Oil Market Chronological Daily Blog: Anticipating a Turn in the Oil Market — Trend Change?

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12/19–21/2014

Intro: OPEC’s strategy, not to cut oil production, seems to be finding the mark. U.S. drillers are beginning to cut the number of rigs in domestic production. Bloomberg reports “The number of rigs targeting U.S. oil has slid from a record 1,609 as drillers retrench in response to escalating competition from the world’s largest suppliers that’s sent international oil prices plummeting by more than $50 a barrel. Eight hundred more rigs are at risk of being idled should prices remain where they are, suspending an unprecedented boom in domestic production that’s brought the nation closer to energy independence than it’s been in three decades.” (Drillers Facing Lowest Oil Prices Since 2009 Idle Rigs ). However, in another report, it states oil production in the US will remain at higher levels. - “Output in the U.S. is the highest in three decades, and production is poised to approach a 42-year high next year as declining equipment costs and enhanced drilling techniques more than offset the drop in oil markets, according to Troy Eckard, whose Eckard Global LLC owns stakes in more than 26`0 North Dakota shale wells. Oil extraction is soaring at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking.” (Non-OPEC Producers Called on to Cut Oil Output After Rout )

On the other hand, U.A.E is calling on non OPEC countries to cut production, to reduce the oil glut that is driving oil prices lower as also reported by -Bloomberg “We call on all other producers to stop the increase because the increase is harming the market,” U.A.E. Energy Minister Suhail Al Mazrouei said in a separate interview at the conference. “If the increase stops, and they follow OPEC’s lead, OPEC’s decision is to fix production, if production stabilizes in 2015 things will stabilize much faster.” (Non-OPEC Producers Called on to Cut Oil Output After Rout ) Here in lies the risk. The question becomes, will the total world’s oil production fall enough to slow the price decline and reverse the price trend? That said the increasing rate of change of the production curve is apparently slowing. In addition, Reuter is reporting a decoupling, in price direction, between oil and the stock price of energy companies.

How much lower will oil prices fall before stabilizing is anyone’s guess. The prudent thing to do is to prepare and execute a strategy before the trend is apparent. Though implementing the strategy at this point, before the heard enters, carries a greater risk premium the hope is the returns would compensate the risk.

With that in mind, we will minimize our risk by targeting currencies, bonds and energy companies that suffered with the collapse oil prices.

As oil prices get closer to finding a floor, expect an increase in volatility, prices will bounce around (move up and down) prior to setting a trend. The fundamental question becomes, when is it the right time to enter the market? Prices will not go straight up there will be pull backs (volatility) so one can gauge, based on your comfort level , the appropriate time to enter the market as additional information, hopefully clarifies the risk.

For example, OPEC has replied to U.E.A.‘s call to cut production as reported by Reuters Saudi Arabia says won’t cut oil output see the following links as published in the NY Times, World’s Top Oil Producer Says It Will Ride Out Price Slump, OPEC’s Badri Says Hopes for Oil Price Revival by End H2 2015 and Kuwait Oil Minister Says OPEC Does Not Need to Cut Output.

On the positive side of the risk curve, sentiment is being to change, becoming more positive that the industry is reaching a turning point, as money flows into the sector, as noted in these Bloomberg articles , Oil’s 50% Drop From 2014 High Stokes Faith in Rally, Oil Advances as Funds Wager on Rally.

12/22/2014

In early trading on European Bourses, the decoupling seems to be holding as oil prices continue to decline, while most Energy Sector stocks are advancing, will this pattern hold? Will oil prices continue its decline into the second half of 2015? Fund managers are staking their claim as outlined in this Bloomberg report Funds Raised Brent Bullish Bets as Prices Extended Drop However if oil continues its decline there will be a reversal in energy stocks, a pullback in stock prices, presenting an ideal opportunity to enter the sector.

The key is the oil price, specifically the rate of change of its decline based on either demand and or the level of production; demand fueled by global economic growth, and or a pullback in drilling due to the economics of production, will fuel demand, greatly increasing the time frame for a reversal in oil prices.

As of Mon Dec 22, 2014 11:53am EST Reuter reports Oil slides after Saudi’s Naimi says OPEC won’t cut output with European “Shares in oil and gas stocks ended lower, surrendering early gains as oil prices resumed their downward march on Monday after Saudi Arabia’s powerful oil minister said OPEC would not cut production at any price.” Thus reverting back to its earlier correlation between oil and energy stock prices, let’s see if this holds with the American markets. Outlook Sours for Europe’s Oil Titans on Crude Slump: S&P

The S&P500 AS of Dec 22, 2014 1: 26 pm EST Bloomberg reports “Energy companies in the S&P 500 fell 1.5 percent as the price of crude oil declined for the second time in three days. The resource has slumped about 21 percent since OPEC decided against cutting its production target last month, prompting a plunge in the value of currencies from the Russian ruble to the Norwegian krone. Chesapeake Energy Corp. and Southwestern Energy Co. slid more than 5.4 percent, while Transocean Ltd. decreased 3.6 percent.” (U.S. Stocks Rise After Three-Day Rally as Tech Advances )

The trading day ended as oil and energy stocks fell as reported by the NY Times “The price of U.S. oil fell on expectations of a further buildup in supplies both in the U.S. and from OPEC producers. Benchmark U.S. crude fell $1.26 to close at $55.26 a barrel in New York. Oil has plunged since peaking at $107 a barrel in June. Several oil production and exploration companies tumbled as the slide in oil prices deepened Monday.

Nabors Industries fell 53 cents, or 3.9 percent, to $13.10, while Chesapeake Energy slid $1.44, or 7.3 percent, to $18.42. Range Resources shed $2.80, or 4.7 percent, to $57.07. Southwestern Energy dropped $1.69, or 5.5 percent, to $29.31.” (Wall St. Closes Higher, but Home Sales Data Disappoints )

Confirming the reversal in the decoupling of oil and energy stock prices as the downward trend reestablishes itself.

12/23/14

As of 5:30 AM: European energy stock and crude are climbing as “Oil inventories in the U.S., the world’s largest consumer, probably dropped for a second week through Dec. 19, a Bloomberg News survey of energy analysts showed before data tomorrow”. (Dow Average Tops 18,000, Dollar Gains While Bonds Fall )

Iraq plans to boost production to 4 million barrels a day next year as OPEC refuses to cede market position, said Oil Minister Adel Abdul Mahdi. OPEC members Saudi Arabia and the United Arab Emirates have pledged to maintain output, while Qatar’s energy minister, Mohammed Al Sada, has said the market is oversupplied by 2 million barrels a day. The 12-member group is responsible for about 40 percent of the world’s supply.” Bloomberg. (Oil Futures Advance After U.S. Economic Growth Surges )

NY 5:48 AM: Oil also rose as seen in Bloomberg’s article “Oil rose in New York before a report that may show the U.S. economy expanded more than previously estimated last quarter. Prices moved between gains and losses in London after Saudi Arabia’s oil minister said the world’s biggest exporter won’t lower production if this year’s price plunge persists.” “West Texas Intermediate climbed as much as 2.9 percent in New York, paring this year’s decline to 43 percent. Saudi Arabia, OPEC’s biggest producer, doesn’t plan to pump less “whatever the price is,” Oil Minister Ali Al-Naimi told the Middle East Economic Survey yesterday. The U.S. economy expanded 4.3 percent in the third quarter from a year earlier, a Bloomberg News survey shows.” (Oil Advances as Traders Weigh U.S. Recovery With Saudi Policy )

This as producers continue to trim spending and rethink drilling strategies “Billionaire Harold Hamm, whose early adoption of shale drilling in North Dakota helped usher in a U.S. energy renaissance, plans to cut spending by 41 percent at his company after the plunge in oil prices.

Continental Resources Inc. and other U.S. producers can adjust quickly to the crude collapse and will be able to withstand the downturn better than many producing countries, which face economic “ruin,” Hamm said in an interview.” (Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash )

Additional production adjustments made as indicated by Bloomberg (Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash) “Spending at Oklahoma City-based Continental will fall to $2.7 billion and the company will increase production by as much as 20 percent next year. That’s a decline from a previous growth forecast of as much as 29 percent, the company yesterday said in a statement.”

OPEC still maintain it none cut production stance however some members face their own reality (i.e. “Fighting in Libya that’s pushed oil production below consumption in the holder of Africa’s largest reserves is a reminder that not all OPEC members are in a position to defend market share by maintaining output. As Iraq plans to boost supplies next year amid repeated pledges by Saudi Arabia and theUnited Arab Emirates to keep pumping the same amount of crude, Libya’s National Oil Corp. said output has dropped to a “very low point.” Conflict between the government and Islamist militias has spread to the region of Mellitah, where the country’s fourth-largest oil port is located, after disrupting two other export terminals, according to the state-run company.”) Bloomberg — OPEC Oil Market Defense Eludes Libya as Production Drops

12/23/2014

8:30 AM est.: With better than expected GDP numbers, 5% expected 4.3%, oil prices moved to the up side based on greater economic growth in the US. As of 8:58 AM EST Bloomberg reports “West Texas Intermediate climbed as much as 2.9 percent in New York, paring this year’s decline to 43 percent while Brent gained as much as 2.3 percent inLondon. The U.S. economy expanded at a 5 percent annual rate from July to September, according to the Commerce Department. Stockpiles in the U.S., the world’s largest oil consumer, probably dropped for a second week, a separate Bloomberg survey showed before weekly government data tomorrow.” “The jump in personal consumption and investment point to a U.S. economy starting to gain traction and to be self-supporting, which should translate into positive momentum in 2015,”Michael Hewson, London-based chief market analyst at CMC Markets Plc” (Oil Extends Gain as U.S. Economy Grows at Fastest Pace in Decade), (Oil Futures Advance After U.S. Economic Growth Surges), (West Texas Intermediate Oil Pares Advance in New York)

At the close, oil and energy stocks gained on better than expected U.S. growth getting us closer to the trough of the price curve.

AS production slows and demand increases, volatility will accelerate as well as trading opportunities. However, as an investor set your time horizon and entry point and ride the wave. (Oil uncertainty remains high, even as calm returns to stocks) (Oil up on stronger-than-expected U.S. GDP growth data) (Oil Drillers Under Pressure to Scrap Rigs to Cope With Downturn)

12/24/14

6:21 AM EST. Oil returned to its downward trend after advancing on yesterday’s higher than expected U.S. GDP 5 % growth report. U.S. growth was seen not to be sufficient to curb the global oil glut.

As reported by Bloomberg 6:25 “OPEC, whose 12 members supply about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, a separate Bloomberg survey of companies, producers and analysts showed. That exceeded their collective target of 30 million for a sixth straight month.” Despite disruptions in production in Libya as fighting continues. A 72 hr. ultimatum (from 4 pm yesterday) was given to Libyan Islamists by the forces defending the oil production facilities to with draw or fighting will intensify. “Brent for February settlement slid as much as $1.11 to $60.58 a barrel on the London-based ICE Futures Europe exchange and declined $1.04 to $60.65 at 11:22 a.m. local time. The contract climbed $1.58 to $61.69 yesterday, the highest close since Dec. 12. The volume of all futures traded was 71 percent below the 100-day average for the time of day.” (Oil Falls Amid Concern U.S. Growth Insufficient to Offset Glut).

As Asian markets closed “West Texas Intermediate fell 1.6 percent, paring yesterday’s 3 percent gain” “Oil is heading for the biggest annual decline since 2008 amid a global glut exacerbated by the highest U.S. output in more than three decades and a decision by OPEC to resist supply cuts. “WTI crude fell $0.95 to $56.17 a barrel, paring a 3.4 percent advance yesterday. Brent oil fell 1.5 percent to $60.79 a barrel in London.” Bloomberg (Asian Stocks Advance With Metals on U.S. Economic Growth).

8:41 am EST Reuters reports “Data from the American Petroleum Institute (API), an industry group, showed U.S. crude stocks rose by 5.4 million barrels in the week ended Dec. 19. Analysts had expected a drop of 2.3 million barrels.” (Oil falls, near $60 on supply glut, strong dollar). The oil glut remains the issue, as a lack of demand keeps downward pressure on oil prices. Based on the correlated trend, expect energy stocks to continue declining. Note: as of 3.33 am est. BP was up as the company is close to a deal with Kommersant. Reuters “Oil major BP Plc gained 1.1 percent, outpacing oil and gas shares, after the Kommersant business daily said the firm was close to a deal with its Russian partner, state oil company Rosneft, for a new project that would expand its commitments in Russia despite Western sanctions.” (European shares inch up in shortened session)

As expected energy stock followed oil’s downward trend as “Exxon Mobil Corp. dropped the most in the Dow today as oil futures slid more than 3 percent. Nabors Industries Ltd., Denbury Resources Inc., Apache Corp. and Transocean Ltd. tumbled more than 2.1 percent.” Bloomberg (U.S. Stocks Extend Rally as Russell 2000 Nears Record).

The refiners are producing at the high end of the curve with no retreat in sight; Bloomberg “As a result we are seeing not only pressure on the outright price of crude oil but pressure on refining margins.” Last week’s gasoline production surpassed the previous record of 9.84 million barrels a day in June. Output has jumped 19 percent from this year’s low of 8.33 million in January. Refinersoperated at 93.5 percent of their capacity last week, the highest level for this time of year since 1998.The 3–2–1 crack spread, a rough measure of the profit from processing three barrels of oil into two of gasoline and one of heating oil, was $14.09 a barrel. That’s down from $16.25 on Dec. 15 and a 52-week high of $25.88 in April.” (Gasoline Production Reaches Record High as Crude Prices Tumble).

