retaliatory strikes against the US by launching missiles at two US Bases in Iraq housing military members, as well as towards the US consulate in Ebril (the consulate was not hit). There were no casualties in the strikes. 

Upon news of the missile strikes, the market shot up almost 5% on overnight trading. 

Despite the overnights being up so sharply, by today's open when it was clear there were not massive US casualties (which would all but guarantee further action), the market was essentially flat and plummeted through the day as news updates became available.

Today's round of press conferences and news briefs indicated strongly that Iran was signaling that they would not retaliate further, and as of the moment the US position is apparently to de-escalate by working on sanction proposals versus further military strikes. Of course, both of these positions are subject to change at a moments notice, and it's entirely possible sanctions are interpreted by Iran as escalation, but for the moment we at least have some calm on the Iran/US tension front and hopefully that continues. 

At the close,Crude settled out below $60/bbl again, at $59.61, ULSD shed .0742 to close at $1.9582, and RBOB lost .0734 to settle at $1.6488. 

Stay Tuned! 

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Topics: Iran

2020 Starts with Surging on Iran Strikes

Posted by Kelly Burke on Jan 3, 2020 3:05:39 PM

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Today, the market surged up to 4% on intraday highs as the Pentagon confirmed that US Airstrikes in Bahgdad killed Iran's top commander, Qasem Soleimani. Soleimani was considered to be responsible for the attacks by Iran on the US Embassy earlier this week, and the strikes have been framed as a retaliation for those attacks, as well as a preemptive action to prevent alleged further attacks in the works on US targets in the region.

This afternoon, Iran's Supreme Leader Ayatollah Khamenei promised retaliation ("Severe Revenge"), and the US announced that 3500 additional troops would be deploying to the Middle East. 

Concerns are obviously mounting about the nature of Iranian retaliation for the strikes, with the major concerns being either an escalation to war between the US & Iran, or that we will see Iran begin to attack crucial infrastructure in the region again, like they allegedly did in Saudi Arabia this past September. 

It is important to remember however, that when last September's attack took 5.7mmb out of global supply instantaneously, and essentially halved Saudi Arabia's production capacity, the markets spiked, but had essentially returned to flat within a few trading days.

That is to say - it's anyone's guess whether we continue to climb or the market does a quick turnaround over the next week of trading.

We did back off intraday highs by the close, where ULSD was up +.0373 to 2.0614, RBOB was up +.0446 to 1.7488, and Crude settled at $63.05/bbl.

However, the story is still developing so it's hard to know what impact any late afternoon & weekend developments may or may not have on the the electronics as well as Monday's open. 

Stay Tuned! 

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Topics: Iran

Inventories & Rumored OPEC+ Cuts Boost Oil Prices

Posted by Kelly Burke on Dec 4, 2019 3:50:58 PM

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Markets shot up today after relative calm earlier in the week, on EIA inventory reporting this morning that showed a 4.9mmb drop in Crude, once again far surpassing analyst predictions.

This week's report marks the first time in 6 weeks that US Crude inventories have showed declines.

At the close, WTI settled at $58.43, ULSD was up .0430 to $1.9229, and RBOB was up .0413 to $1.6042. 

In terms of larger ongoing issues affecting markets, the OPEC meeting is still looming (this Thursday & Friday). Analysts expect that the OPEC+ agreement will both be extended and strengthened as a result of the upcoming meeting, and they expect deeper cuts going forward to be the main outcome of the meeting (rumor is cuts will be an additional 400K bpd).

However, there has been some drama recently with Saudi Arabia and other member nations over adherence to production caps.

Basically, Saudi Arabia has kept production well below their agreed upon level in order to offset the overproduction by non compliant producers (Iraq being chief offender - they over pumped by around a quarter million barrels per day). As a result of that, Saudi Arabia is essentially subsidizing and taking the financial hit for other countries over production in order to keep global pricing levels stable. 

Understandably, they are a little tired of doing so and last week threatened to unilaterally boost their own production and send the whole pricing house of cards tumbling if other nations don't step up their compliance rates. Its likely an empty threat - even though they're taking a hit covering for the other nations, they also stand to lose the most (by a LONG shot) if prices were to crash now. The threat is meant to keep other producers in line, but who knows what will happen if they don't. We will have to see how the meetings go at the end of this week. 

Stay Tuned! 

 

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Topics: OPEC, EIA Inventories

Mixed Market Week on Same Old Concerns

Posted by Kelly Burke on Nov 22, 2019 3:27:27 PM

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Happy Friday!

We are ending out a mixed week on the NYMEX today, to put it mildly. Monday & Tuesday were both substantial down days with the market shedding over 4 cents (.0433 and .0473, respectively) on ULSD both days, and landing Crude at $55.21 at Tuesday's close. 

Wednesday & Thursday however, saw the NYMEX jump up substantially.

