Energy Market Updates

Posts about:

IEA

No Quick Fixes or Shortcuts

Not to brag, but I cook a mean steak.  Most hate the process, but enjoy the results.  It’s takes time and patience to get the perfect medium rare.  No quick fixes or shortcuts….  Same can be said about fuel pricing the last 30 days.  Even though diesel pricing is down over $.40 since mid September, it has been a real grind getting here.   The Israeli – Hamas conflict continues to be the flame keeping front month prices elevated.  As concern of this developing into a much larger regional conflict persist.  Domestically, fundamentals have kept pricing in check as Inventories have shown a mixed bag, but the real news is in the demand numbers.  Gasoline demand is down slightly over last week and last year, while distillate demand was down a whopping 8% to last week, yet up 5% to last year.  Trucking tonnage, the blood pressure of the transportation industry and overall economy, was down 4.1% in September over last year. (trucking is ¾ of all transportation modes in the US) this typically signals weaker pricing to follow.  Add in that IEA recently published they see peak Oil demand to hit in 2030, vastly different that OPEC’s estimation of 2045. 

A lot to digest, the takeaway may be that the summer run up in pricing was largely overdone.  Momentum begets momentum and before you know it you are $.50 higher.  Again, with the steep backwardation in the market, opportunities still exist in the spring and summer months to firm up pricing.   This winter may be tough as tight supplies and volatile daily price swings will rule.  Add in, what is expected to be an above average snow season, its important to have the right Supplier in your corner. One that not only has product, but the means to deliver as well.

Read More

Russian Strikes in Ukraine Push Prices to Multiyear Highs

shutterstock_2125123799

Oil prices surged another 7% today. At peak intraday highs, WTI hit $105.14/bbl before settling at $103.41.

Refined products followed suit skyward, with front month ULSD up +.2198 to $3.1511, and RBOB up .1562 to $3.0887 (May trading closed +.1915, $3.0381 ULSD/+.1532 $3.0621 RBOB).

Monday we saw WTI close over $100/bbl for the first time since 2014.

The obvious driver for the spiking prices we’ve been seeing has been the ongoing military strikes in Ukraine by Russia, and the resultant fears of not just supply disruptions themselves, but the further impacts that multinational involvement in the conflict could have globally.

Today, the US and allies (Germany, the UK, Italy, Japan, Netherlands, and South Korea) announced their agreement to release 60 million barrels from strategic reserves, half of which will come from the United States.

Markets were not comforted much by the announcement (although we did see a slight tempering), largely because the strategic reserve release is much more a symbolic gesture than one that solves supply concerns on a fundamental level.

A multinational agreement to release gallons is more of a statement of solidarity against what is seen as Russian aggression, and a message that countries are willing to take extraordinary measures to prevent global impacts rather than softening their stance on Ukraine. It’s also meant to reassure citizens of allied countries that are facing rapidly increasing prices at the pump that all available measures are being taken to minimize the impact. Currently AAA figures have gas prices in the US averaging $3.62 today, up 9 cents this week and 24 this month, and without a reversal on the markets and an end to the Russia-Ukraine war, that’s not likely to change.

Other measures being taken on the Energy Market side of things have included talks with the Saudis about supply adjustments to backfill any potential shortfalls. It’s unclear that such a jump in production for stability of the markets would be in the cards, however. The thought seems to be that assistance from OPEC/Saudi countries to offset disruption would mostly be necessary should Russia choose to restrict supply or short commitments in an attempt to manipulate the situation. As of right now, they have not given any indication that would be their next move, but as sanctions begin to take severe effect on the Russian economy, essentially anything is possible.

Sanctions and specific company withdrawals from Russia seem to be having impact already on some fronts. Maersk, the worlds largest shipping firm, has halted service to and from Russia, and countries like Britain are not accepting Russian ships at their ports. Major oil companies, including BP and Shell are exiting Russian operations, and TotalEnergies announced a halt to any further capital investment in Russian projects. The Ruble (Russian currency) is tanking after SWIFT banking sanctions took effect and it is currently valued at less than a penny in American dollars.

Long story longer, the situation is very much ongoing, escalating, and uncertain on the ground in Russia, and it remains anyone’s guess how the real world impacts and the market impacts will shake out.

Read More

IEA Forecasts & Inventory Numbers Push Commodities Closer to New Lows

Line charts depicting the stock market scattered on a table

And down we go again - today WTI closed down almost 3%  (the final close was 40.74), which is around an 8% loss on the week. Brent came within 2 dollars of a low not seen in over 6 years, and also ended the week at around an 8% loss, according to Reuters.


To round out the board - RBOB dropped .0342 to 1.2389, a multi month low, and ULSD dropped to 1.3813, a loss of .0253.

So what's going on?

The IEA is forecasting global oil demand growth to drop to 1.2mmb per day throughout 2016, as compared to the 1.8mmb per day we've seen this year. Given that the 1.8mmb has clearly not been robust enough demand to stop prices from crashing, the IEA announcement doesn't bode well for any serious and sustained price rebound anytime soon, if we ignore other factors that we can't predict (geopolitical escalations, etc).

IEA also announced that OPEC oil inventories are at a record almost 3 billion barrels for September, and this weeks EIA Inventory report showed a build of 4.2 million barrels of US Crude, as well as a spike in production.

Rig counts were up for the first time in 11 weeks as well, according to Baker Hughes.

There's been a lot of reporting this week that over 20 million barrels of Crude are sitting on cargo ships backing up in the Gulf Coast, which is approximately double the usual amount. If you recall, there was some reporting a few weeks ago about ships backing up at other major ports outside of China and the Arab Gulf as well, that had contributed to prior drops on basically what amounts to visible evidence of an extreme oversupply.

When you factor these items in with a dollar that continues to strengthen, it's less than surprising that prices are continuing to slide across the board to multi month lows.

Stay Tuned!

Read More

Subscribe to Email Updates