By all indications the downward price pressure doesn’t seem to be abating, look for this trend to continue indefinitely. We need to see a slowdown in production and or a rise in demand. Bloomberg “This report provides us with a very consistent picture that we’ve got supply outpacing demand and inventories are piling up,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “There’s too much crude coming in. Refineries are operating at a high rate but not high enough to make a dent in this.” (Oil Slides as U.S. Supplies Jump Most in Two Months)

Also look for carnage amongst companies with weak balance sheets, who are highly leveraged. A number of companies borrowed excessively, because of low interest rates, to finance production that needed prices above $70–75 level to make interest payments on their debt. These companies have a very high probability of defaulting on their High-Yield Bonds (Junk Bonds) and or prime M&A candidates. Expect M&A activity to pick up in 2015.

Additional Links (Iraq Says Oil Fair at $70-$80 as Lower Oil Will Need OPEC), (Oil slides, Brent tests $60 as data shows glut building)

12/25/2014

U.S. & European markets were closed for Christmas

However the Saudi’s issued their 2015 budget showing confidence in their strategy, not to cut production. They are relying on their huge fiscal reserves to ride out the fall in prices. Though some austerity measures were taken, overall they have increased spending, signaling self-assurance in the approach. Reuters “Financial markets had feared the kingdom might slash spending. But the budget, released by the Finance Ministry on Thursday, suggests authorities are confident of their ability to ride out low oil prices and see no need for major austerity.” “We have the ability to endure low oil prices over the medium term,” Finance Minister Ibrahim Alassaf told Saudi television after the announcement. He defined the medium term as three to five years but also said oil was expected to rebound late next year or in 2016. “ (Saudis to keep spending heavily in 2015 budget, shrug off oil plunge). Additional links (Saudi Arabia Sees Wider 2015 Budget Deficit as Oil Falls), (Saudi Rulers to Curb Wages as Kingdom Confronts Oil Slump)

11:01 pm est. The Lybian government made good on their treat to bomb (air strikes) Libyan militants with 72 hrs. Bloomberg “The strike comes two days after the Petroleum Facilities Guard gave the militias 72 hours to return to Misrata, their main stronghold, to avoid the airstrikes after an earlier attack on the Es Sider terminal.”The fighting caused crude output to decline to 352,000 barrels a day, Mohamed Elharari, a spokesman for National Oil, said today by phone.” This as the price of oil advanced. (Libya Oil Ports Guard Calls In Strikes on Islamist Militias)

Referring to 12/24/14 blog Bloomberg “The recent fall in the oil price spooked investors and they’re now questioning if the shale oil-and-gas companies can survive,” said Peter Sleep, a senior money manager at Seven Investment Management LLP in London. His firm oversees more than $10 billion. “There’s been quite a selloff in U.S. high-yield ETFs. With such a substantial fall, volatility goes up, and the price of protection spikes.” “Investors increased hedging with the slump in oil as the proportion of energy companies making up the high-yield debt market has ballooned. Since early 2010, they have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG.” (Traders Dive Into Junk-Bond ETF Hedges on Oil Concerns: Options)

Take note: The lack of oil has turned into a mark of a winner in the developing world’s bond markets. And that’s proven to be a boon for borrowers in Asia. Dollar-denominated notes from the region, a net energy importer, had the biggest returns inemerging markets this year with a 7.49 percent advance. The world’s fastest-growing continent also held up better in December, when the selloff in crude oil upended issuers from commodity-producing companies in Russia and Brazil. (The Reason Why Asian Bond Buyers Can Dismiss Oil’s Plunge)

12/26/2014

Boxing day — European Markets closed; U.S. Markets Open (shorten trading day)

3:58 am est. Oil prices began the day trading above $60 per barrel. As suggested in earlier blogs here comes the volatility Bloomberg “Oil traded above $60 a barrel in London amid the highest volatility in more than three years on speculation that Saudi Arabia, the largest crude exporter, is signaling confidence that prices will rally.” (Oil Trades Above $60 Amid Signs of Saudi Confidence in Rebound).

The market seems assured in the Saudi’s $80 price target. The 2015 budget is based on oil levels of $80 as opposed to $103 in past budgets. That said let’s see where we go from here.

Remember what’s driving the oil price trend, lack of demand and over production. Expect volatility to continue.

8:14 am est. As Per my reminder what’s driving the oil trend Bloomberg “Brent gained as much as 1 percent in London. Libya’s government said its action was prompted by a militia attack on Es Sider where loadings were halted earlier this month. Libya’s output has declined to 352,000 barrels a day, according to Mohamed Elharari, a spokesman at state-run National Oil Corp. That compares with production of close to 1.6 million barrels a day in 2011. Trading volumes are about 88 percent below the 100-day average for the time of day with much ofEurope on holiday after Christmas.” (Oil Rises as Fighting Intensifies Around Libya’s Biggest Port). Reuters 9:19 am est. (Oil rises further above $60 as Libyan output slumps)

The oil market closed with the week, dominated by the oversupply issue, causing an increase in volatility, Bloomberg (Oil Heads for Fifth Weekly Loss on Global Glut Concern). Unless there is a major disruption, beyond Libya, expect more of the same next week. Even with increase fighting in Libya, over the weekend, one can expect increase volatility with the main downward trend to remain in place. A major even threatening or an unexpected fall in oil supply is needed to jolt the market to the upside; I would venture to say Libya isn’t that even at this point in time, Reuters (Oil declines amid stronger dollar, crude oversupply in U.S.)

12/28/2014

8:41 am est. Bloomberg reports 6.2 million barrels of oil, stored in Libyan facilities, are at risk as fighting intensifies. This will have a trading effect, prices will temporally move to the up side, while maintaining the downward price trend. Bloomberg “Libya’s oil production was 580,000 barrels a day in November, down from 1.59 million barrels a day at end of 2010, according to data compiled by Bloomberg. Its capacity is 1.55 million barrels. The fighting has caused production to decline to 352,000 barrels a day, Elharari said on Dec. 26.” (Fires Spread to Five Crude Tanks at Libya’s Oil Terminal). This shouldn’t have a significate short term effect on the current oil glut. The Libyan situation should be kept on the radar, however the disruption shouldn’t have a major impact on the global oil glut as demand remains weak. AS evidence china reported, a 4.2 percent drop in November’s industrial profits, adding to the increasing lack of demand argument. Bloomberg (China’s Industrial Profits Drop Most in Two Years Amid Slowdown), Reuters (China’s November industrial profits suffer sharpest fall in 27 months)

12/29/2014

4:53 am est. As expected prices advanced as the Libyan conflict escalated Bloomberg (Oil Strengthens as Libya Conflict Offers Relief From Glut).

Three of the fires were reported to be out Bloomberg “Fires have been extinguished at three of five tanks at Es Sider, Libya’s largest oil port, which were set ablaze after an attack by militants, said Ali al-Hasy, a spokesman for the Petroleum Facilities Guard. Algerian Energy Minister Youcef Yousfi called on the Organization of Petroleum Exporting Countries to cut output to boost prices, the Associated Press reported.” This just adds to price volatility, presenting a trading opportunity.

Unless global demand picks up and or we experience a significant decrease in production the long term trend remains to the down side. Global economic growth, with the exception of the U.S. and U.K., is still very sluggish.

6:50 am est. A statement from a Reuters report suggests, “It’s very supply driven, on the demand side, the only impact is when you see a negative change in data.” Brent crude LCOc1 was up 65 cents at $60.10 by 1128 GMT after hitting $60.40 earlier in the day. The benchmark settled down 79 cents in the previous session. (Oil rises to $60 per barrel, Libya fire supports)

7:31 am est. ICE Futures Europe exchange stated Money Managers ended their net long positions in Brent Crude by 15% in the week ending Dec 23. Bloomberg “Hedge funds and other financial traders pared overall bullish bets on Brent crude for the first time since before OPEC’s decision to maintain production levels triggered a collapse in oil prices.” (Funds Cut Brent Bullish Bets for First Week Since OPEC Meeting)

7:42 am est. Bloomberg reports “A fresh assessment of the damage at Es Sider oil port showed six tanks have caught fire after an attack by Islamist militias last week, one more than what was previously announced, according to state-run National Oil Corp.” “The fires at Es Sider started on Dec. 25 when Islamist militias shot rockets at the port in a second attempt to capture it, after one on Dec. 13. The export terminal houses a total of 21 storage tanks, the Libya Herald newspaper said.” (Fires Put Out at Three Oil Tanks at Libya’s Es Sider Port)

12:43 pm est. Oil reversed its earlier gains, continuing its downward trend on glut concerns. Bloomberg — “Oil fell to the lowest level in more than five years amid speculation that a global supply glut that’s driven crude into a bear market will continue through the first half of 2015.” “We’re looking at a significant supply-demand surplus through the first half of 2015,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The problems in Libya and any reduction in the growth of U.S. production will only help limit the surplus, but it’s not going away anytime soon.”(Oil Falls to 5-Year Low as Supply Glut Seen Lingering). Reuters — “Crude oil prices tumbled on Monday, with Brent and U.S. crude hitting their lowest levels since May 2009, reversing early gains on selling by investors convinced that supply disruptions in Libya would not offset a global supply glut.” (Oil prices drop, market less worried about Libya supply).

12/30/2014

5:15 am est. Bloomberg “Oil fell to the lowest since 2009 in New York and London amid speculation that U.S. crude inventories will stay at the highest for the time of year in at least three decades.” (Oil Drops to Lowest Since ’09 With Stockpiles at Year-End Record)

The year ends with oil playing a role in the valuations of the major markets (Equities, Currencies, Commodities, and Bonds). This is expected to continue into the first quarter of 2015. Bloomberg “Brent crude fell to $57.19 a barrel in London, the lowest since May 2009. Prices have tumbled 46 percent this year as the largest U.S. oil output in about 30 years combines with slowing global demand and the refusal of the Organization of Petroleum Exporting Countries to reduce production levels.”

“Almost $1.3 trillion was erased from the value of equities worldwide this month amid the slump in oil prices. U.S. crude stockpiles are the highest for the time of year in more than three decades. Spain’s consumer prices fell the most since 2009 this month, raising the prospects for central-bank stimulus to ward off deflation. Greek Prime Minister Antonis Samaras will request elections for Jan. 25, with the anti-austerity party Syriza leading polls.” (Europe Stocks Drop With U.S. Futures on Oil; Ruble Gains)

The key has been and will continue to be the over production of oil, which led to the oil glut. However OPEC’s strategy, allowing prices to fall by not cutting production, will begin paying dividends in the first half of 2015. The effect of their strategy is beginning to be felt, U.S. Shale & Fracking production is slowing. The number of U.S. rigs in production is starting to fall Bloomberg -““We should see the rig count going down at least through the end of the first quarter as a reaction to the low oil prices,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, before the report. “By midyear, we should see measurable impacts on production.” The total rig count, which includes one miscellaneous rig, dropped 35 to 1,840, an eight-month low.”( Sub-$55 Oil Has U.S. Drillers Idling Most Rigs in 2 Years)

The next piece of data expect to impact the market is U.S. Inventory. Reuters- “Investors awaited U.S. inventory data. The American Petroleum Institute was scheduled to release data on Tuesday while the U.S. Department of Energy’s Energy Information Administration will issue data on Wednesday. A Reuters poll forecast U.S. crude inventories would show a drop of 900,000 barrels, after a rise to their highest recorded level for December in the week ended on Dec. 19. [EIA/S]”

3:14 pm est. WTI closed the day on the upside as concerns that the disruption in Libya’s production and the decline in number of U.S. rigs in operation will have an impact on the glut. The rationale is Libya’s production falling below 300,000 barrels per day and a Reuter’s poll forecasting a drop in U.S. Inventories of 900,000 barrels will reduce the oversupply. This is more of a speculative trading position prior to the release of the actual report. Bloomberg -“WTI for February delivery rose 51 cents, or 1 percent, to $54.12 on the New York Mercantile Exchange after earlier falling as far as $52.70, the lowest since May 2009. The volume of all futures traded was about 37 percent below the 100-day average for the time of day” with “Brent for February settlement added 2 cents to $57.90 a barrel on the London-based ICE Futures Europe exchange after sliding to $56.74, also the lowest since May 2009. Volume was 29 percent below the 100-day average. The European benchmark crude traded at a premium of $3.78 to WTI on the ICE.” (WTI Gains on Speculation Libya Disruption May Pare Glut).

That said, we need to see a rise in demand with an acceleration in decreasing oil production to change the direction of the price trend.

12/31/2014

5:29 am est. Oil resumed its downward trend Bloomberg — “Crude oil fell, heading for its worst year since 2008 amid a global supply glut. “ with “West Texas Intermediate crude fell 1.5 percent to $53.31 a barrel at 10:26 a.m. in Londonand the Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, declined 0.6 percent. “

In the last few months of the year oil was responsible for affecting valuations across markets and sectors Bloomberg “Obviously oil stocks have been hit but others, consumer-sector stocks for example, are shrugging it off and seeing it as a positive. On currencies, anybody who is an oil producer is very severely hit.” “Oil’s slump has squeezed government budgets in producing nations including Venezuela and Ecuador, while boosting China’s emergency crude reserves and helping shrink fuel subsidies in India and Indonesia. OPEC has signaled it won’t cut supply to influence prices, instead preferring to defend market share amid an unprecedented U.S. shale boom.” (Oil Falls in Worst Year Since 2008 as Europe Stocks Gain).

