Prices Rally as EIA Reports Say Lower Inventory, Higher Demand

Posted by Kelly Burke on Apr 14, 2021 1:17:23 PM

shutterstock_1676555767

By noon trading today Crude was up almost 5%, and on the refined products side, ULSD was up 7 cents and Gas up almost 6 (+.0586) and the market looked like we could see the highest close since mid-March. 

So what's going on?

EIA Reports! The EIA demand outlook was increased signaling the agency sees a continuing growth in demand for petroleum products going forward. On top of that, the EIA Inventory reports this morning showed a draw of 5.9mmb on Crude for the week ending 4/9. This is actually pretty close to the number analysts had predicted on Crude - however, analysts had predicted builds on gasoline of 5.65mmb, and that's what kept prices in range Tuesday. The actual reporting from the EIA showed a build of only 300K, obviously a far cry from the priced-in 5.65mmb, and that took the brakes off of holding prices back.

So essentially, the EIA is predicting more demand and reporting dropped inventories at the same time, and that's pushing prices north. 

Other bullish factors behind prices moving up include substantial growth in Chinese oil usage (imports increased a reported 21% last month) and continuing positive economic indicators in US.

On the other side of the equation however, we are seeing a continually slow vaccine rollout (particularly in Europe) while we simultaneously see explosions in cases in some areas (ie Brazil). Yesterday, we also saw an announcement that the United States is "pausing" administration of the Johnson & Johnson one-shot vaccine for COVID-19 after reports of potentially fatal blood clots in a small number of recipients. The pause reportedly will be for "weeks or even days not months" according to officials, but the major concern is a PR one, that the pause will cause hesitation in getting vaccinated among those who have not yet, which could hypothetically impact both case numbers, and how quickly the country is able to be fully back open for business. 

So vaccination concerns and case numbers are basically the black rain clouds over a potentially stronger, longer rally on prices, and it's anyone's guess which side of the equation wins out over the next few weeks. 

Stay tuned!

 

Read More

Topics: EIA Inventories, economic data, covid-19

OPEC+ Production Reversal signals Economic Optimism, Props Prices

Posted by Kelly Burke on Apr 2, 2021 1:44:51 PM

shutterstock_651733465

Last month, the OPEC+ decision to stay the course on previously announced production cuts pushed the market up. Yesterday, the OPEC+ decision to reverse course and bring more supply online over the next 3 months (May, June, July) resulted in....surprise! The market going up! 

The announcement on the OPEC+ production level change came initially around noon - normally we would see an immediate drop on the screens in the event of a production increase announcement.

So why not yesterday?

It seems the sentiment is that the sudden reversal is a strong vote of confidence for global economic recovery and a resulting surge in demand, and that confidence, along with some hopeful signs of demand upticks (resuming air travel, refinery utilization increases, import resurgence) is supporting higher price levels. 

This morning, the first jobs report published under new Labor Secretary (Boston's own!) Marty Walsh showed a surprising uptick in jobs. Non farm payrolls shot up 916,000 jobs (analysts had predicted 675K), and the unemployment rate dropped to 6% (last April the unemployment rate was 14.7%).

The markets were closed today in observance of Good Friday so we were not able to see the reports full impact, outside of some upticks in bonds, but it would seem to support the optimistic stance taken by OPEC+ regarding economic recovery. Major economic indicators are still up in the air however, and while countries are making progress with vaccinations and easing of restrictions, we are certainly not "past" COVID as of yet, so optimism should likely be tempered with some caution. 

In terms of the numbers, yesterday Crude closed out at $61.45/bbl - surprisingly tight to the close on the last day of trading in February despite March's volatility (last day of Feb trading Crude settled $61.50). April 1 close for ULSD on front month trading was $1.8316 (+.0618) and gasoline was $2.0223 (+.0626). 

Stay Tuned! 

 

 

Read More

Topics: OPEC, economic data, Jobs Report, covid-19

Despite Friday Drops, Gains for the Week on NYMEX

Posted by Kelly Burke on Jan 15, 2021 4:42:27 PM

markets_pic

Despite today's across the board drops on refined prices, (-.0262 UL & -.0255 RBOB) this week saw oil prices overall continue to tick upward. 

What's pushing prices up? A weaker dollar, and stronger confidence in economic rebound as the vaccine rollouts continue. At play as well is new agreement on supply curbs by Saudi Arabia in tandem with larger than expected draws in US inventory levels. 

Wednesday prices came close to hitting 1-year highs at the close, briefly going over in intraday trading for Brent Crude. So far, halfway through January, Crude prices are up ~9% or so as confidence builds in eventual recovery from the COVID induced shut downs and resulting dips in demand that we saw push WTI into negative territory about 10 months ago. 