Wednesday's inventory numbers fell short of expected builds and we saw intraday highs over 5 on refined products, with the close reflecting +.0347 on ULSD ($1.8921) and +.0526 on RBOB ($1.6563) and Crude closed at $57.11. 

Thursday gains were around 2% with ULSD closing up +.0526 to $1.9447, RBOB +.0481 to $1.7044 and Crude up to $58.58, a two month high. 

Today we saw the market shed some of the week's earlier gains, with ULSD down -.0153 to $1.9294, RBOB off -.0301 to $1.6743 and Crude closed out at $57.77, about back where it was Wednesday mid-morning. 

So what's going on? Good question. It seems a lot of the back-and-forth action this week (and for a few weeks prior) has primarily been the result of ongoing speculation and reaction on three repeating themes 1) China-US Trade War 2) OPEC Cut questions 3) Global economic concerns.

Essentially we have been bouncing up or down based on reaction to inventory reporting, economic reports, rumors of progress then retreat on ongoing China-US discussions, tariff delay questions, and uneasiness about what OPEC may or may not announce regarding cuts at their December 5th meeting. 

Hopefully there is some solid direction on any of these questions over the next few weeks, or it's anyone's guess when the see-saw action will subside. Until then, it's Deja Vu all over again, as they say. 

Stay tuned!

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Topics: OPEC, NYMEX, EIA Inventories, china, tariff

Supply vs. Demand Concerns Temper Early Gains

Posted by Kelly Burke on Nov 14, 2019 3:27:29 PM

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The markets were initially up somewhat today on EIA inventory reporting and projected slowdowns in US Shale production through 2020.

However, ongoing positive hopes regarding a trade deal between China and the US, as well as some unexpectedly positive demand numbers from China allayed some concerns on the demand side of the equation and prevented supply related spiking on the NYMEX today, and we ended up closing down on Crude & RBOB, and up slightly on ULSD. 

Official numbers at the close: Crude $56.77 (from $57.12), ULSD $1.9179 (+.0054) and RBOB $1.6158 (-.0207)

On the OPEC front, no "major changes" are anticipated on current supply curbing measures and member adherence. There is some question though if going forward there will be further cuts to prop prices, which seems important both for Aramco valuation and to compensate for continually dwindling demand. On the other hand, the ongoing concerns for the cartel regarding the portion of demand loss that has been taken by non-OPEC producers, including the US, makes further supply cuts anything but a sure thing.

As we've discussed, OPEC nations, particularly the Saudi's have the lowest oil production costs globally, so while they can withstand "cheap" oil, producers of Shale who are looking at both higher production costs and high overhead and financing debt on newer exploration projects cannot. Thus far, obviously, the multi-year campaign to push higher cost producers out has not worked - and some analysts think that should OPEC decide to pursue further cuts to prop pricing, (rather than continuing to ride it out), it could signal an acceptance of this fact and potentially signal a major shift in their approach going forward.  

The next meeting is scheduled for December 5-6. The way the news has been going, it's probably a good assumption that we will see enough volatility from other issues that it will sneak up on us again. 

Either way, stay tuned! 

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Topics: OPEC, EIA Inventories, shale, US Crude Production

EIA Data drops prices, but OPEC cuts loom ahead of Aramco IPO

Posted by Kelly Burke on Nov 6, 2019 3:27:17 PM

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The NYMEX was down across the board today, with Crude settling at $56.35 (from $57.23), ULSD dropping .0288 to settle at $1.9278, and Gas shedding .0484 to close out at $1.6262.

We've been up and down on the markets recently with the news doing a tug-of-war around trade tensions, global supply fundamentals, and demand/economic outlook concerns.

Today's drop, however, we can attribute to a pretty straightforward factor - huge builds in supply on this morning's EIA report. 

This week's EIA data showed an increase of a whopping 7.9 mmb in Crude supplies, almost triple the number (2.7mmb) analysts had predicted. This is the second week in a row that analysts pegged a build of around 2.5/2.7mmb and the actuals dwarfed the estimates, which explains much of today's quick drop (no one had it "priced in"). 

Gasoline & Distillate inventories both showed draws, but came in relatively close to analyst predictions, with actuals showing 2.8mmb on gasoline (2.4mmb predicted) and 600,000bbl on distillates (versus 1mmb predicted). Gas & Diesel have had unseasonably high demand as of late so draw downs are actually a positive sign in that regard.  

So supply is up more than anticipated, and there are still concerns regarding global demand & economic growth... but before deciding that means prices will stay depressed, its important to note that OPEC is again discussing further supply cuts across the board, despite the ever present concern regarding US Shale production.

Word on the street is that Saudi Arabia has been pressuring producers in their region to agree on further cuts in an effort to boost market valuation of the Aramco IPO. (High valuation on the IPO may make risking a resurgence in shale production in the US worth it, when it otherwise would not be).