A new variable has been added to supply equation Bloomberg — “The Obama administration’s move to allow exports of ultralight crude without government approval may encourage shale drilling and thwart Saudi Arabia’s strategy to curb U.S. output, further weakening oil markets, according to Citigroup Inc.” “U.S. producers are under the gun to reduce capital expenditures given lower prices,” Citigroup said in the report. “Now an export route provides a new lease on life that can further weaken crude oil markets and throw a monkey wrench into recent Saudi plans to cripple U.S. production.” “Current U.S. export capacity is at about 200,000 barrels a day, which could be expanded to 500,000 a day by the middle of 2015, according to the bank.” (U.S. Opening Door to More Oil Exports Seen Foiling OPEC Strategy) The impact of the new policy is an unknown; we have to see how it evolves. It will increase the supply the key is velocity and amount traded .

As I eluded to in previous blogs, expect implied volatility (speculative price swings) to remain high in 2015. This is ideal for traders. Bloomberg — “OPEC has always been there to lower volatility both on the upside and downside, but now they have less and less weight,” (OPEC Resolve on Supply Promises No Calm for Oil Markets: Energy)

One should note Hedge Fund managers are pulling their bullish bets as the oil price war progresses. Bloomberg — “Hedge funds finally pulled back from bets on higher oil prices as the market faces its worst year since 2008. Speculators reduced their net-long position in West Texas Intermediate crude for the first time in four weeks, cutting their holdings by 5 percent in the week ended Dec. 23, Commodity Futures Trading Commission data showed yesterday. Long wagers dropped the most since August.” (Hedge Funds Surrender to Oil Rout as Bullish Bets Drop)

12:25 pm est. The Saudi’s seem to blink as December’s numbers show their production was down, averaging 9.5 million for the month. A 150,000 barrels a day drop, their biggest decline. Bloomberg — “Output by the 12-member Organization of Petroleum Exporting Countries slipped 122,000 barrels a day, or 0.4 percent, to 30.239 million, led by declines in Saudi Arabia, Libya and the United Arab Emirates, according to the survey of oil companies, producers and analysts.” (OPEC December Crude Output Slips as Global Prices Tumble)

Needless to say “the plot thickens” let’s see the follow through. Are they slowly cutting output to support prices?

We end the year with a bearish report from The Energy Information Association. Reuters — “Oil prices continued to decline on Wednesday as investors digested a government report showing slowly growing demand and an increasing supply glut at the U.S. oil storage hub at Cushing, Oklahoma.” (Oil declines after bearish report from U.S. government)

1/1/2015

Oil prices in the mid-fifties, seem to be shaking things up, as the Saudi’s suspend plans to build a $2 billion clean fuels plant Reuters — “State oil giant Saudi Aramco has suspended plans to build a $2 billion clean fuels plant at its largest oil refinery in Ras Tanura, three industry sources said.

The energy project appears to be one of the first suspended in Saudi Arabia in response to the halving of the oil price in the last six months.” (Saudi Aramco halts Ras Tanura clean fuels project-sources) and Iran calling to curb the fall in prices as budgets across the Middle East (oil exporters) are being hit. Reuters — ” “If Saudi does not help prevent the decrease in oil price … this is a serious mistake that will have a negative result on all countries in the region,” Abdollahian said in an exclusive interview on Wednesday evening.” (Iran says Saudi Arabia should move to curb oil price fall)

1/2/2015

5:46 am est. Oil is facing additional head winds as growth in China and Europe is slowing as per latest PMI numbers. Bloomberg — “Oil traded near its lowest closing price since mid-2009 amid signs of manufacturing weakness in Europe and China Futures headed for a sixth weekly loss in New York and London. Euro-area manufacturing expanded less than initially estimated in December as growth rates for output, new orders and employment remained near stagnation. The bloc’s currency weakened to a 4 1/2-year low against the dollar. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday.” (Crude Oil Trades Near 5 1/2-Year Low Amid Manufacturing Weakness)

Where does this leave oil prices. With low demand and no increase in sight through the first quarter (China’s economy is project to grow at 7.0% in the first quarter of 15); one can expect prices to remain at or below current levels, providing there are no major cuts in production. That said, prices will face downward pressure thru the end of this quarter and possibly into the 1st half of the 2nd quarter.

7::50 am est. Adding to oil’s pain is an increase in supply from Russia and Iraq. Bloomberg — “Oil fell to the lowest since mid-2009 amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China. Oil supplies in Iraq and Russia surged to the highest level in decades, signaling no respite in early 2015 from the glut that has pushed crude prices to their lowest in five years. The two countries provided 15 percent of world oil supply in November, according to the International Energy Agency. Russian oil production rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed today by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, said Oil Ministry spokesman Asim Jihad.” (Oil Trades at 5 1/2-Year Low After Russia, Iraq Boost Supplies)

7:56 am est. Reuters -”With no production cuts in the offing and a significant demand response years away, oversupply looks to be with us for a while,” said RBN Energy analyst Rusty Braziel in a note. “$100 a barrel crude oil prices are in the rear view mirror, at least for a couple of years.” (Oil hits new post-2009 low below $56 as supply glut prevails)

12:08 pm est. WTI gained as Brent narrowed losses, due to trading noise. Demand remains weak with supply showing no signs of dropping appreciably to reverse the trend. Reuters — “U.S. crude turned positive on Friday, while Brent’s losses narrowed after it hit a new low as traders felt for a market bottom and balanced positions at the start of the new year.” (Oil sees choppy trading in first day of new year)

3:50 pm est. WTI and Brent ended the day lower Bloomberg — “West TexasIntermediate for February delivery fell 58 cents, or 1.1 percent, to $52.69 a barrel on the New York Mercantile Exchange, the lowest close since April 30, 2009.” “Brent for February settlement dropped 91 cents, or 1.6 percent, to close at $56.42 a barrel on the London-based ICE Futures Europe. It’s the lowest settlement since April 30, 2009.”

Expect the downward pressure to continue.

1/5/2015

6:18 am est. Oil hit a 5 ½ low as increasing supplies and sluggish demand remains the issue. Reuters — “The two crude oil benchmarks — Brent and U.S. light crude, also known as West Texas Intermediate — have now lost more than half of their value since mid-2014. Brent crude LCOc1 for February dropped as low as $55.16 a barrel, its weakest since May 2009, before edging back to $55.32, down $1.10, by 1055 GMT (0555 ET). (Oil hits five and a half year lows on supply glut)

With prices this low companies are beginning to hit the proverbial “financial brick wall”. It’s becoming more of a buys market as the industry enters a restructuring phase. Bloomberg “Continental Resources Inc. (CLR), the shale driller founded by billionaire Harold Hamm, budgeted for $80-a-barrel oil and planned to spend $4.6 billion in 2015. Six weeks later, with crude down 29 percent in the interim, Continental cut its 2015 budget to $2.7 billion.” (Oil Below $60 Tests U.S. Drive for Energy Independence).

The Oil market’s fundamentals don’t appear to be getting better as supplies are forecast to the up side. Bloomberg –“Output may increase from fields in West Africa, Latin America, the U.S. and Canada in addition to more exports from Russia and Iraq, offsetting concerns of reduced production in Libya, analysts including New York-based Adam Longson said in an e-mailed report today. Iran may raise overseas shipments by about 500,000 barrels a day if western sanctions against the country are lifted, according to the report.

Morgan Stanley is predicting additional supplies coming to the market as the Organization of Petroleum Exporting Countries maintains its production quotas and the U.S. pumps at the fastest rate in more than three decades. Benchmark prices are extending declines in a bear market as OPEC pumped above target for a seventh straight month in December” (Morgan Stanley Sees ‘More Problems’ for Oil Market on New Supply).

9:29 am Est. Oil trades below $55 as glut continues to be a concern. Reuters — “Russia’s oil output hit a post-Soviet high last year, averaging 10.58 million barrels per day (bpd), up 0.7 percent thanks to small non-state producers, Energy Ministry data showed. Iraq’s oil exports were at their highest since 1980 in December, an oil ministry spokesman said, with record sales from the country’s southern terminals. But oil producer group OPEC has decided not to cut output, opting to let the market find its own level.” (Oil hits five and a half year low under $55 on supply glut).

1:50 pm est. The market appears to be pricing in the realization that demand is very sluggish and supply will be dictated by the economics of the market place. Bloomberg — “The market is continuing to price in weak fundamentals in the first half of this year,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “There’s also been a return to risk aversion because of Greece, something we haven’t seen in a while.” “West Texas Intermediate for February delivery dropped $1.93, or 3.7 percent, to $50.76 a barrel at 1:31 p.m. on the New York Mercantile Exchange. It slipped to $49.95, the lowest level since April 29, 2009. The volume of all futures traded was 3.3 percent higher than the 100-day average for the time of day. Brent for February settlement declined $2.71, or 4.8 percent, to $53.71 a barrel on the London-based ICE Futures Europe exchange. The contract touched $52.66, the lowest since May 4, 2009. Volume for all futures traded was 41 percent above the 100-day average. The European benchmark grade traded at a $2.95 premium to WTI.” (WTI Falls Below $50 a Barrel First Time in 5 1/2 Years). Expect volatility to pick up.

4:30 pm est. The decline in oil reverberated across all markets as the downward trend extents into 2015. NY Times — “The drop in prices has led to a rising tide of oil company announcements in recent days of investment cuts for the coming months. Ensign Energy Services, a Canadian drilling contractor, reported that it would be laying off 700 workers, or roughly 10 percent of its work force, in California fields. Several Texas-based companies that have borrowed heavily in recent years to produce in new Texas and North Dakota shale fields are expected to announce steep investment and job cuts in the coming days.” (Oil’s Fall Continues, and Stock Market Shudders).

1/6/2015

Oil prices in the mid-50s will cause the industry to restructure. Bloomberg — “The rig count fell by 93 in the three months through Dec. 26, and lost another 17 last week, Baker Hughes Inc. (BHI) data show. About 200 more will be idled over the next quarter as U.S. oil explorers make good on their promises to curb spending, according to Moody’s Corp.” “Drillers are already running the fewest rigs in nine months after a 46 percent drop in U.S. benchmark West Texas Intermediate oil in 2014, the steepest decline in six years and the second-worst since the commodity began trading in 1983. The price slipped below $50 a barrel yesterday as U.S. producers and the Organization of Petroleum Exporting Countries remain in a standoff over market share. Meanwhile, production from Russia and Iraq last month reached the highest level in decades.” (Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead). For example companies feeling the pain Bloomberg — “With crude prices down more than 50 percent from their 2014 peak, fields as far-flung as Kazakhstan and Australia are no longer worth pumping, said a team of Citigroup Inc. (C)analysts led by Alastair Syme. Companies on the hook for risky, high-cost projects that don’t make sense in a $50-a-barrel market include international titans such as Royal Dutch Shell Plc and small wildcatters like Sanchez Energy Corp.” (Oilfield Writedowns Loom as Crude Slump Guts Drilling Values).

In addition the Saudi’s continue to show signs of backing down from the price war. After cutting production last month they are raising prices to their Asian customers Bloomberg — “Saudi Arabia raised the cost of its oil sales to Asia in February, prompting speculation the world’s biggest exporter is retreating from using record price discounts to defend market share.” (Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers).

As a consequence of falling oil prices we see a flight to safety Bloomberg — “Bonds rose and the yen strengthened with gold as oil extended its decline below $50 a barrel and Europe’s economy showed signs of weakness, stoking demand for investment havens. Stocks pared earlier losses.” (Bonds Rise as Oil Extends Decline Below $50; Yen Advances).

6:06 am est. Oil continues its decline as the oil glut increases Bloomberg –“Oil extended losses below $50 a barrel amid speculation that U.S. crude inventories will expand, exacerbating a global supply glut that’s driven prices to the lowest level since April 2009.” (Oil Extends Drop Below $50 as U.S. Stockpiles Seen Rising)

1:03 pm est. The trend continues as oil seeks a floor, adding additional stress to production cost. Reuters — “Global oil markets slumped on Tuesday for a fourth straight day, still seeking a bottom with crude prices at their lowest since spring 2009 on mounting worries about a supply glut.” (Oil slides more, prices seek bottom after five and a half year low).

Bloomberg — “The market is obsessed with the supply side,” Hans van Cleef, energy economist at ABN Amro Bank NV in Amsterdam, said by phone. “Prices have dropped too fast and too far, but with the market this negative it’s hard to see a trigger which could turn the sentiment. If U.S. inventories are higher than expected, we could see Brent below $50 this week.” (Oil Extends Drop Below $50 as U.S. Stockpiles Seen Rising).