In terms of the supply side, EIA reports indicated that US Crude inventories dropped a little over half a million barrels for the prior week, with gasoline dropping 1.1mmb & distillates dropping 2.3mmb - double what some analysts had projected. More broadly, Saudi Arabia has pledged to cut its output by 1mmb/day which will drop overall production levels, even though Russia will actually have allowance to produce slightly higher levels than before. Sort of an odd twist to the usual OPEC+ setup - you can read more about the specifics on the deal here in the New York Times: Saudi Arabia Will Cut Its Own Production, Allowing Russia's to Grow 

On the demand side of the equation, talks regarding further stimulus under the Biden Administration, as well as continued vaccine rollout seems to have traders (and everyone else) hopeful about eventual demand recovery as the economy hopefully strengthens and rebounds once immunity levels hit threshold. 

We did however see drops today to close the week out across the board. Front month ULSD & RBOB settled at 1.5929 & 1.5284 respectively, with Crude at 52.36/bbl. March numbers closed out with ULSD off .0263 to 1.5942, and gasoline dropped .0261 to 1.577. 

Who knows what happens next. Enjoy your weekend & stay tuned! 

Read More

Topics: saudi arabia, covid-19, Biden Administration

New COVID Strain Stops the Spread of Price Rally

Posted by Kelly Burke on Dec 22, 2020 3:38:01 PM

shutterstock_1681191754

Last week's market pushed up on hopes of progress against COVID with vaccine rollouts and encouraging signs of demand growth on fuels. This week however, those hopes were dashed as talk turned to a variant strain of COVID found in the UK that has caused surging infections, and prompted the "Christmas Lockdowns" in other European nations to become increasingly severe. This has all but wiped out any hope of demand stabilizing in the near term.

Sunday France closed it's border to the UK, stranding truckers and travelers in the process. This afternoon they are allowing drivers who test negative to cross, if they have an essential purpose for travel. No travelers will be permitted without a reason for travel and negative test within 72 hours going forward, according to current reports. Overall, more than 50 countries have banned travel to & from the UK in the wake of the new strain's discovery, in an attempt to keep it from spreading. 

Even the passage of the second stimulus in the US that's been hanging over the market for what seems like eons didn't do much but slow today's declines as compared to yesterday's losses. 

Yesterday we saw both Brent & WTI shed over 2%, where we saw increases of 1.5% on both just Friday (Friday saw the highest front month settle on both flavors since late February). News moves fast.

Yesterdays close on WTI was $47.74, and $47.02 today. In terms of refined products, ULSD shed .0158 to $1.4616 for front month & -.0152 to $1.4630 for February trading. Gasoline followed suit, dropping -.0209 to $1.3395 Jan, -.0193 to $1.3355 Feb. 

It remains to be seen how things shake out when the second stimulus takes actual effect, but more importantly it remains to be seen what the implications of the new COVID strain will be. If it's contained, or vaccines are effective in slowing or preventing its spread, it may end up just a blip on the radar. If not.. well, we can only hope for the best. 

Stay safe and stay tuned. Hope everyone has a safe and happy holiday season, despite how different it may look this year. 

Read More

Topics: European Economy, Stimulus, covid-19

NYMEX Ends the Week on a Calm Note

Posted by Kelly Burke on Dec 11, 2020 4:12:32 PM

markets_pic

Markets backed off slightly today across the board. At the close, we saw front month ULSD settle up .0012 to 1.4369 (1.4416 +.0006 for Feb), RBOB dropped .0089 to 1.3077 (-.0087 to 1.3137 for Feb) and WTI closed out at 46.57

Yesterday was another story - markets shot up and we saw Brent Crude hit & settle at $50 for the first time since March. Most upward trajectory in the markets lately has been Vaccine news related, as we've discussed previously. This past week, FDA emergency approvals for the Pfizer vaccine continued the optimism and pushed pricing up. 

Another factor appears to be demand growth globally as compared to last month. Bloomberg is reporting an uptick in road fuel usage in both Europe & Latin America as compared to November, although use is still down a staggering 30% from pre pandemic levels, according to their reports. (Great article - you can read it here: Global Oil Demand is Rebounding Again )

While there is some optimism then with regard to Europe & Latin America in terms of demand growth, the continuing surge of COVID cases in the United States is still a sort of cartoon anvil hanging over the market.

Massachusetts this week rolled back their reopening to a prior phase, California is enacting extremely strict lockdowns for affected zones, and other States are following suit with their own lockdown protocols. Optimism in Europe may be overstated as well, as Germany announced today they were heading into another national lock down. 

Beyond COVID, the counterweight to some demand growth is the new OPEC+ production agreement, under which they will increase production by 500K barrels per day. While not a devastating increase, it's worth remembering that the prior cut in May by 9.7 million barrels per day was revised to only drop 7.7 million 4 months later. So, we shall see if this production increase remains modest, or gets revised upward. 

Stay tuned! Happy Friday, everybody!

