Prices Rally as EIA Reports Say Lower Inventory, Higher Demand

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

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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!

 

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Topics: EIA Inventories, economic data, covid-19

Oil Spikes on OPEC+ Agreement

Posted by Kelly Burke on Mar 4, 2021 2:57:31 PM

shutterstock_651733465WTI jumped over 5% late this morning, as news broke that OPEC+ members would be agreeing not to raise production levels in April. According to reports, the current established levels for each of the member countries will be continuing as is through April and May, and the Saudi's are planning to forge ahead with continuing to keep the additional 1 million barrels per day offline as agreed to for February and March.

The news of continued cuts leaking from the (currently still happening) meeting surprised the markets, which is part of why we are seeing such a jump - often the predicted outcomes are "priced in" but today analysts fully expected that the ruling would be to let production cuts expire at the end of March as scheduled, and assumed Saudi Arabia would be ramping up production. We have started to see signals of demand levels returning, which, along with the ongoing price rally, had made analysts comfortable that OPEC would begin to ramp production levels back up. Reports indicate that Saudi Arabia urged caution and pushed for today's cut extensions, with Energy Minister Prince Abduliziz bin Salaman saying "Let us be certain the glimmer we see ahead is not the headlight of an oncoming express train"

Yesterday, prices jumped as well as the weekly EIA data for the US showed that the snowstorms and widespread freezing that impacted states in the Gulf Coast region continued to wreak havoc on refinery utilization. Crude stockpiles ramped up by 21.5 million barrels for the week ending Feb 26. That build is even larger than what we saw last April when the sudden imposition of COVID lockdowns demolished demand across essentially all sectors immediately. Crude built as a result of the lack of refinery capacity still in effect, and the opposite was seen (of course) on refined products. Although draws on refined products were clearly predicted, the EIA report still shocked as it showed draws on gasoline of 13.6 million barrels (about 5 times the anticipated draw) and distillates drew down 9.7 million barrels, versus the 3 million predicted.

In other news today, Houthi rebels in Yemen are claiming responsibility for a missile strike on a Saudi oil facility in Jiddah, in a continuation of infrastructure strikes in the ongoing proxy war. The conflict is definitely something to keep an eye on - as we saw in September 2019, attacks on Aramco infrastructure can rock the markets pretty severely. 

At today's close, WTI settled at $63.83. ULSD +.0603 to $1.8960, Gasoline up .0461 to $1.9979

 

 

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Topics: OPEC, EIA Inventories, saudi arabia

Markets Up on Second Stimulus Hopes, Unemployment Numbers

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

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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! 

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

Double Hurricane Threat Spikes Markets

Posted by Kelly Burke on Aug 24, 2020 3:07:47 PM

Hurricane Laura & Marcos

Gasoline hit 5 month highs today, with distillates and Crude following upward as well, as twin storms Marco and Laura continue their trek towards the Gulf. 

Bloomberg is reporting that 60% of offshore production is already offline ahead of the storms, as of this morning, Additionally, Motiva & Valero are slated to close their Port Arthur plants and Exxon is planning to shutter Beaumont facilities.

The storms are anticipated to make landfall in a sort of one-two punch and could cause estimated billions in damages (depending on model accuracy).

What we wont know until its over, obviously, is whether plants and the Colonial Pipeline are impacted severely enough to cause a longer term spike in prices by impacting supply, or if we will see a reversal. 

This will be an interesting one to watch, in terms of longer term market impacts. The continuing pandemic has put enormous pressure on demand & consumption levels as much of the world slows down, so we have seen relative price stability in the face of factors that would normally push longer & sharper rallies, like back to back draws in US inventories, and continuing OPEC drama. Despite steadily creeping upward over the past month or two, Crude appears to be staying stable around the $40/benchmark for WTI, at least for now. (Of course, keep in mind that $40/bbl levels mean shale production coming back online, so it's anyone's guess where pricing heads next. )

At the close, September ULSD added .0396 to 1.2476, Gasoline jumped .0830 to 1.3671 and Crude settled at 42.62. October distillates were up .0357 to 1.2640 and gasoline added .0468 to 1.2598.