5:12 pm est. The trend continues, oil closes below $50 Bloomberg — “Oil extended losses below $48 a barrel amid speculation that U.S. inventories will expand, deepening a global supply glut that’s driven prices to a five-year low.” (Oil Extends Drop Below $48 as U.S. Stockpiles Seen Rising)

1/7/2015

As oil prices reverberate through the markets, oil producing nations are, in some cases, at the end of their ropes (i.e. Venezuela) Industrialized and oil consuming countries are reaping the benefits.Bloomberg — “The biggest winner would be the Philippines, whose economic growth would accelerate to 7.6 percent on average over the next two years if oil fell to $40, while Russia would contract 2.5 percent over the same period, according to an Oxford Economics Ltd.’s December analysis of 45 national economies.” “Among advanced economies, Hong Kong is the biggest winner, while Saudi Arabia, Russia and the United Arab Emirates fare the worst, according to Oxford Economics.” (How $50 Oil Changes Almost Everything).

Oil at or below $50, one would think consumer based businesses should be high on your investment radar. However here is some counter intuitive food for thought Bloomberg — “While the 55 percent retreat in oil since June is good for stores and restaurants, it’s a mistake to overestimate the importance of those industries to the S&P 500, Suzuki said. Equities take a bigger cue from business spending, and because so much of that is tied to commodities the net effect of lower oil on earnings over the next few months is negative.” “The direct impact to profits in the energy sector and energy-related companies in the industrials sector far outweighs the positive impact on the consumer sectors,” Suzuki said by telephone. “The positive impact for other sectors is actually pretty muted.” (Why Oil Is Dragging Down the S&P)

5:00 am est. Bloomberg — “Oil fell below $50 a barrel in London for the first time since May 2009 amid speculation that U.S. inventories will increase, exacerbating a global supply glut that’s driven prices to a five-year low.” (Global Crude Falls Below $50 as U.S. Supply Seen Adding to Glut)

7:34 am est. Implied volatility soared as prices fell below $50 on supply worries Bloomberg — “Implied volatility for at-the-money options in the front-month WTI contract rose to 60.2 percent this week, the highest level in more than three years, data compiled by Bloomberg show. It’s about 58 percent today, while Brent’s volatility is almost 49 percent.” (Global Crude Pares Loss After First Drop Below $50 Since 2009)

1:33 pm est. WTI rebounded, with implied volatility this high 60.2%. expect prices to gyrate. However supply is still driving the trend Bloomberg — “Crude production rose 11,000 barrels a day to 9.13 million last week. Output climbed to 9.14 million a day through Dec. 12, the most in weekly data that started in January 1983. “ {Oil Rebounds From 5 1/2-Year Low on U.S. Refinery Demand

An unexpected jump in U.S. Shale exports is another factor to be considered as per U.S. production and the glut. Oil exports in such volumes were unthinkable a few years ago. What’s the impact on the economics of production? Is this the beginning of an increasing export trend? Bloomberg — “Shipments surged 34 percent to average 502,000 barrels a day in November, the highest on record dating back to 1920, surpassing the previous monthly peak of 455,000 barrels set in March 1957, data from the U.S. Census Bureau and the Energy Information Administration show. The U.S. is now the 17th-largest exporter.” (Oil Exports From U.S. Jump to Record as Shale Output Booms)

The U.S. Government appears to be standing by their December decision Reuters — “The White House does not feel pressure to loosen restrictions on U.S. oil exports further and views debate over the issue as resolved for now, John Podesta, a top aide to President Barack Obama, told Reuters in an interview.” (Exclusive: White House not under pressure to expand U.S. crude exports — adviser)

1/8/2015

Oil prices are expected to hit a bottom and stay in a $55 — $75 range for much of the 2015. Exporting countries’ economies will shrink along with major industries, providing investment opportunities on the short & long end. Keep an eye on Canada Bloomberg — “Plummeting oil prices are taking a toll on Canada’s energy exports and threatening to leave little in the economy’s tank for 2015.” “Shipments of crude oil and bitumen dropped 9.9 percent to C$6.9 billion ($5.8 billion) in November, the biggest decline in almost three years, the federal statistics agency said Wednesday from Ottawa. The trade report is among early signs this may be a tough year for an economy that’s suffered least among developed nations from the 2008 financial crisis, as energy-export woes add to concerns the nation’s housing market is in jeopardy.” (Oil Export Plunge Signals Canada Economy Running on Empty)

6:35 am est. Oil gained the most in weeks. Prices will bounce around, high implied vol, for much of the year. The trend is still to the down side, though de-accelerating, nearing a bottom. Bloomberg — “Current prices aren’t sustainable in the long term and there may be “attractive trading opportunities” over the coming 12 months, Andrew J. Hall, the head of hedge fund Astenbeck Capital Management, wrote in a Jan. 2 letter to investors obtained by Bloomberg News. Oil will remain under pressure this year, according to the letter.” “U.S. output expanded to 9.14 million a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983.” (Oil Extends Biggest Gain in Two Weeks Spurred by U.S. Supply)

8:54 am est. Oil holds gains. Bloomberg — “Oil was steady after an unexpected drop in U.S. stockpiles spurred the biggest gain in two weeks yesterday.” (Oil Holds Gains After Rebound Spurred by Drop in U.S. Stockpiles)

10:41 am est. Reuters –“ Oil held above $51 a barrel on Thursday, supported by a surprise drop in U.S. inventories, as bulls and bears searched for a floor to the market’s second-biggest rout.” (Oil holds above $51 as traders search for floor)

3:17 pm est. Oil lost its gains as glut remains the issue. Bloomberg — “Oil slid to the lowest level in more than five years as analysts said a global supply glut will linger through the first half of 2015” (Oil Declines as Analysts Say Global Supply Glut to Linger)

1/9/2015

OPEC members are affirming their commitment to shake out the U.S. shale market. This injects more volatility into prices, expect shale production companies financing to rise adding additional risk to borrowing cost. Bloomberg-“Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want — and are achieving — further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.” (How OPEC Weaponized the Price of Oil Against U.S. Drillers)

The Trend continues prices will extent there fall. The key is the economics of shale production expect a major reduction in rigs as drillers pull back and or go out of business. Bloomberg –“he United Arab Emirates has no plans to reduce output no matter how low prices drop, according toYousef Al Otaiba, the nation’s ambassador to the U.S. Representatives from Saudi Arabia, Kuwait and the U.A.E. stressed a dozen times in the past six weeks that OPEC won’t curb output to halt the biggest drop in crude since 2008. WTI’s discount to Brent shrank to its narrowest since October.”(Oil Set for Seventh Weekly Drop as OPEC Reaffirms Supply Stance)

Drillers will cut back on current costly production and new ventures will most likely be shelved, slowly reducing supply. Bloomberg — “This is just the beginning,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said by telephone from Houston. “Even the best of the best who continue drilling have balance sheet constraints when you get oil this low. It might make sense to just terminate these contracts and not do anything and wait for a better day.” (Sub-$50 Oil Has U.S. Shale Producers Cutting Rigs Loose Early)

If OPEC stays the course, prices are expected to fall into the $40s. Bloomberg –“Crude may drop below $40 a barrel in the next few months without a substantial slowdown of production growth in the U.S. and Canada, said Doug King, London-based chief investment officer of Merchant Commodity Fund. Bearish oil wagers in the second half of 2014 helped the $260 million fund gain 59.3 percent, the best performance since its June 2004 start. (Don’t Bank on Oil Rebound Says Fund That Foresaw Collapse)

Adding to the volatility, a 40 year old, U.S., ban exporting crude to Mexico may be over turned as Bloomberg — “Petroleos Mexicanos is in talks with the U.S. Commerce Department to import 100,000 barrels a day of light crude to increase Mexico’s gasoline production and improve refining. Pemex, as the world’s ninth-largest oil producer is known, would send its heavy oil to U.S. Gulf Coast refineries in exchange.” (U.S. Oil Export Ban Poised to Loosen With Mexico Request)

Adding to the volatility, a 40 year old, U.S., ban exporting crude to Mexico may be over turned as Bloomberg — “Petroleos Mexicanos is in talks with the U.S. Commerce Department to import 100,000 barrels a day of light crude to increase Mexico’s gasoline production and improve refining. Pemex, as the world’s ninth-largest oil producer is known, would send its heavy oil to U.S. Gulf Coast refineries in exchange.” (U.S. Oil Export Ban Poised to Loosen With Mexico Request)

2:26 am est. Volatility dominates as growth & supply glut concerns drives prices back below $50 Reuters — “Oil prices slumped again on Friday after two days of relative stability, hitting 5–3/4 year lows in search of a bottom to the market’s six-month-long rout.” (Oil slides again, hits lowest since April 2009)

It simply comes down to letting the price squeeze run its course. If demand isn't there to stabilize price then production economics will. Back to where we started, with an increase in volatility.

1/12/2015

The trend remains downward as Goldman forecast $40 and sees inventory building in 1st half of the year Bloomberg — “The bank reduced its forecasts for global benchmark crude prices, predicting inventories will increase over the first half of this year, according to an e-mailed report. Excess storage and tanker capacity suggests the market can run a surplus far longer than it has in the past, said Goldman analysts includingJeffrey Currie in New York.” (Goldman Sees Need for $40 Oil as OPEC Cut Forecast Abandoned)

Oil Producers are also anticipating lower prices Bloomberg — “Companies are hedging more and drilling less amid concern that the biggest slump in prices since 2008 will continue. Oil dropped for a seventh week after officials from Saudi Arabia, the United Arab Emirates andKuwait reiterated they won’t curb output to halt the decline.

AS prices fall debt concerns looms large Bloomberg — “With oil prices below $50 and approaching $40, we’re in survivor mode,” Steven Rees, who helps oversee about $1 trillion as global head of equity strategy at JPMorgan Private Bank, said via phone. “The companies with the higher degrees of leverage have underperformed, and you don’t want to own those because there’s a fair amount of uncertainty as to whether they can repay that debt.” (Shale Debt Matters Most to Stock Investors as Oil Plunges)

5:07 am est. Oil continues its fall on Goldman’s call Bloomberg — “Oil extended losses from the lowest level in more than 5 1/2 years as Goldman Sachs Group Inc. reduced its price forecasts and Venezuela called on OPEC producers to work together to spur a recovery” (Oil Falls as Goldman Cuts Outlook While Venezuela Seeks Recovery)

The negative impact falling oil prices have on S&P 500 earnings Bloomberg –“Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut.” (Oil Whacks S&P 500 Earnings Growth)

11:15 am est. Crude falls as it dampens earnings outlook Bloomberg — “Energy shares tumbled 2.7 percent, the most among 10 groups in the S&P 500, (SPX) as crude dropped 4 percent. Tiffany & Co. lost 12 percent after the jewelry retailer lowered its annual forecast after sales declined during the holiday. SanDisk Corp. fell the most in almost six months after reporting preliminary results below its own estimates” (U.S. Stocks Fall as Crude Slump Weighs on Energy Shares)

1:29 pm est. Treasuries rise on speculation that inflation will be subdued, therefore pushing back the FEDs timetable to hick interest rates, given falling oil prices. This is just a trading play as the Fed’s rightfully pointed out Bloomberg — “Policy makers suggested in minutes of the Fed’s December meeting published last week that any drag in oil prices may only be temporary and not enough to derail the central bank’s plans to raiseinterest rates from near zero this year” (Treasuries Rise as Renewed Oil Weakness Damps Inflation Outlook)

3:48 pm est. Oil plummets to new lows. Reuters — “Oil fell 5 percent to its lowest in nearly six years on Monday, extending the second-deepest rout on record, after Goldman Sachs warned that prices would fall further and Gulf oil producers showed no sign of cutting output.” (Oil dives anew, falling 5 percent on Goldman downgrade, outages)

1/13/2015

Oil slump continues on concerns of expanding glut. US inventory is expected to expand and OPEC hold firm on output. Bloomberg –“

Futures fell as much as 4 percent in New York, declining for a third day. Crude inventories probably gained by 1.75 million barrels last week, a Bloomberg News survey showed before government data tomorrow. TheUnited Arab Emirates, a member of the Organization of Petroleum Exporting Countries, will continue to expand output capacity, while shale drillers will probably be the first to curb production as prices fall, according to Energy Minister Suhail Al Mazrouei.” (Oil Drops Below $45; U.S. Stockpiles May Speed Collapse)

OPEC’s strategy may pay off after all; by not cutting output and allowing the glut to expand, economically pressuring US producers to attain their desired result. In essences, the economics of production will lead to cost reductions, as the price falls thus reducing output, leading to a reduction in the glut. Bloomberg — “Representatives of the leading members of the Organization of Petroleum Exporting countries have been saying for weeks they would not pump less oil no matter how low its price goes. Saudi Arabian Oil Minister Ali Al-Naimi has said even $20 per barrel wouldn’t trigger a change of heart. Initial reactions in the U.S. were confident: U.S. oil producers were resilient enough; they would keep producing even at very low sale prices because the marginal cost of pumping from existing wells was even lower; OPEC would lose because its members’ social safety nets depends on the oil price; and anyway, OPEC was dead. “ (America’s Going to Lose the Oil Price War)

11:40 am est. The markets (WTI & BRENT) converged to trade at parity $46 per barrel as trades balance their blotters. The trend remains to the down side as oversupply concerns persist. Reuters — “Traders said it was not immediately clear why the benchmarks converged, but analysts said it was a combination of oversupplied global markets coupled with short covering on the U.S. crude contract.” (Oil near six-year low; Brent, U.S. crude briefly reach parity)

2:03 pm est. WTI traded higher than Brent on strong utilization by U.S. refineries and the possibility of increase exports. Bloomberg — “WTI is relatively strong because it looks like exports will be rising,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “The Mexican request could be the first of many.” U.S. refineries have operated at over 90 percent of capacity for the last two months, according to the Energy Information Administration. This activity has bolstered demand for domestic crude, John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said. Bloomberg — (WTI Crude Oil Surpasses Brent for First Time Since 2013)

