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EIA Inventories (4)

Mixed Market Week on Same Old Concerns

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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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Supply vs. Demand Concerns Temper Early Gains

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

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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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Talk of Easing Iran Sanctions Trumps Crude Draws

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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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NYMEX Drops Again on EIA Data

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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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Inventories & Gulf Storm threat push NYMEX higher

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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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EIA Data, Refinery Closures & International Tensions Spike NYMEX

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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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WTI Hits Lows on Inventory & Projection Data

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Prices continued to slide Wednesday as the EIA reported builds in Crude supplies of 2.21mmb for the week ending June 7th. (Yesterday, the API report indicated even more drastic build of 4.9mmb). This afternoon, WTI closed out at $51.14/bbl, the lowest close since January. WTI has dropped close to 20% since April peaks. 

On the NYMEX today, both gasoline & distillates tumbled alongside Crude, shedding -.0702 and -.0422, respectively. (The session closed out at $1.6861 for RBOB, $1.7799 on ULSD.) 

In addition to pricing being low, demand forecasts have been revised downward for 2019 & 2020 by the EIA, by around 100K bbl per day, globally.  

However, despite both the drop in prices and the slowing demand, forecasts indicate that not only will production continue in the US, but will ramp up by approximately 1.4mmb/day in 2019, according to the EIA. This is supported by statements made by the Deputy Energy Secretary of the United States, Dan Brouillette this week, who said production would continue to increase domestically despite pricing and demand concerns and he expects that demand concerns will resolve "as the economy begins to rev up". He also dismissed concerns that the ongoing tariff dispute with China would adversely impact US production, which remains to be seen. 

Analysts seem to be in agreement that OPEC is unlikely to seek any more curbs in output for their member nations, so essentially, with no major impact events on the horizon, we are just waiting to see if this is the bottom, a new normal, or a temporary blip. 

Stay tuned!

 

 

 

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EIA Levels Push Gas Lower, Distillates Hang Steady Ahead of IMO Change Questions

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EIA Inventory reports for the week ending March 22 indicate that Crude inventories showed a build, while finished products (Diesel & RBOB) showed draws. 

Reports indicate a 2.8mmb build in the period for Crude, draws on gasoline of 2.9mmb and a smaller draw of 2.1 mmb on distillate inventories. 

We have seen WTI trending toward the $60 benchmark, where it continues to trade today after inventory levels were announced. Gasoline on the other hand, was down over 5 today after the news.

At first blush the drop on gas seems surprising, given the draw down, but production levels are still very high (9.7 million barrels per day) and very much outpacing projected demand, even as the U.S. heads toward "driving season".

Of note among analysts, diesel has remained relatively stable in the face of fluctuating inventory and international headlines, and the thought is that this period of calm is caused by (and will be short lived because of) the IMO Bunkering regulation changes set to take effect in January. Refiners, marketers, and end users are all eyeing potentially huge upcoming shakeups in the market there and the anticipation is putting a damper on major swings or selloffs in the current market. Or that's the prevailing theory, anyways. 

So what is IMO 2020? The short version is that as of January 1, 2020 marine fuels will be subject to a global cap of 0.5% sulfur (the current level is 3.5% in non-ECA/Emission Control Areas). Since this is global, it will impact essentially all refiners and supply point inventory options out there, in addition to the obvious end-user impact. 

(If you want a more in depth version of exactly what IMO 2020 is about and its anticipated impacts, Sea Trade Maritime News has a fantastic explanation here: Seatrade Maritime News: The 2020 IMO Fuel Sulphur Regulation  )

At the close, ULSD closed off $-.0093 to $1.9806 while RBOB shed $-.0602 to close out at $1.8955. WTI closed out at $59.41/bbl, continuing to hover around the $60 benchmark. 

 

Stay Tuned!

 

 

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Dow Collapse Pushes Prices Down Despite Storm & Supply Concerns

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Despite earlier in the week price increases on global supply concerns (Iran), and Hurricane Michael making landfall in the Florida Pan handle in the afternoon, Wednesday saw oil prices slump 2% on intraday trading.

Despite the fact that both of those variables usually push prices up, the catastrophic day for the US markets Wednesday overall pulled energy prices down with the ship, so to speak. The Dow Jones was down over 800 points yesterday, seemingly for no clear reason. (Currently, as of writing, the Dow is down slightly today, while the Nasdaq is up slightly).

Hurricane Michael is currently tracking through the Carolina's on its way back out to sea and has been downgraded to a tropical storm, which minimizes further supply interruption concerns. 

The energy markets today are again trending downward, as of 12:30 diesel was down over 4 and gas was down over 6. 

The EIA report this morning showed builds on Crude higher than analysts expected, with inventories up 5.98 million barrels. (projections were a 2 million barrel build). Both gasoline and distillates showed builds as well (951K barrels and 42K barrels, respectively) when projections showed both would be draws.

Presumably that looks good for continuing downward price pressure on refined products, but you never know. 

At the close yesterday, ULSD settled at 2.3949 (-.0289), RBOB at 2.0204 (-.0570) and Crude closed at $73.17. Today, as mentioned, we are trending down as well so we look to hold steady below the $2 & $75 benchmarks for the week.

(as an aside, the exchange platform is a great way to capture market drops like the ones we saw today and yesterday, if you would like more information on how to utilize that buying option, reach out to your rep or contact us via the site)

Stay Tuned!

 

 

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