Crude Rallies Again on Escalation in Syria & Uncertainty in Iran

Posted by Kelly Burke on Oct 8, 2015 3:38:13 PM

Line charts depicting the stock market scattered on a table

Crude came back in a big way in trading today – with intraday highs briefly breaking $50 before settling out at $49.43/bbl. (Fun fact – we haven’t seen WTI break $50 since July)

ULSD and RBOB rallied as well, with ULSD closing up (+.0222) to 1.6018 and RBOB up (+.0178) to 1.4078.

It appears that yesterday’s inventory-induced drops were a one-time thing, and the market has shifted its focus to escalation in Syria.

On Wednesday Russia launched its first round of naval assaults on Syria, and today saw more airstrikes. Of note, in one of today’s campaigns, the Russians reportedly fired 26 Cruise missiles at Syrian targets. Reportedly however, at least 4 of them hit Iran instead. Yes, Iran. There has been no comment from Moscow, but US sources are confirming the hits.

This obviously fuels concern about the conflict in Syria not just escalating, but spreading throughout the region. Adding to the regional uncertainty, Ayatollah Khomeini has reportedly balked at further negotiations with the US on the controversial so called “Iranian Nuclear Deal,” claiming the US would use it to undermine the Islamic Republic’s fundamental interests, which will likely lead to more uncertainty in the Middle East, and also led to speculation that Iranian sanctions may not, in fact, be lifted which would obviously result in their exports not coming back online.

However, despite today’s jump and the ongoing conflict, there is still consensus among many that the US stockpiles are the indicator to watch. Goldman Sachs announced they would not only not be raising their price forecast for 2016, but that they were not ruling out dropping it further. Their calculation is based on the continued presence of the oil glut and record production.

Of note domestically, the House is expected to vote on and pass a repeal of the Crude Export Ban tomorrow. It’s unclear whether it will pass the Senate yet, but the White House has already issued a statement that it will veto the bill. There may be some market rumblings depending on how the bipartisan bill fares in the Senate early next week.  

Stay Tuned!

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Topics: Iran, Iran Sanctions, CRUDE, Syria, russia

Inventories & Iran Continue to Pummel Crude Prices

Posted by Kelly Burke on Aug 20, 2015 1:59:15 PM

Man grasping his head looking at computer screens

Oil prices are continuing their tumble - and it doesn't look likely they'll rebound in any significant way any time soon.

Wednesday's EIA Inventory Report showed a Crude build of 2.6mmb, bringing US Crude stockpiles to 456.2mmb. Analysts had forecast (hoped for?) a decline of 1.2-2.3mmb, depending on which group you looked at. 

Wednesday's trading saw WTI plunge 4% to below $41/bbl  - the lowest it's been in over 6 years. It settled out at $40.80 for September, and $41.27 for October. Brent lost 3.4% as well to settle at $47.16 for October.

$40 is a fairly significant benchmark, both psychologically and because it touches on production cost for some producers, which means it becomes essentially unprofitable to produce if oil goes any cheaper than $40. 

WTI may bounce some today as September trading closes out, but with refineries going offline in the fall for scheduled maintenance and no reason to think Crude stockpiles will suddenly plummet - it's likely that the decline will continue further. The only real question is what the bottom will be. 

Additionally, the pending Iran Nuclear deal if approved (which is essentially guaranteed) would lift sanctions in Iran, which would allow them to export more oil. They currently export around 1 million barrels per day from their 2.7 million barrel production. Reports say they are capable of about 4 million barrels of production, but its unclear how much of that they would be capable of exporting. 

Regardless, the EIA has revised its projection for oil prices throughout 2015. The new numbers put WTI at below $50 dollars ($49) for the remainder of the year, and only project WTI at $54 for 2016. EIA also cautioned that the numbers may be revised again, depending on Iran's ability to put new oil produced up for export. 