1/14/2015

Producers are retreating from new exploration as Wall St. jumps on the lower price band wagon Bloomberg — “The Arctic — spanning Russia, Norway, Greenland, the U.S. and Canada — accounts for more than 20 percent of the world’s undiscovered oil and gas resources, including an estimated 134 billion barrels of crude and other liquids and 1,669 trillion cubic feet of natural gas, according to the U.S. Geological Survey. That’s almost as much oil as Iraq’s proved reserves at the end of 2013 and 50 percent more gas than Russia had booked, BP Plc (BP/)’s Statistical Review of World Energy shows.”(Arctic Explorers Retreat From Hostile Waters With Oil Prices Low) ; Oil supply remains a looming issue as Goldman and or Wall St. firms lower their price expectations Bloomberg –“Oil is seeking a “new equilibrium” as the Organization of Petroleum Exporting Countries abandons its role of keeping supply and demand aligned, according to Goldman. Prices are poised to drop further, testing the ability of U.S. shale drillers to keep pumping.” (Oil at $40, and Below, Gaining Traction on Wall Street)

Demand remains a soft spot as World Bank cuts global growth Bloomberg — “The report adds to signs of a growing disparity between the U.S. and other major economies while tempering any optimism that a plunge in oil prices will boost output. Risks to the global recovery are “significant and tilted to the downside,” with dangers including a spike in financial volatility, intensifying geopolitical tensions and prolonged stagnation in the euro region or Japan.” (World Bank Cuts Global Growth Outlook With U.S. Lone Bright Spot)

5:23 am est. Lower oil prices adds to investor’s confusion -benefits (consumers spending, retailers etc.) and concerns (growth, deflation etc.) as reflected in Markets Bloomberg –“The global economy is now terribly sensitive to small inputs in important factors, such as currencies, oil prices, and commodity prices,” David Hussey, head of European equities at Manulife Asset Management, said by phone from London. “People are going to be very worried about whether we’re in deflation and whether growth is coming back. The market is extremely confused. That’s what this year is all about, and there will be a lot more volatility.” (European Stocks Fall as Drop in Miners, Oil Shares Outweigh ECB)

Lowering oil prices raises market & credit risk as reflected in the volatility index (VIX) by way of intra-day price swings Bloomberg -“Every time oil goes down into a new range, those fears reignite,” Zemsky said in a phone interview. “Will something happen in Russia? Will a hedge fund blow up? Which banks will get hammered by this?” “Signals from energy and bond markets rattled stocks for an eighth day as the Chicago Board Options Exchange Volatility Index (SPX) climbed above 20 and the Dow Jones Industrial Average pared a loss that reached 143 points. The euro slumped to a nine-year low on bets policy makers will ramp up stimulus, while yields on 10-year Treasuries fell to match a 20-month low.” (Nerves Rattled in U.S. Equities as S&P 500 Volatility Turns Ugly)

The reality of growth and deflation risk reflected in the Debt to Gross Domestic Product ratio Bloomberg — “Debt to gross domestic product ratio in the region excluding Japan rose to 203 percent in 2013 from 147 percent in 2007, with most of the increase coming from companies, analysts led by Chetan Ahya in Hong Kong wrote in a report yesterday. The ratio is close to or has exceeded 200 percent in seven of 10 nations including China and South Korea, they said.”“Deflation risk is spreading from Europe to Asia as oil prices plunge, raising the specter of companies and consumers postponing spending and threatening a recovery in the global economy. Asia could take its cue from the U.S. where a policy of keeping real rates low after the 2008–2009 global financial crisis encouraged private-sector investment and boosted productive growth, the analysts said.” (Plunging Oil Prices, Rising Debt Leaves Asia Staring at Deflation: Morgan Stanley)

9:04 am est. Cooling U.S. growth remain a concern as December’s Retail Sales drop by 0.9% Bloomberg — “Retail sales in the U.S. slumped in December by the most in almost a year, reflecting a broad-based retreat that will probably prompt economists to cut growth forecasts.” (U.S. Retail Sales Down Sharply, Likely Cuts to Growth Forecasts Ahead)

10:18 am est. Oil steady as we awaiting U.S. inventory numbers. Reuters — “Oil prices recouped some early losses on Wednesday but remained under pressure after the World Bank cut its global economic growth forecast, doing little to end a rout that saw prices touch their lowest in nearly six years in the previous session.”(Oil steadies but stays under pressure on World Bank growth cut)

12:43 pm est. Prices headed lower; U.S. inventory show a buildup of 4.5 million barrels Reuters — “Energy Information Administration data showed U.S. crude stocks rose by 5.4 million barrels in the last week, far more than analysts’ expectations for an increase of 417,000 barrels, pointing to continued oversupply in the market.” “It is a squarely bearish report with large across-the-board inventory builds,” said John Kilduff, a partner with Again Capital LLC, New York. “At this point, the bar has been raised in terms of engendering the next leg lower for prices.” (Brent oil eases more on U.S. stock build and slow global growth)

3:36 pm est. Oil jumped for no logical reason, it’s merely a trading play. The trend remains down as U.S. output climbs to 9.19 million barrels per day. Bloomberg — “U.S. production of crude oil rose to a record even as prices slumped to the lowest in more than five years and the number of rigs targeting oil decreased.” “Output climbed to 9.19 million barrels a day last week, the most in Energy Information Administration weekly estimates going back to 1983. Strong production helped push crudeinventories to a seasonal record, EIA data showed.” (U.S. Oil Output Advances to Record Even as Prices Drop)

1/15/2015

6:14 am est. Back on track, oil resumes its downward trend. Bloomberg — “West Texas Intermediate for February delivery declined as much as $1.32 to $47.16 a barrel in electronic trading on the New York Mercantile Exchange and was at $47.43 at 10:52 a.m. London time. The contract advanced $2.59, or 5.6 percent, to $48.48 yesterday. The volume of all futures traded was more than double the 100-day average for the time of day.” “Brent for February settlement, which expires today, dropped as much as $1.69, or 3.5 percent, to $47 a barrel on the London-based ICE Futures Europe exchange. The more-active March future slid as much as $1.74 to $48.12. The European benchmark crude was at a discount of 40 cents to WTI.” (Increased U.S. Output Bolsters Oil Glut Fears Sending Prices Back Down)

9:36 am est. Oil rallies on OPECs report that U.S. supplies will slow as product cuts take hold, though there is no reported evidence to date. Bloomberg –“OPEC’s monthly report has taken over the focus with prices seemingly rising on their view that U.S supply will slow,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail. “However, when you see another record production from the U.S. last week despite a 12 percent cut in rig counts it does not give much hope for OPEC that reductions will come from the U.S.”(Oil Rallies a Second Day in New York to Trade Near $50 a Barrel) The trend remains down based on latest U.S. inventory report. “U.S. crude production increased by 60,000 barrels a day in the week ended Jan. 9, the EIA reported yesterday. Stockpiles expanded by 5.39 million barrels to 387.8 million, more than 9 percent above the five-year average for this time of year, according to the Energy Department’s statistical arm. Inventories at Cushing, Oklahoma, the delivery point for New York-traded futures, climbed for a sixth week.”

OPEC expects weaker demand for their product and predicts U.S. production will slow given lower prices. Bloomberg — “Demand for OPEC oil will average 28.8 million barrels a day, about 100,000 barrels less than forecast last month, the Vienna-based organization said in a monthly report. While the group boosted its 2015 estimate for U.S. oil production, it said annual growth will be slower than previously estimated as lower prices lead to investment cuts and less drilling. Iraq’s output extended gains from its highest level since 1978.” “They’re trying to send a message that lower oil prices will have an impact on the market but I don’t think the numbers are necessarily reflecting that,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said by phone from London. “They do talk about U.S. production being impacted, but they don’t really do much with it.” (OPEC Sees Less Demand for Its Crude, Slower U.S. Supply )U.S. production is expected to slow; however this isn’t a game changer at this point in time. A de-escalation in the rate of change of the downward price pressure, yes, not a trend reversal. Volatility will increase as the market tries to find a bottom.

Falling prices are reverberating through the industry in the form of layoffs. Bloomberg — “It’s hard to blame him. The oil industry has been on a tear for most of the past decade, with just a brief timeout for the financial crisis. As of November, oil and gas companies employed 543,000 people across the U.S., a number that’s more than doubled from a decade ago, according to data kept by Rigzone, an employment company servicing the energy industry.” “Stunned by the sudden plunge in the price of oil, energy companies have increasingly resorted to layoffs to cut costs since Christmas, shocking a new generation of workers, like Osakwe, unfamiliar with the industry’s historic boom and bust cycles.”(Gravy Train Derails for Oil Patch Workers Laid Off in Downturn)

12:18 pm est. Oil prices headed back down on global oversupply and lower demand expectations as the U.S. Economy is showing signs of slowing, Reuters — “Oil prices fell on Thursday after weak U.S. economic data spurred worries over crude oil demand.” “Global benchmark Brent was down 34 cents to trade at $48.35 at 11:37 a.m. EST (1637 GMT). U.S. crude fell $1.03 to trade at $47.42.” (Oil prices fall after U.S. data spurs demand worries)

3:21 pm est. Bloomberg — “Nothing fundamental has changed,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “It’s going to take months before you see U.S. production slowing down. Any rally will be sold into.” (Crude Oil Erases Advance on OPEC’s Reduced Demand Forecast)

1/16/2015

Major oil companies are cutting operational cost to protect their balance sheets. Bloomberg — “From Royal Dutch Shell Plc (RDSA)canceling a $6.5 billion project in Qatar to Schlumberger Ltd. firing about 9,000 people and Statoil ASA (STL) giving up exploration in Greenland, the oil industry this week concluded that the slump is no blip. Top producers follow U.S. shale developers such as Continental Resources Inc. (CLR) in unraveling a boom that produced more oil and natural gas than the world is ready to buy.” (Big Oil Companies Get Serious With Cost Cuts on Worst Slump Since 1986)

In December Investors poured ~$2.3 billion in to funds, that were long the market, are taking it on the chin as prices continued its decline — Bloomberg “The market is stuck in something called contango, an exotic term that really just means that prices on crude contracts to be delivered in coming weeks are lower than those on contracts due later. Exchange-traded fund (DBO) managers, as a result, are left to sell the cheaper expiring oil contracts and re-invest the proceeds in the more expensive ones due the following month, creating a vicious cycle that erodes returns.” (The Cruel Oil-Market Math Conspiring Against ETF Bulls)

The International Energy Agency reported that non-OPEC oil producers are trying to re-balance the market by slowing their rate of production. Bloomberg — “The adviser lowered its non-OPEC supply growth estimate by 350,000 barrels a day, the first cut since the 2015 forecast was introduced in July. Half the cut is from Colombian output while effects on U.S. production are so far “marginal,” it said. The slow-down in non-OPEC output will lead to a “rebalancing” of currently over-supplied global markets in the second half, reviving prices, the agency said.” (IEA Sees Oil-Price Recovery; Cuts 2015 Non-OPEC Output Estimate)

6:27 am est. Non-OPEC producers present a potential game change. Reuters “Brent crude oil rose more than $2 to almost $50 a barrel on Friday after the West’s energy watchdog forecast the market downtrend would end, although analysts said a strong rebound soon was unlikely as global output continued to outweigh demand. “ (Oil jumps as IEA sees signs market ‘tide will turn’)

12:31 pm est. Though the market has reversed its self, the fundamentals remain the same. Weak global demand and a significate glut is still at hand. Where is the floor? who knows, given the volatility there will be a shakeout period and ample opportunities to get in at reasonable prices.Reuters — “While the report was definitely bullish, it was not enough to balance out the rest of the world’s diminishing demand, said energy economist James Williams at WTRG Economics. “It doesn’t fix anything in Europe,” he said. “The world isn’t getting better.”” (Oil spikes above $50, global economic woes pare gains)

3:41 pm est. Oil closed higher for the first time in weeks on bullish IEA production and University of Michigan consumer sentiment reports; though supply and demand issues have not abated. Reuters — “Additionally, while reports may indicate increasing demand, the global supply glut is still outweighing it, he said. “Demand is on the increase, it’s still not catching up to supply,” Zahir said.” (Oil closes up for first week in eight after supportive reports)

1/19/2015

6:40 am est. Oil decline on oversupply concerns as Iraq reported producing a record amount of oil. Bloomberg — “Prices slid as much as 1.9 percent in London and New York after their first weekly gain in two months.Iraq is pumping at a record pace of 4 million barrels a day, Oil Minister Adel Abdul Mahdi said. Oil extended losses after Chinese shares plunged the most since 2008 as regulators cracked down on margin lending.” (Oil Trades Near $50 After First Weekly Gain in 2 Months)

This month (to date) investors have pilled ($1.11 billion) into four of the biggest oil exchange-traded products. The thinking is prices will not fall much more and a reversal is at hand. This is a great time to assess which stocks and funds are benefiting from the inflows and evaluate the risk. The rational is prices will swing back and forth (high implied volatility) affording the opportunity to gauge their performance. Bloomberg — “People are willing to buy into the market at these price levels,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Jan. 16. “It suggests that they think that the odds of us going much lower are small.” (Hedge Funds Cut Oil Bets After Worst Drop Since 2008)