It's unclear if and when the cuts could take effect, but its definitely something that could impact near term pricing and is worth keeping an eye on. 

Stay tuned! 

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Topics: OPEC, EIA Inventories

NYMEX spikes in wake of Saudi Arabia attacks

Posted by Kelly Burke on Sep 16, 2019 3:41:35 PM

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Saturday, ten unmanned drones struck a major Saudi Aramco facility in Saudi Arabia, and immediately took 5.7 million barrels out of the global supply. The Abqaiq plant that was impacted is one of the world's largest processors. 

The Saudi government indicated that Iranian weapons were responsible but stopped short of blaming Iran for the attack, (although US Secretary of State Pompeo did NOT stop short and explicitly called Iran out in a series of tweets).

Yemeni Houthi rebels have taken credit for the strike, and threatened further escalation but it's unclear if they are, in fact, responsible.

Initial reports seem to indicate the attack did not come from Yemen, but Iran has denied any involvement. A lot of the long range implications of the attack will of course hinge on whether military escalation from other nations becomes probable, which directly depends on whether Iran, Yemeni rebels, or a third party was responsible. 

Markets reacted in a big way - Crude was up on the overnights, and Crude, ULSD & RBOB all surged within seconds of the open, and never came back down. 

At the close, ULSD was up a whopping +.2060 to $2.0838, RBOB +.1993 to $1.7524 and Crude $62.90 (+8.05 over Friday's settle) 

This is still a developing story - CNN has a great, continually updating article you can follow new developments on in real time here: Saudi Attacks Send Oil Prices Soaring 

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Topics: Iran, NYMEX, Saudi Arabia Attack

Talk of Easing Iran Sanctions Trumps Crude Draws

Posted by Kelly Burke on Sep 11, 2019 3:36:58 PM

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After starting the morning up on the EIA inventory reports of large crude draws (-6.9 mmb), the NYMEX dropped later through today's trading, as more information about the firing of US National Security Advisor John Bolton came to light, and as global demand growth estimates were revised downward yet again. 

The reason an Advisor firing is at all relevant to the oil markets is: Iran.

There was speculation immediately that Bolton's firing was a good sign for US-Iranian relations, and as details emerge it seems that speculation was not only accurate, but an undersell.

Bloomberg is reporting that the Administration discussed easing sanctions in order to broker meetings with Iranian President Rhouhani and kickstart negotiations. Evidently the support voiced for doing so led to a blowout of sorts that prompted the firing. 

Prices dropped almost instantaneously on the news that sanctions could potentially be eased on Iran. 

Additionally, today OPEC's estimates for global growth demand were revised downward (but worth noting is that the revision puts their estimates in line with those of other analysts and economists already existent predictions). The EIA numbers were revised slightly down yesterday as well (down 100,000 bpd from the August prediction to 900,000 bpd).

Overall it appears that for at least today's session, the current market of OPEC cuts and US domestic crude draws did not outweigh longer term concerns about a potential future supply glut in the face of low growth demand. 

At the close, Crude settled at $55.75/bbl, ULSD shed .0280 to close at $1.9032, and RBOB dropped .0209 to close at $1.5699

We'll have to see what happens tomorrow. 

 

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Topics: Iran Sanctions, OPEC, EIA Inventories

Today's Market = John Bolton Firing vs OPEC Cuts

Posted by Kelly Burke on Sep 10, 2019 3:22:00 PM

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This past Friday, ahead of the scheduled OPEC meeting this week, Saudi Arabia abruptly announced a new Energy Minister, Prince Adbulaziz. The move sparked momentary concern that this was a signal the Saudi's would be reversing course on the OPEC+ production cut agreement, but it appears they are actually doubling down.

The kingdom announced they would be adhering to and encouraging the production cuts going forward, and Russian officials announced that they fully anticipated continuing the current trajectory with the new leadership. 

This consensus initially let prices continue their several day climb, with WTI hitting a 6 week high momentarily ... BUT!

But this afternoon, the Trump Administration announced the firing of US National Security Advisor John Bolton.

Bolton was extremely vocal regarding his hardline stance against Iran, and his "resignation" may be a positive signal for future progress on peace talks with Iran, and in the near term, may be a good move to de-escalate the current situation, a lot of which has impacted the oil industry via threats to tankers & the threat to block the Strait of Hormuz. 

Prices have backed off intraday highs following the Bolton announcement. Essentially any hint of resolution with Iran, while positive, also renews concerns about Iranian supply flooding the market, and that is pushing down on pricing (despite the prematurity of any concern). 

Time will tell how the interplay between production cuts and lingering supply concerns levels out, particularly depending on inventory reporting (which we should see tomorrow) and domestic production.

For today, at the close, we ended essentially flat. ULSD +.0035 to $1.9312, RBOB +.0062 to $1.5908

Stay Tuned! 

 

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Topics: Iran, OPEC, russia, WTI Crude

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