Stay Tuned, and Stay Safe out there!

 

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Topics: EIA Inventories, Coronavirus, hurricane Laura, hurricane marcos

Markets Up on OPEC+ Hope and Coronavirus Slowdown

Posted by Kelly Burke on Feb 12, 2020 3:18:21 PM

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WTI Crude traded & settled below $50/bbl earlier this week, as prices continued to slide across commodities. Today, however, we saw the trend reversing, with the market up this morning by almost 3%. (Early on, we were up over the 3% mark but gains dropped off slightly after the EIA inventory reports were released this morning.) 

EIA Inventories showed builds on Crude of 7.5mmb, well above analyst expectations. Gasoline drew down 100K bbl, and distillate stocks dropped 2mmb, as well. Distillate numbers were essentially in line with expectations. Crude pared about .5% on the builds, and gasoline moderated but stayed up, as analysts were predicting builds of ~700K barrels versus the actual drop of 100K barrels reported. 

In broader news, most of today's increases are being pegged on confidence that the OPEC+ production cuts supposedly forthcoming will both be in effect quickly, and will see full member adherence to new lower limits.

Also, China is reporting the lowest number of new Coronavirus cases since January, which is continuing to restore confidence in their economy and calming fears regarding a longer term global slow down on oil demand growth.

At the close, Crude settled back up over $50 again at $51.17/bbl (Tuesday's close was $49.94), ULSD closed up .0490 to $1.6757 and RBOB closed up .0668 to $1.5810.

Stay tuned!

 

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Topics: OPEC, WTI Crude, EIA Inventories, china, Coronavirus

Crude drops 15% in January

Posted by Kelly Burke on Jan 31, 2020 3:32:02 PM

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After what seems like 76 days, January is finally over. 

As it goes into the books, January 2020 will go on record as having the largest drop in Crude prices since January 1991 - with a drop of 15% (around 12% on Brent). That's a lot on it's own, but it's especially surprising if you remember that the beginning of the month saw huge spikes on the US-Iran Strikes.

The largest driving factor dropping prices now is growing concern about the potential global economic impacts of the Coronavirus spreading from the Wuhan province in China. There have been several cases now outside of the original geographic area, including the first confirmed human to human transmission in the US.

Late Thursday the World Health Organization (WHO) declared the virus a global health emergency. Rumors abound that the State Media in China is vastly under reporting the numbers when it comes to official infection rates and the death toll. Whether that is true or not, it has thoroughly spooked investors and traders, as global markets and the NYMEX tumbled this week.

Wednesday's EIA report showed domestic Crude builds shot way past expectations, clocking in up 3.5mmb for the week ending January 24. (Gasoline also hit a high of 261.1mmb). Obviously builds do not bolster prices, but Wednesday was relatively calm as compared to both Monday & Thursday. Thursday alone saw a 2.2% decline in Crude prices (to $52.14), and a drop of over 6 cents on ULSD at the close. 

Markets kept the downward trend going today as well, with March contract month numbers closing down .0136 on ULSD & off 14 points on RBOB, with Crude settling out at $51.56/bbl.

Reportedly, OPEC is already in discussion to move their March meeting up to promote cuts and stem losses. It's worth noting that the Libyan outage had essentially zero effect on prices this week, where it otherwise (presumably) would have - so the OPEC changes will likely need to be substantial to move the needle, unless the Coronavirus dies down relatively quickly. 

So while we don't know how long prices will be depressed, or when they might reverse, what we do know is that times like this it makes sense to reevaluate the strategies you use to hedge against the market with contracts or variable options, so you can get ahead of the next spike.  

See you in February! 

 

 

 

 

 

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Topics: OPEC, WTI Crude, EIA Inventories, Coronavirus

US-China Trade Deal Keeps Markets Range Bound

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

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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

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

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