9:59 am est. Oil reversed earlier gains based on unchanged fundamentals, sluggish demand and oversupply issues. Reuters — “Brent crude oil prices fell below $50 a barrel on Monday after the global economic outlook darkened and Iraq announced record oil production. The world’s biggest energy consumer, China, faces significant downward pressure on its economy, its premier Li Keqiang was quoted by state radio as saying on Monday.” (Oil prices slip on Chinese data, record Iraq output)

3:06 pm est. Oil traded down on thin volume today. Reuters — “Brent crude settled at $48.84 a barrel, down $1.33. U.S. benchmark crude was last trading down $1.17 at $47.52 a barrel.” (Oil slips $1 on China economy worries, record Iraq output)

1/20/2015

Bearish demand for oil will continue to drag the market down as the IMF significantly lowered its global-growth forecast. Bloomberg — “The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the International Monetary Fund said in its quarterly global outlook released late Monday in Washington. The Washington-based lender also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October.’ “The weakness, along with prolonged below-target inflation, is challenging policy makers acrossEurope and Asia to come up with fresh ways to stimulate demand more than six years after the global financial crisis. Central bankers and government officials including Bank of England Governor Mark Carney and the Bank of Japan’s Haruhiko Kuroda may talk about options when they convene this week at the World Economic Forum’s annual meeting in Davos, Switzerland.” (IMF Lowers Global Growth Forecast by Most in Three Years)

6:10 am est. Volatility will continue to be the name of the game as China’s economy unexpectedly grew more than previously thought. Bloomberg –“Stocks rose around the world and the dollar strengthened as China’s economy grew more than estimated and investors speculated the European Central Bank will boost stimulus. Treasuries gained with gold.” (Stocks Rise on China Growth, ECB Bets as Dollar Advances)

China is clearly taking full advantage of low oil prices by importing and refining record amounts of oil. Bloomberg — “Apparent oil demand, a measure of consumption, rose to an unprecedented 10.63 million barrels a day in December amid record crude processing and increased shipments from suppliers includingSaudi Arabia, data compiled by Bloomberg show. This year, demand may expand by 5 percent, bolstered by about 7 million metric tons of crude stockpiling for emergency use, according to ICIS-CI Energy, a Shanghai-based consultant.” (China Makes Most of Oil’s Collapse as Demand Rises to Record)

9:42 am est. The market is taking its cue from the IMF report on weaker global growth Reuters — “Brent crude oil prices fell toward $48 a barrel on Tuesday after the International Monetary Fund cut its forecast for global economic growth in 2015 implying lower demand for fuel.”( Oil slips toward $48 after IMF cuts growth forecast)

11:06 am est. The trend continues weak demand and oversupply, as Iraq’s production surge. Bloomberg –“Oil dropped after Iraqi crude production surged to a record and the International Monetary Fund cut its global growth outlook.” (Oil Falls as Record Iraqi Output Seen Compounding Surplus)

2:42 am est. Oil sank as fundamentals, oversupply and sluggish demand, dictate. Bloomberg — “West Texas Intermediate oil sank about 5 percent and the Standard & Poor’s 500 Index was little changed at 2,020 as of 2:39 p.m. inNew York after losing as much as 0.7 percent. The Stoxx Europe 600 Index rose for a fourth day and the Bloomberg Dollar Spot Index climbed for a third day. The 10-year Treasury yield fell four basis points to 1.80 percent. Gold added 1.3 percent, while U.S. natural gas dropped more than 9 percent.” (Oil Tumbles While Treasuries Gain; S&P 500 Reverses Loss)

1/21/2015

In the last 6 months ending Dec 31, 1.6 Billion was cut from shale (oil & Gas) production and development. How long before the reduction shows up in the supply numbers is question worth watching. Bloomberg — “Their plans to cut oil drilling rigs in the U.S. is a pointer to what’s to come in the oil market,” Ric Spooner, chief strategist at CMC Markets in Sydney, said today by phone. “We will eventually see a supply response to the drop in the oil price from the U.S. onshore producers.”( BHP Cuts U.S. Shale Rigs as Oil to Iron Ore Prices Slip)

4:46 am est. Oil rebounded as volatility rises. The pattern of rig reduction is getting stronger creating a noticeable slowing in U.S. shale production. The draw down isn’t at a critical point however the decreasing rate should be watched carefully. Bloomberg — “BHP Billitonwill reduce the number of operating rigs to 16 from 26 by July, the Melbourne-based company said in a statement. Drillers have cut the number of rigs in service by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987.” “Slower drilling is visible,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “We have already seen the trend through the weekly rig counts.” (Oil Rises From Biggest Slide in Week as Volatility Rises)

On the other hand, Iraq’s strategy is to increase its export volume to compensate for lower oil prices. Bloomberg –“Iraq, the nation adding more new oil to global markets than any other supplier in OPEC, said it needs to boost production and exports of crude to compensate for collapsing prices. “Because of the new challenges, especially the price of oil, Iraq has to try its best to raise it oil production and exports,” Deputy Prime Minister Rowsch Nuri Shaways said today at the World Economic Forum in Davos, Switzerland.( Iraq Says Oil Output Must Rise to Compensate for Price Collapse)

10:22 am est. Oil trading to the upside as dollar falls. Fundamentals remain the same as traders take their cue from a falling dollar. Commodities are priced in U.S. dollars so as it ($) weakens commodities look attractive hence the increase. In this case it’s just a trading play. Though cost cutting is pervasive as shale companies try to protect their balance sheets, supply remains the dominant concern. Reuters — “The heads of both France’s and Italy’s largest energy producers, Total and ENI Spa, said Wednesday they were cutting capital expenditure next year, including U.S. shale investments.” (Oil jumps 2.5 percent to above $49, outlook remains weak)

3:27 am est. Oil gained as the market battles over fundamentals. Volatility will remain high until the supply issue is priced in. As the number of rigs in production falls prices will fluctuate, however the cut backs will not have an immediate impact on supplies. Bloomberg — ““There’s a lot of oil to be pumped before we reach our peak output of the year,” Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees about $120 billion, said by phone. “It will be in the second half of the year when we’ll start to see the impact of low prices on output.” (Crude Rebounds From Biggest Drop in Week as U.S. Drilling Slows)

1/22/2015

The price war continues with supply being the determinant. Based on a Bloomberg survey of Analyst and Money Managers the majority expect OPEC to blink before Shale cut back reduces U.S. supply. Bloomberg — “U.S. shale drillers won’t scale back output quickly enough for OPEC to avoid production cuts this year, according to a quarterly poll of Bloomberg subscribers.” “Forty-nine percent of analysts, traders and investors surveyed said the Organization of Petroleum Exporting Countries will have to lower its production target this year, while 34 percent said shale drillers will lower output in time. Seventeen percent weren’t sure.” (OPEC Will Blink First in Battle With Shale Drillers, Poll Shows)

4:53 am est. Oil trading below $48 as market awaits ECB’s stimulus plan. Bloomberg — “Brent futures fell as much as 1.1 percent. The dollar approached an 11-year high against the euro, undermining the appeal of dollar-priced commodities for protecting against inflation, amid speculation the ECB will today introduce large-scale bond purchases. Oil also declined on estimates that U.S. crude inventories expanded for a second week.” “The ECB will rule market sentiment today,” Olivier Jakob, managing director at consultants Petromatrix in Zug, Switzerland, said by e-mail. “Some QE is already priced in, hence directionally crude can go both ways” once the ECB’s intentions are clear, he said. (Oil Trades Below $48 as U.S. Crude Supplies Seen Higher)

9:34 am est. Oil retreated after ECB announced a slightly stronger stimulus package causing the dollar to strengthen against the euro. Bloomberg — “The ECB announcement has strengthened the dollar, which is going to give the markets a downward bias at least until the inventory data is released,” Thomas Finlon, the Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. “Dollar strength is the primary factor at the moment.” (Oil Falls as ECB Asset Purchase Program Boosts Dollar)

11:30 am est. Oil maintains its downward trend given another bearish inventory report. Reuters — “Prices extended losses after data from the U.S. government’s Energy Information Administration showed a sharp 10.07 million barrel rise in crude stocks in the United States last week, far more than the market expected, including a 2.91 million barrel rise at Cushing, Oklahoma, delivery point of the U.S. crude contract.” (Oil drops to $48 after ECB launches QE, U.S. crude stocks jump)

1:20 pm est. Prices continued to drop due to the very bearish inventory report. The major take away from the report is the decline in refinery activity. The reduction is a result of seasonal maintenance; refineries generally schedule planned work for late winter. That said expect a buildup in inventory over the next coming weeks that will result in downward pricing pressure. Bloomberg — “There’s a clear bearish combination here, with ongoing robust imports from Canada and a sharp decline in refinery activity for planned seasonal maintenance,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “We’re close to a modern-day record for crude supplies. There’s clearly too much oil.” (Oil Slips as U.S. Crude Stockpiles Surge Most in 14 Years)

3:33 pm est. Oil was down at the close. Bloomberg — “Brent for March settlement fell 51 cents, or 1 percent, to end the session at $48.52 a barrel on the London-based ICE Futures Europe exchange. Volume was up 17 percent from the 100-day average. The European benchmark oil closed at a $2.21 premium to WTI, the most since Jan. 7.” (Oil Slips as U.S. Crude Stockpiles Surge Most in 14 Years)

1/23/2015

2:48 am est. Oil increases as speculation of an OPEC policy change with the passing of The Saudi’s King. This is just a trading noise as implied volatility spikes. This presents a great environment for traders. Bloomberg –“The passing of King Abdullah is going to increase uncertainty and increase volatility inoil prices in the near term,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by phone. “I wouldn’t expect a change in policy in the near term to be known, but the passing comes at a challenging time for Saudi Arabia.” (Oil Climbs as Saudi King’s Death Spurs Policy Speculation).

The odds are against a policy change. The main driver of Saudi’s oil policy is the oil minister, Ali al-Naimi. Bloomberg — “A key indicator will be whether Salman, 79, retains the oil minister, Ali al-Naimi, who has driven decision-making since 1995. Al-Naimi, who turns 80 this year, has said he’d like to devote more time to his other job, chairman of the science and technology university named after the late sovereign.” (Saudi Arabia’s New King Probably Will Not Change Current Oil Policy)

Prices are highly unlikely to increase base on The Kings death. Volatility will spike creating an ideal short term trading environment. Bloomberg — “Oil volatility may rise after the Saudi king’s death until the kingdom provides clarity on its policy, succession and new appointments, said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co.” (Oil Prices Probably Won’t Keep Gains Made After Death of Saudi King)

On the supply side U.S. condensate producers are seeking global clients as they try to expand the market base. Bloomberg — “The supply situation for U.S. condensate won’t change dramatically,” Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo, said by phone. “They will continue to bring more cargoes into Asia. There’s a comparatively bigger pool of buyers here.” (U.S. Oil Exporter Scouting for Buyers Signals OPEC Test)

6:30 am est. The market seems to be stabilizing after digesting the news of The Kings death. Bloomberg –“It was expected the oil market would react nervously to the king’s death,” said Giovanni Staunovo, an analyst at UBS AG in Zurich. “But it’s likely to be a short-term reaction as the majority of market participants don’t expect a change in Saudi policy. Since the bounce, prices have drifted lower again.” (Oil Pares Gains as New Saudi King Says Policies Stable)

9:03 am est. Oil pared back gains, Saudi’s expected to maintain policy. Reuters — “Oil prices rose on Friday after the death of Saudi Arabia’s king added to the uncertainty in global oil markets, although the new ruler indicated immediately there would be no policy change. Brent crude LCOc1 rose to a high of $49.80, up $1.28 a barrel, before easing to $49.25 by 1335 GMT. U.S. light crude oil CLc1 was at $46.38, up 7 cents.” (Oil pares gains as Saudi oil policy set to continue)

11:39 am est. Market responds relatively rational to Saudi’s King death, prices registering small upside move. Bloomberg — “Brent pared an earlier advance of as much as 2.6 percent in London. Salman Bin Abdulaziz Al Saud, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies. Oil Minister Ali Al-Naimi, who led OPEC’s November decision to defend market share against surging U.S. shale supplies, remains in his post, according to state-run Saudi Press Agency.” (Oil Erases Gains as New Saudi King Says Policies Stable)

3:52 pm. Est. Oil ended the day down; Saudi’s to maintain policy. Bloomberg — “Salman Bin Abdulaziz Al Saud, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies. The kingdom will not cut production to boost prices because other producers will fill the gap, SaudiPrince Alwaleed Bin Talal Al Saud said. U.S. crude inventories rose the most since 2001 last week, according to a government report.” “There already has been a pretty well established succession plan so it’s not a big deal,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Supply has been very stout and demand’s not been what people had expected. It highlights the bearish sentiment in the market.”(Oil Falls as New Saudi King Says Policies Won’t Change)

1/26/2015

5:45 am. est. Oil declined from its six year closing price, on concern the oversupply issue isn’t abating. Bloomberg — “All the indications from the Saudis point to no major policy changes,” Ole Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by phone. “The market’s focus remains on supply that isn’t being met by demand.” (Oil Slides to Near 6-Year Low; Saudi Arabia Holds Firm Despite Supply Glut).

