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Everything is dropping across the board today - WTI is maintaining itself under the $80 benchmark (currently -1.76 at 78.78/bbl), Gas and ULSD are both down over 5 this morning on the NYMEX and the Dow and Nasdaq are both following suit into the red.
So whats going on?
Goldman Sachs has revised its projected oil prices for 2015 to $75/bbl for WTI and $85/bbl for Brent Crude, in response to ramped up supplies and slow projected global economic growth.
Production from the US, Brazil, and the Gulf is projected to increase almost 1 million bpd, combined, and OPEC production is assumed to remain more or less stable - with gains in Iraqi production and drops in Libyan output essentially cancelling one another out.
Thursday saw prices tick up after it was reported that the Saudi's output dropped from 9.69 million barrels to 9.36 million barrels. There has been some chatter and concern around the scheduled OPEC meeting in November. The concern being that OPEC will push curbing supply to stop the price declines we've seen in recent months. Brent Crude was up 3% on the news, the highest its been in 4 months.
However, despite the OPEC chatter, the Saudi's have said they will keep output at scheduled high levels even with lower pricing to maintain market share. Additionally, reportedly only a small number of members have suggested supply curbing.
Thursday we saw ULSD settle out to erase most of Wednesdays drop - Wednesday it closed down -.0136 to 2.4586, and Thursday settled out at 2.4703 (+.0117). Gas not only erased Wednesday's 3 cent drop, but rebounded up +.0622 for the day to 2.2109. This morning, ULSD is trending up about a penny/penny and a half, while gas is hanging in the +.005 range, both having backed off earlier jumps.
So what's going on?
If you were to ask me two weeks ago if I thought the HEAT pit would rebound 30 cents after falling 45, I would say its about as likely as a tornado in Massachusetts.... And so here we are! With what has been an almost two week rally, todays moves looked to be a reaction to the indecisiveness of OPEC. For that last few years, OPEC has lost much of their mojo and most discounted their pumping policies and mandates as rhetoric. As with any slow news day, people needed something to jump onto and the report that OPEC was doing nothing had bulls run the table. That coupled with the DOE report of Crude having a 4.8mbl draw simple let the gates open for a decisively higher session. Jobless claims increase slightly last week still signaling a troubled economy. Even the Natgas report that showed an unexpected injection of 80bcf could not derail the upside. While many see the last several sessions as technical buy backs, it is difficult to maintain the notion that better days are to come as we pop 3 or 4 cents higher everyday. At the close, Crude maintained above $100 and settled up $1.19 to $101.93, HEAT rose .0441 to $3.1378 and RBOB jumped .0611 to $3.0398.
Presidents Day is historically a quiet day as most participants are off for the long weekend, but today’s moves have bucked the historical trend.
The sideways action continues as a healthy correction has once again seen buyers run for the hills. On the heels of healthy construction spending and new home sales, and...