OPEC has maintained they will not be reducing supply regardless of the slide - it remains to be seen whether they reverse that stance if oil continues well below the $40, or even $30 dollar benchmarks as some think it may. 

Back to today- US stocks are getting crushed from fears about oil prices and the lack of foreseeable demand increases, the Chinese economy, and employment. The most recent jobs report showed an increase in unemployment claims - the fourth week in a row it both increased and beat estimates of how much it would increase. Unemployment ticking up, and the Fed signaling that the economy may not be strong enough to withstand an interest rate increase yet (according to their recent meeting notes) have for obvious reasons, not inspired confidence. 

Stay Tuned!

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Topics: Iran, Iran Sanctions, CRUDE, OPEC, EIA Inventories, wti

Job Reports, Inventories & International Issues Keep Volatility Going

Posted by Kelly Burke on Apr 3, 2015 1:27:07 PM

Line charts depicting the stock market scattered on a table

It's been a while, so while the markets closed today, lets take a quick look back at whats been happening (some "light reading for your Friday afternoon)

The economy -

After positive reports in February, the March jobless numbers released today were something of a dissapointment. Only 126K jobs were added, which broke a 12 month streak of 200K+ jobs per month being added. This raises some eyebrows on the state of the economic recovery but some analysts are blaming the extended winter, arguing that the normal pick up in seasonal and construction industry jobs is simply delayed because of the cold. 

This lackluster jobs number, however, will once again probably have Wall Street see-sawing over speculations on the Fed interest rates, its probably unlikely to happen soon (I know, deja vu) given the weakness of the report. With the market closed today though we won't see what if any impact this will have until next week.

Commodities and Pricing

This weeks EIA report for the week ending March 27th showed Crude Inventories at record highs for the 12th straight week (+4.8mmb to 471.4mmb). Gasoline dropped 4.3mmb, way over analyst predictions of a less than 1mmb drop. We've seen stronger than expected demand in gasoline, particularly in January and thats sort of underlying its volatility at the moment - if you recall, RBOB jumped .0612 Wednesday on the report, but then pared the gains on Thursday, closing out -.0699 to 1.7613.

The main underlyer on the volatility over the past few weeks is more politically driven - we saw jumps on the NYMEX when it was announced that Saudi Arabia had begun airstrikes on Yemen. Additionally, the Iranian nuclear deal has some traders and speculators on edge, and continuing issues with ISIS and the ongoing strikes against them are keeping Middle East tensions higher than we'd all like to see. Luckily for the most part, days we've seen spikes on international turmoil have usually been reversed with a few days. It's likely this will continue unless there's some real movement or resolution on any of the aforementioned issues. Til then, hold onto your hats and enjoy the ride!

 

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Topics: Iran, Jobless numbers, EIA Inventories, saudi arabia, yemen

Distillate Inventories Carry Futures Higher

Posted by Mark Pszeniczny on Nov 20, 2013 5:25:00 PM

Last night API's set the early tone for todays rice action as preliminary numbers showed large draws in distillates.  Those numbers were confirmed this morning with the EIA releasing a staggering 4.8mbl draw in distillates vs expectations of a mere 700k.  Gasoline was down slightly at 345k and Crude showed a slight build at 375k bls.  On the surface it appears distillate demand is on the rise, not only in the US, but also from an export position.  Soon after the data released, pits jumped almost .04, and stayed in that range for most of the afternoon.  Supporting the bullish price action was FED meeting minutes which appear to confirm last weeks chatter that we will start to see some significant unwinding of the Bond buying program in the months to come, as well as a positive retail report for October.  The hope is that a positive October doesn't turn into a lackluster November and December which is often the case in the retail world.  News hit mid afternoon of US-Iranian talks ended almost as quickly as it started, one report said the talks lasted less than 10 minutes with few words spoken.  Even with the draw in distillates, the market appears to be well supplied as Crude actual lost .01 to close out at $93.33, RBOB added .0235 to $2.6630 and HO led the gainers settling up .0487 to $2.9545.  Again, well within its comfort zone.