Hedge Funds are positioning themselves for lower prices. Bloomberg — “Money managers increased short positions in West Texas Intermediate crude to the highest level since September 2010 in the week ended Jan. 20, U.S. Commodity Futures Trading Commission data show. Net-long positions slipped for the first time in three weeks.” “There’s been a rush to call a bottom,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Jan. 23. “The fundamentals are still stacked against a rebound.” (Hedge Funds Bet Oil Will Fall Further)

Saudi’s fearing lessening demand, keeps an eye on renewables. Bloomberg — “The U.S. shale revolution showed that forecasts of dwindling world oil supply were premature. It also gave credence to the old adage, attributed to a Saudi oil minister more than 30 years ago, that the Stone Age didn’t end because of the lack of stone. With costs falling for clean energy and international attention focused on slowing climate change, the Saudis are more worried that the world is inching closer to peak demand.” (For Saudis, Falling Demand for Oil Is the Biggest Concern)

8:29 am. Est. Oil rebounds as Secretary-General of the OPEC producer group said he expects prices to bottom out around $45 — $55 level. That said all indications show the downward trend should hold based on fundamentals (supply and demand). Reuters –“”Now the prices are around $45-$55 and I think maybe they reached the bottom and will see some rebound very soon,” Abdullah al-Badri, Secretary-General of the Organization of the Petroleum Exporting Countries said in an interview.”(Oil prices turn positive as OPEC sec gen calls bottom to market)

11:05 am. Est. Oil remains to the upside on Secretary-General of the OPEC producer group comments. Don’t expect this price move to hold. The fundamentals are still bearish. Until supply and or demand indicators move (or hints of moving) the needle downward price pressure remain in play. Bloomberg — “El-Badri’s comments sparked a little rally,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “We drilled it down very hard last night. The market came within 15 cents of the recent low.” (Oil Pares Losses as OPEC Says Spending Cut Could Boost Price)

3:35 am. Est. Oil ended the day lower, resuming its downward trend based on fundamentals. Bloomberg — “El-Badri acknowledged that there’s about a 1.5 million-barrels-a-day surplus,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “It’s up to the market to decide whether that’s the critical factor or the possibility of OPEC-non-OPEC cooperation or the speculation that there could be $200 oil at some future date. It looks like the market decided.” (Oil Falls to Lowest in Almost Six Years on Global Glut)

1/27/2015

Expect the downward trend to continue until supplies show signs of reversing and or global sluggish growth begin to pick up. Bloomberg — “Oil prices will probably continue to decline and could reach as low as $30 a barrel, according toGary Cohn, president of Goldman Sachs Group Inc.”( Goldman Sachs’s Cohn Says Oil Prices May Hit $30 in Extended Slump)

4:49 am. Est. Prices continue its slow decline on fundamentals. Bloomberg — “Oil traded near the lowest in almost six years inNew York as OPEC’s warning that prices may surge without new investment in production failed to shift the market’s focus from more immediate signs of a global supply glut.” (Oil Trades Near 6-Year Low as OPEC Fails to Turn Focus From Glut)

5:47 am. Est. Oil rebounds as traders leverage against dollar weakness. Reuters — “I certainly don’t think it changes the fundamental dynamic of the direction of prices with regard to oil,” said Hewson. “When you look at where Brent is and where it’s been, there’s a pretty solid floor at the moment around $47 a barrel.” (Oil price recovers as dollar weakens against euro)

12:02 pm. Est. Crude stays higher as dollar shows weakness. Bloomberg -“The dollar is definitely a factor that seems to be giving the market some support,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “The Saudis are going back to some non-OPEC producers. That may be a sign that they are willing to stabilize the prices.” (Crude Rises for First Time in Four Days as Dollar Weakens)

3:43 am. Est. A weaker Dollar boost commodities; oil jumped as much as 3% from its opening price as traders cued off of the Dollar. Reuters — “Oil prices jumped as much 3 percent on Tuesday as a weaker dollar propped up commodities priced in the currency, prompting short-covering in a market that has sold off with little pause over the past seven months.” (Oil jumps on weaker dollar; traders wary of stock build) 

1/28/2015

Iraq’s production is increasing adding additional pressure to oil glut and prices. Bloomberg — “Iraqi crude production is climbing from a 35-year high as it adds growing Kurdish supplies to its exports, while southern oilfields remain unscathed by Islamic State militants. Finding buyers for the new output means offering more attractive terms than rivals in the Organization of Petroleum Exporting Countries, say Citigroup Inc., DNB ASA and Barclays Plc.” (Iraq Oil Surge to Fan OPEC Rivalry That Triggered Slump)

The strength of the U.S. Dollar will continue to be a trading factor. There is a strong negative correlation relation between the dollar and crude prices. Bloomberg — “The correlation between oil and the dollar during the past 52 weeks was minus 0.99, about as negative as it could possibly be, according to data compiled by Bloomberg. Correlation can be between 1 and minus 1, with the latter showing one data series typically rises when the other falls, and vice versa” (Oil Plunge’s End Seen Hinging on Dollar Swing: Chart of the Day)

7:12 am est. Oil falls as U.S. Inventory rose by the most in two decades. Reuters — “The American Petroleum Institute said late on Tuesday that U.S. crude stocks jumped by a massive 12.7 million barrels last week, triple the volume expected, and including a 2 million barrel increase at Cushing, Oklahoma, the delivery point of the U.S. oil contract. [API/S] “ (Oil slips to $49 on huge U.S. stock build, firm dollar)

10:56 am. Est. Oil remains to the down side on inventory concerns and a stronger dollar. Reuters — “Oil slipped to $49 a barrel on Wednesday after U.S. crude stocks soared to the highest on record last week, and as a firmer dollar weighed on prices.” (Oil slips to $49 as U.S. crude inventories hit record)

Goldman & Barclays are predicting, no significant recovery is expected for oil in the first half of 2015. Reuters –”We expect to see further downside to prices in the next few months, with both WTI and Brent likely to trade into the high $30s before the oil price decline is arrested,” Barclays analyst Michael Cohen said in a note to clients.” (Barclays, Goldman forecast bearish first half for oil prices)

3:35 pm. Est. Oil slumped based on The U.S. Energy Information Administration (EIA) repot. Oil stock rose by 9 million barrels boosting inventory levels to approximately 409 million barrels. Reuters — “U.S. crude’s front-month contract CLc1 settled down $1.78, or almost 4 percent, at $44.45 a barrel. It sank to as low as $44.08 before the close, marking a bottom since April 2009. Open interest in the front-month remained near record highs for a fifth straight day, according to Reuters data.” (Oil tumbles; U.S. crude prices near six-year low on record stockpiles)

1/29/2015

Lower oil prices are taking a toll on the industry as reflected in the profit margins of big oil companies. Bloomberg — “The global industry is scurrying to respond as oil below $50 a barrel guts cash flows. Statoil ASA, Tullow Oil Plc and Premier Oil Plc have delayed projects or cut exploration spending. BP Plc has frozen wages and Chevron Corp. delayed its 2015 drilling budget. By cutting spending, companies aim to protect returns to investors.” (Shell Cuts $15 Billion of Spending as Profit Misses Expectations)

7:53 am. Est. Oil stays above $48 on speculative trading, anticipating a price upturn. Reuters — “It’s a tug of war between the non-supportive fundamentals and investor flows — investors are more concerned about missing a potential bounce,” said Ole Hansen, senior commodity strategist at Saxo Bank. “But there is nothing bullish to be found in those numbers.” (Brent oil holds above $48 after U.S. stocks hit record high)

9:14 Oil stays higher as the bull bear tug of war continues. Bloomberg — “Brent for March settlement jumped 56 cents, or 1.2 percent, to $49.03 a barrel on the London-based ICE Futures Europe exchange at 9:08 a.m. in New York. West Texas Intermediate for March delivery gained 26 cents, or 0.6 percent, to $44.71. The contract closed at the lowest in almost six years yesterday.” (Brent Oil Rebounds From Biggest One-Day Drop in a Week)

1:20 pm. Est. Prices resume the downward trend, drive by oversupply apprehensions. Reuters — “There are absolutely very few reasons to buy crude oil now and the only path I see from here is lower,” said James Williams, energy economist at WTRG Economics in London, Arkansas.” (U.S. crude drops below $44 as inventory builds scare market)

4:06 pm. Est. Reuters — “Global oil prices firmed slightly on Thursday but not before U.S. crude hit a near six-year low and benchmark Brent pared gains on data showing fresh additions to already record-high U.S. oil inventories.” (Oil rises on short covering but supply worries loom)

1/30/2015

The fallout from the oil market meltdown is beginning to impact investment portfolios as companies balance sheets are adversely affected thus reducing stock values. Bloomberg — “Now that oil prices have fallen below $45, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of $393 billion since June — $353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost $40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.” (Cheap Oil Burns $390 Billion Hole in Investors’ Pockets)

6:38 am. Est. speculative trading moves the market higher, though oil is expected to maintain its lower trend. Reuters — “Oil rose above $49 a barrel on Friday, supported by renewed violence in Iraq but with a persistent global supply glut keeping the market on course for a seventh straight month of declines, its longest bear run on record.” (Oil rises, but set for record run of monthly falls)

As expected more pain seen for oil companies, through 4th quarter, as balance sheets are adjusted. Reuters — “Energy company earnings are seen tumbling 25 percent in the fourth quarter, according to Thomson Reuters data, a bigger decline than the drop of 19.8 percent forecast at the start of the year. For the full year, earnings are seen down almost 45 percent, nearly twice the decline of 23.3 percent forecast on Jan. 1.” (Energy may see further weakness as key names report)

3:19 pm. Est. Oil moved significantly higher, 8%, the biggest one day move in 2 ½ years. The move was motivated by a report showing the number of rigs declined 7% this week. The response was trigger happy on trader’s part as fundamentals haven’t changed. Expect prices to fall as the trend remains to the down side. Reuters — “The rig count drop was the most since 1987. With drillers having idled about 24 percent of their oil drilling rigs since the summer, some traders may be betting that an anticipated slowdown in U.S. oil production is nearer than expected. Yet, some traders were not convinced that the selloff in oil, which has taken Brent down from a June high above $115 a barrel, was over.” (Oil surges 8 percent as U.S. rig count plunges, shorts cover)

2/2/2015

As if there isn’t enough on the plate United Steelworkers union have called a strike impacting oil refineries, terminals, pipelines and chemical plants Bloomberg — “The refineries called on to strike span the U.S., from Tesoro Corp.’s plants in Martinez, California, Carson, California, and Anacortes, Washington, to Marathon Petroleum Corp.’s Catlettsburg complex in Kentucky to three sites in Texas, according to the USW’s statement. The sites in Texas are Shell’s Deer Park complex, Marathon’s Galveston Bay plant and LyondellBasell Industries NV’s Houston facility, the statement shows. The walkout also includes Marathon’s Houston Green cogeneration plant in Texas and Shell’s Deer Park chemical plant. More refineries are standing by to join the sites on strike, according to two people familiar with the plan who asked not to be identified because the information isn’t public. The remaining USW-represented sites are operating under rolling, 24-hour contract extensions, the USW said.” (Oil Workers in U.S. Begin First Large-Scale Strike Since 1980) What impact will this have on production — oil supplies? This will be taken as a bearish sign pushing prices down.

The strike enters a second day, placing additional pressure on falling prices as demand falls. Bloomberg –“The strike by oil workers at plants accounting for 10 percent of U.S. refining capacity entered a second day Monday in the biggest walkout since 1980. Crude futures fell.” (U.S. Oil Workers Strike Enters Second Day as Crude Prices Slide)

6:14 am. Est. Oil prices are advancing, counter intuitive, as trades cover short positions. One would have expected prices to decline as the strike is expected to acerbate the glut. The price increase is a bleep on the screen as prices are expected to reverse direction. On the other hand, expect gas prices to increase as refineries cut production. Bloomberg — “The market was oversold before and the sentiment was extremely negative so on a way up the shorts are being grilled, which is in itself causing prices to rise further,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, wrote by e-mail Monday.”( Oil Extends Advance From Six-Year Low Amid U.S. Refinery Strike)

Oil companies’ balance sheets are hitting crisis mode creating demand for creative financing. Bloomberg — “That financing is coming from hedge funds, private equity shops and mega-wealthy investors like billionaire Carl Icahn who have the cash to weather a prolonged downturn and are on the hunt for deals among the wounded, bankers and analysts say. Oil operators, meanwhile, are laying off staff, freezing salaries and deferring investments to conserve cash. “Companies have lived in a state of outspending cash flow, and the markets have facilitated that,” said Gregory Sommer, who runs energy investment banking at Deutsche Bank AG in New York. “But if prices persist at this level, you’re going to see some companies pulling back significantly” more than they already have.” (Oil Companies Draw on Creative Financing to Stay Afloat After Prices Tumble)

9:58 am est. Oil prices maintain its upward move, as rig counts continue to fall, in anticipation of a reduction in production and the glut. However, the market maybe getting ahead of its self as oversupply issues still prevails. In the coming weeks expect the market to become more volatile as money in flows increase. This is an ideal trader’s environment as price swings will dominate. Reuters — “There were a lot of people on the sidelines waiting for an opportunity to buy,” said Bjarne Schieldrop, chief commodity analyst at SEB. (Oil prices rally above $53 as investors pile in)

4:22 PM Est. Oil rose 11% in two trading sessions, the advance is based on speculation that supplies will fall given the reduction in Rigs in production. However, fundamentals still point to the glut holding. In addition, refineries production is expected to fall, adding to a buildup in supplies. Reuters — “I don’t think anything’s changed fundamentally, except for the psychology of the market,” said Chandravir Ahuja, an analyst at Kolmar Americas Inc in Bridgeport, Connecticut. “We’re moving a lot more on headlines that we probably would on a normal day.” “Speculators in Brent had raised their net long positions by 1,056 contracts to 143,039 in the week to Jan. 27, exchange data showed on Monday, as some took the view that prices were stabilizing from the sell-off that began in the summer. “ (Oil up 11 percent after two-day rally; trade volatile on stock builds)

2/3/2015

The oil rally continues based expectations that glut will reverse course as oil companies cut production and the number of drilling rigs in operation. Reuters — “We’ve seen a lot of oil companies announce significant cuts in capacity expenditure and reductions in rig counts. What you’re getting at the moment is a paring back of expectations as a result of the measures being taken,” Hewson said.” “Some investors are betting a floor has formed under the market’s seven-month-long rout, with signs that a fall in drilling activity at U.S. shale deposits has raised concerns about future production.” (Oil prices jump as BP cuts capital expenditure).