 

 

Read More

Topics: OPEC, $50 benchmark, covid-19

Markets Soar on Vaccine News, Presidential Transition

Posted by Kelly Burke on Nov 24, 2020 3:22:10 PM

shutterstock_1676555767

Final answers to lingering questions shot markets up today - Oil markets hit an 8 month high and the stock market soared,  with the Dow breaking 30,000 for the first time. Airlines, Cruise Lines, and Energy stocks all pushed up on continuing positive news regarding a COVID-19 vaccination. 

In intraday trading, WTI surged over 4 % to $44.80 (the last time we saw the $45 benchmark hold was in March, prior to both the Saudi/Russian price war and the expanding of COVID into a full blown global pandemic. In other words, its been quite some time. Who can even remember life before lockdowns started?).

Since November 9 (first vaccine announcement) Crude has gained ~15% and Brent is in backwardation, another positive sign. 

ULSD & RBOB both traded up over .05+ the majority of the trading day. At the close, ULSD was up +.0490 to 1.3595 for December & +.0484 to 1.3642 for January. RBOB gained +.0542 for December to 1.2582, and +.0539 for January to 1.2510. Crude closed at $44.91/bbl - juuuuuuust under that $45 benchmark. 

Earlier in the month (November 9) we saw markets jump on the announcement by Pfizer that they had developed a 90% effective vaccine. AstraZeneca and Moderna have also announced success on their iterations of a vaccine, one of which has the potential to solve some of the logistical issues regarding cold storage transport posed by the initial vaccine. Obviously, a vaccine means markets are hopeful that we will see a transition back to "normal" sooner rather than later, and the rally in industries particularly hammered by lockdowns, including air travel and general transportation would seem to bear that out. 

The other factor pushing markets today is the official start of the transition of power to the Biden Administration. Given the legal challenges being raised by the Trump Administration regarding vote counts, there was substantial uncertainty around the transition, and if there's anything the market hates, its looming questions without answers. It seems that the clarity is boosting confidence.

Lest we get overly optimistic however, it's important to note that although vaccine news is good news - none of the vaccines announced have been approved for general use yet. We are also still in a surge of COVID cases right now and there is no timeline on when a large enough contingent of citizens will be vaccinated in order for restrictions to begin easing. Goldmann Sachs & JP Morgan have revised economic expectations due to surging, New York City has closed schools again, and even in Massachusetts we are seeing field hospitals being reopened to handle expected increases in cases. All of this to say while today was great for 401(k)s, it is probably premature to be overly optimistic about the next few weeks to months. 

Despite all the craziness of 2020, we're Thankful to be here still working for our customers. We hope you have an amazing and relaxing (social distant) Thanksgiving. Enjoy the long weekend! 

 

 

 

Read More

Topics: NYMEX, stock market, Trump Administration, covid-19, Biden Administration

Markets Up on Second Stimulus Hopes, Unemployment Numbers

Posted by Kelly Burke on Oct 22, 2020 4:12:36 PM

shutterstock_1691814493

Today we opened up slightly on the NYMEX, and the big drops kicked in around 11am, (up to almost 3% on WTI temporarily) when Speaker Pelosi announced that they expected "pen on paper" for a second round of stimulus packages. The announcement came as somewhat of a surprise, as much of the activity on the second stimulus as of late has involved blocking, show bills, and discussions of everything being postponed until after the Election (and other typical political maneuvering).

The other factor lifting hopes and the market today was the jobless claims number released this morning by the US Department of Labor, which put new weekly jobless claims in the US at 787K, much lower than analysts expected. (Projections were 870K+ new claims would be filed, so the report was MUCH better than anticipated)

At the Close, ULSD gained .0208 to 1.1607 (Dec: +.0211 to 1.1687), Gasoline was up .0078 to 1.1581 (Dec +.0181 to 1.1452) and WTI was 40.64 (up about 2%). 

Wednesday we saw prices slide, largely due to the EIA inventories showing massive builds in gasoline (+1.9 mmb), and lower production than the prior week - both of these indicate a continuing drop in gasoline demand domestically and were more than enough to overwhelm the slight draws on Crude also reported by the EIA.

Overall, the demand outlook seems to be pretty grim globally for the short term, particularly as COVID-19 cases continue to trend upward in the West, so it remains to be seen how the markets will play out. If job numbers continue to improve and there is movement on stimulus, it could signal continued upticks in pricing based on economic outlooks improving.

One of the wild cards at play however, is COVID-19 and more specifically, it's impact economically and on global oil demand. We saw Ireland become the first European nation to return to lockdown today, and if that becomes a continuing trend, it's hard to see the market maintaining optimism about economic recovery. 

We will have to wait and see how it shakes out over the next several weeks.

Stay tuned! 

Read More

Topics: Jobless numbers, Stimulus, EIA Inventories, covid-19

Recent Posts

Posts by Topic

see all