RBOB Close
                      CLOSE     CHANGE            
DEC   2.6630         +.0235
JAN   2.6458         +.0259
FEB    2.6483        +.0257
MAR    2.6609         +.0253
APR    2.8241         +.0239
           MAY   2.8209         +.0227         
HEAT Close
      CLOSE            CHANGE
DEC   2.9545    +.0487
JAN   2.9528     +.0464
     FEB    2.9503     +.0431   
 MAR   2.9449     +.0397
APR   2.9355    +.0361
 MAY   2.9267    +.0327
 

 

 

Line graph

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Topics: Iran, EIA, API report, Inventory Draws, FED rates

Spanish Banking Bailout causes Stir, Only to Falter

Posted by Mark Pszeniczny on Jun 11, 2012 3:24:00 PM

For many of us who log in to check the market on Sunday evenings at PM, it is often times like Christmas morning to see what the surprise will be. Last night we got a lump of coal to see Commodity futures skyrocketing on news of a Spanish banks receiving a $120 billion dollar bailout. Heating Oil was as high as +.07 at one point. The infusion of cash looks to signal that the Euro will be around for a while longer. As the sun rose, the speculative gains were peeled away and the wheels fell off the cart with about an hour left in the session. Crude finished less $1.40 to close at $82.70, RBOB slipped .0286 to $2.6566 and HEAT fell .0364 to $3.6357, a whopping .11 cents lower than Sunday evening. It appeared that the bullish appointments on the calendar just could not keep the rally going. Next week, Greece has elections, Iran is set to meet with a group of five Nations on its nuclear program with Israel going increasingly impatient and the scheduled FOMC meeting. Many have commented on the limit to the downside in the pits after retracing some 60 cents in the last 50 days. With Europe still not out of the woods, the trend is your friend.

Daily Heating Oil Chart

heat map

RBOB CLOSE
CLOSE CHANGE
 
JUL 26566 -.0286
AUG 25877 -.0338
SEPT 25322 -.0378
OCT 23775 -.0387
NOV 23511 -.0388
DEC 23428 -.0365
HEAT CLOSE
CLOSE CHANGE
JUL 26357 -.0364
AUG 26394 -.0357
SEPT 26468 -.0350
OCT 26558 -.0352
NOV 26676 -.0352
DEC 26789 -.0354
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Topics: Iran, European Economy, Spain Banking Bailout, Euro Debt Zone

Futures Continue to Rise as All Eyes on Iran

Posted by Mark Pszeniczny on Feb 22, 2012 3:59:00 PM

It seems like we have been repeating the same mantra for a month, " we appear to be at the high end of the range".... Unfortunately we haven't moved any lower. Since the begriming of the month we have seen roughly 20 cents gets tacked on to HO ( as shown below) . Presently we are at 18 month highs for the Heating Oil pit. Early in todays session it appeared we were going to have a healthy correction as both pits were off roughly 2 cents on news of lagging manufacturing rates. That sell off gave way to a buying spree as more and more people put Greece on the back stove and gave credence to Iranian threats. Iranian ministers again today announced it would not idly sit by if provoked by another country. This comes on the heels of yesterdays announcement that it would take "preemptive measures" if provoked by sanctions. The nation has already cut supplies to the European zone that continues to be mired in a deep freeze. There is no doubt that we have a problem in Iran, the key will be how the White House chooses to deal with it. Domestically, as gas prices continue to rise, the self fulfilling prophecy has taken hold over news outlets predicting $5 gas by Memorial Day. All in all, there is very little in the way of bearish data or news to push the trade down and as historically happens, demand destruction will be a deciding factor for lower prices. At the close, Crude rose 3 cents to $106.28, RBOB tacked on .0175 to $3.0877 and HEAT gained another .0331 to $3.2724.
 
heat map
RBOB CLOSE
CLOSE CHANGE
 
MAR 30877 +.0175
APR 32630 +.0145
MAY 32536 +.0151
JUN 32249 +.0160
JUL 31842 +.0158
AUG 31372 +.0150
HEAT CLOSE
CLOSE CHANGE
MAR 32724 +.0331
APR 32650 +.0302
MAY 32509 +.0271
JUN 32417 +.0250
JUL 32429 +.0232
AUG 32445 +.0211
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Topics: Iran, European Economy, $5 Gas

NYMEX continues higher ahead of DOE data

Posted by Mark Pszeniczny on Feb 7, 2012 5:40:00 PM

With the Heating oil pit tacking on over 15 cents in just under a week, many are scratching their heads as to why.  In a winter that has seen more 50 degree days than teens, most would assume the Heat pits to be tanking.  As with the case with these types of patterns, shifts in the jet stream have caused the Northeast to have a mild winter yet Europe is caught in a bitterly cold spell for some time.  Brent Crude has maintained its $20 premium to its cousin WTI, thus explaining the HO to WTI disconnect.  As shown below, that disconnect has been in place most of the year.   Longer term, you may start to see more US vessels head to European markets, signaling some shortfalls down the road.  Many are still on edge as Greece is continuing to try and find a way to pay off creditors and with Iran and Israel in a stare down, the tightening supplies across the pond are having nothing but bullish affects on the trade.  At the close, Crude added $1.50 to $98.41, RBOB slipped .0004 to $2.9275 and HO gained another .0343 to $3.1909.  Again we have touched the top of the 18 month range for HO, then next 30 days have typically seen a healthy pull back.  But again, what is typical anymore?

Continuation crude chart, continuation heating oil chart, RBOB continuation chart, continuation natural gas chart

RBOB CLOSE
                 CLOSE       CHANGE 
  
MAR    29275      -.0004
APR    30674      +.0000
MAY   30572     -.0002
JUN     30296       +.0002
JUL     29951       +.0009
AUG    29590       +.0014
HEAT CLOSE
          CLOSE    CHANGE
MAR    31909      +.0343
APR     31595      +.0342
MAY    31294      +.0318
JUN    31080      +.0288
JUL     31017     +.0268
AUG     31014      +.0246
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Topics: Iran, European Economy, CRUDE

Late Rally pushed Futures higher ahead of the Close

Posted by Mark Pszeniczny on Jan 24, 2012 4:20:00 PM

Futures danced along the even mark most of the day with little news pushing the market for much of the session.  Greece is still trying to get a break on the 14.5 billion it owes creditors come mid March.  US Carriers have moved through the Straits of Hormuz with little in the way of disruptions.  A European refiner filed for bankruptcy, Petroplus, as margins disappeared.  Two of the most notable market moving stories were that the IMF revised down the world economic growth pointing to a slower than expected growth rate over the last five months.  Ahead of the close, the spendingpulse survey (a Mastercard service) pointed to higher gas demand last week.  How much credence is given to this survey has always been a debate, a weekend snow event in the northeast might have boosted sales on Friday.  Nonetheless, most will be looking at Wednesday's DOE report which is expected to show moderate builds across the board.  It looked like heat was on a pretty good downward slide until the last two sessions, which really doesn't make sense if you look at the 7 to 10 day outlook which has temperatures in the Northeast well above normal levels.  At the close Crude lost .63 to $98.95, RBOB rose .0271 to 2.8050 and HEAT added .0144 to $3.0242.heat map
RBOB CLOSE
                 CLOSE       CHANGE 
  
FEB    28050       +.0271
MAR   28105      +.0249
APR    29399      +.0161
MAY   29264      +.0118
JUN   28979      +.0091
JUL    28633      +.0081
HEAT CLOSE
          CLOSE    CHANGE
FEB     30242     +.0144
MAR    30151      +.0116
APR     29951      +.0073
MAY   29741      +.0051
JUN    29611     +.0022
JUL     29612      +.0000
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Topics: Iran, Straits of Hormuz, Futures

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