Traders are pricing in “glut reduction” and an expectation that demand will increase in the near term. Are they right? This is the ultimate test of the trend analysis. Have we reached a bottom? Is the bottom in the $45 — $50 range? Expect prices to retest that range. From this perspective, it appears the market is ahead of itself and prices will fall back within that range. This is a great time to analyze the money flow and identify what to expect (what to buy) when one is ready to enter the market; if as we think it will retest the range.

The oil rally is breathing life into the Russian markets. Bloomberg — “The ruble strengthened for a second day and Russian bonds rallied as rising oil prices eased pressure on the nation’s finances before the government offers the most debt in more than two months”( Ruble Gains as Oil Rally Spurs Russian Bonds Before Fundraising)

As the rally continues here is something to keep in mind. Reuters — “”Headline rig count declines may look impressive, but as we look at the data, much of the drop in oil rig count has come in low yielding vertical or directional rigs, i.e. the low-hanging fruit,” they said. Two OPEC delegates, one from a Gulf producer, said they could not rule out oil prices dropping to as low as $30 to $35, due to weak demand combined with global refinery maintenance in the first and second quarters of 2015.” (Oil prices continue rally on solid U.S. manufacturing figures)

2/4/2015

Oil fell in anticipation of U.S. inventory numbers. Bloomberg — “When the oil supply report does come out, it will potentially cause quite a bit of volatility,” said Matt Riordan, a Sydney-based portfolio manager who helps oversee about $7.5 billion at Paradice Investment Management Pty. “To try and see where the price is going from here will just be guesswork.” (Oil Falls Before Data With Commodity Stocks, Greek Bonds)

Reuters — “Oil prices fell on Wednesday as renewed concerns over global demand and high stock levels halted a rally that pushed up prices by about 19 percent over the past four sessions.” (Oil slips after four-day rally on demand concerns, high stocks)

The Oil bull market maybe ahead of its self! Bloomberg –” For all the optimism among traders, firms from Barclays Plc to Societe Generale SA and UBS Group AG say the rally is just temporary because less spending won’t eliminate a glut overnight. Instead of heading back to $100 a barrel, oil could fall as low as $30 because supply surpluses won’t disappear overnight, said Miswin Mahesh, a commodities analyst at Barclays. “We don’t think we’ve seen the bottom yet,” Giovanni Staunovo, a commodities analyst at UBS in Zurich, said by e-mail on Tuesday. “We expect U.S. commercial crude oil stocks to hit a new 84-year high on Wednesday, while U.S. oil production is likely to stay strong in the near term.””(Oil’s Surge to Bull Market Viewed as Temporary Bounce)

11:08 a.m. est. The U.S. Energy Information Administration reported oil inventories rose by 3.6 million barrels last week for a total 413.06 million barrels. The level is the highest on record. Oil fell on the news. Reuters — “”Just looking at the overall picture, there is no shortage of oil anywhere,” said Sal Umek at the Energy Management Institute in New York. “It is bearish straight across the board.”” (Oil falls under $56 after U.S. stockpiles hit record)

4:24 pm. Est. Oil held its downward slide as traders were unable to overlook the fundamentals. Reuters — “”Hereon, I’ve no illusions that we’ll be going further and further down until something fundamentally changes,” said Tariq Zahir, portfolio manager at Tyche Capital Advisors, an investment fund in Laurel Hollow in New York. “I’m sticking to my shorts and selling into any strength I see until we get rid of 1.5 million to 2 million barrels of oil a day from this market,” he said.” (Oil crashes after four-day rally; U.S. inventory renews glut worry)

2/5/2015

Volatility is expected to persist as bulls and bears battle over glut expectations. Bloomberg — “There is a clash between future expectations of where oil may end up in terms of fundamentals and what we’re seeing on the ground right now,” Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney, said by phone. “That’s why you’re getting that whipsaw affect in prices at the moment. This is something that we’re going to have to get used to, at least in the foreseeable future.” “The U.S. is pumping crude at the fastest rate in more than three decades, driven by new supply from shale formations in Texas to North Dakota. The Organization of Petroleum Exporting Countries has resisted calls to cut its production quota, choosing instead to let prices fall to a level that slows output in nations outside the group.” (Most Volatile Oil Market Since ’09 Seen Persisting on Oversupply)

Investors are chasing a price rebound as they pour billions into the Market. Bloomberg — “They’ve poured more than $4 billion into oil exchange-traded products in the past four months even as prices tumbled 47 percent. That included the $1.99 billion added in January, the biggest monthly inflow in six years.” “A total of $4.21 billion has been sent into the four biggest U.S. oil ETFs since October, according to data compiled by Bloomberg. The U.S. Oil Fund, the biggest oil ETF, attracted $1.15 billion in January. The fund, which follows WTI prices, dropped 6.8 percent Wednesday on the New York Stock Exchange after jumping 18 percent in the previous four days.”(Tenacious Oil Bulls Put $4 Billion in ETFs on Rebound Bet)

6:02 am est. Oil rebound as investors bet on a recovery while ignoring fundamentals. Reuters — “It will be some time yet before we see any sustained trend reversal in oil prices,” said Carsten Fritsch, analyst at Commerzbank. “There’s no basis for a sustained recovery at the moment.” (Oil rises back toward $55, outlook still fragile)

11:32 am est. Oil continues its upward move, on any bullish sign, irrespective of the fundamentals Reuters –“ But many were pessimistic about the market making a sustained rally, with record-high U.S. crude inventories rekindling renewed worries about a supply glut. “We’re in something of a trading range, and we’re going to get these sort of corrective upside moves time to time,” said John Kilduff, partner at New York energy hedge fund Again Capital. “But I think the overall trend will still be lower as the supply picture is too compelling.”(Oil up on Libya violence, China easing; outlook still fragile)

3:49 pm est. Oil ended the day up 4% as more money pour into the market Reuters — “”It is just a changing market sentiment as more and more players are starting to believe production cuts are coming in the U.S. and that will be enough to erase the surplus,” Dominick Chirichella, senior partner at the Energy Management Institute, New York, said on the Reuters Global Oil Forum. “ ”I think there will be a lot of disappointment going forward for that view.””(Oil up over 4 percent on Libya raid, China easing; volatility seen)

2/6/2015

Saudis’ in have cut pricing for March oil sales to Asia. It is evident that they are determined to lower the price to protect market share.Bloomberg — “State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks, the company said in an e-mailed statement Thursday. That’s the lowest in at least the 14 years since Bloomberg began gathering data.” “This is further evidence that they are hellbent on protecting their market share in China,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone Thursday. “They are trying to stay competitive in what is the biggest area of growth.” (Saudi Arabia Deepens Asia Oil Discount to Record Low).However increase prices to the US and Europe were untouched.

Oil continues its tear, as investors focus on the reduction in oil Rigs and fighting in Libya. The expectation is production will be drastically affected. In essence they are pricing in their expectations. Reuters — “Still, many analysts forecast price gains to be short-lived, and limited. Growing numbers of OPEC delegates say they expect no rapid recovery in oil prices.” (Oil rally holds, promising second weekly gain) Bullish Sentiment is very high based on the large money flows into the market. The question is who will prevail. My money is on the fundaments. At this point, the rigs taken out of production will have a marginal effect on the glut. They were taken from low production wells thus the impact on supplies will not be major.

3:33 pm est. Oil ended the week ~20% higher than it was 2 weeks ago as a result of lower rig counts. Reuters — “The worldwide count for oil drilling rigs fell by 261 in January, oil services firm Baker Hughes said. The average number of U.S. oil rigs fell by 199 in January. This week, another 83 U.S. oil rigs went offline, Baker Hughes said. “People have only started playing attention to the oil rig count in the past week despite the fact they have been falling for weeks,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. “I think the people really benefiting from these market gyrations are the high frequency traders as volumes are really up.” (Oil climbs, Brent posts best two weeks since 1998)

2/9/2015

As the oil rally continues the question is; Are some larger funds using the volatility to pump the price up to increase their realize profit margins? This is a common trading strategy that could be harmful, when the market reverses course, if you are on the wrong side of the trade. This is akin to pump and dump; in essence get momentum going in one direction, as it takes off, reverse direction and take profits.; typical trading strategy. Bloomberg — “It’s too early to say the drop in prices is over,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Friday. “There have been several periods of buying during this cycle that have led to the bulls getting burned.” Keep in mind — “The drop in rigs has yet to affect supplies. U.S. crude inventories expanded by 6.33 million barrels to 413.1 million in the week ended Jan. 30, the highest in weekly records compiled since 1982, Energy Information Administration data show. Crude output rose 27,000 barrels a day to 9.21 million a week earlier, the most in weekly estimates that started in 1983”(Hedge Funds Most Bearish on Crude in 4 Years After Rally: Energy)

(Bloomberg) — Energy companies may be slow to cut oil production after a 50 percent price drop because they need to service debt that has risen fourfold since 2003, according to the Bank for International Settlements.“Debt-service requirements may induce continued physical production of oil to maintain cash flows, delaying the reduction in supply in the market,” the Basel, Switzerland-based institution said in a report Saturday. (Oil Companies May Keep Up Output to Repay Debt, BIS Report Says)

(Bloomberg) — Crude production dropped 20 percent since October at a venture that a Chevron Corp. unit operates in the Wafra fields, which Kuwait is developing with Saudi Arabia, according to two people with direct knowledge of the matter. Daily output dropped to 180,000 barrels from about 200,000 barrels last month and 225,000 barrels in October, said the people, who asked not to be identified because the matter isn’t public. Two rigs are halted and more may be idled in the coming months because Saudi Arabian Chevron Inc. faces problems operating wells due to a lack of personnel after Kuwait stopped issuing and renewing work permits in October, they said. (Chevron Unit Said to Cut Output From Saudi-Kuwaiti Oil Fields)

8:31 am est. Oil prices rose over $58 per barrel on OPEC’s report and expectations of U.S. growth Reuters — “”OPEC was much too optimistic on non-OPEC supply,” Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum.

“It is reasonable to cut supply growth outside OPEC, given the recent developments in the U.S. rig count,” he said.” (Oil over $58 as OPEC raises demand forecast for its crude)

The authenticity of the rally is still in question despite OPEC’s report, industry cut backs and rig reductions. Bloomberg — “The recent surge in oil prices is just a “head-fake,” and oil as cheap as $20 a barrel may soon be on the way, Citigroup said in a report on Monday as it lowered its forecast for crude. Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the U.S. is still rising, wrote Edward Morse, Citigroup’s global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out.”” (Citi: Oil Could Plunge to $20, and This Might Be ‘the End of OPEC’)

12:10 pm est. Skepticism about the rally remains, as oil prices climb. Reuters — “Oil services firm Genscape estimated a smaller-than-expected build of 724,000 barrels last week in the Cushing, Oklahoma delivery point for U.S. crude futures, adding to the bullish sentiment, sources said.Both U.S. crude and Brent have gained nearly 20 percent since a Jan. 29 rebound inspired by better confidence in the crude supply outlook following a seven-month-long selloff that halved prices. Some traders were pessimistic though that the rally will last. “It was mainly hedge fund, speculator driven and smacks of price-overshooting,” said Anuraag Shah, portfolio manager at the Los Angeles-based Tusker Investment Fund, which manages nearly $100 million across commodities.” (Oil rallies for third day after OPEC sees greater crude demand)

2/10/2015

AS new production slows companies are experimenting with re-fracking, new cheaper techniques to revive older wells. — Bloomberg — “Fracking techniques have come a long way since the North American shale revolution began more than a decade ago. Since those early, primitive wells were drilled, fracking specialists like Halliburton have gotten far better at figuring out where to put the cracks, and how wide and deep they need to be to get the most production” (Drillers Take Second Crack at Fracking Old Wells to Cut Cost)

8:13 am. Est. Oil pull off its high as oversupply issues re-appear Reuters — ““Oil stocks held by countries in the Organisation for Economic Cooperation and Development may come close to the all-time high of 2.83 billion barrels in the middle of 2015, said the IEA, which advises the West on energy policy.”Despite expectations of tightening balances by end-2015, downward market pressures may not have run their course just yet,” the IEA said in a monthly report.”( Oil falls as IEA warns stocks may approach all-time high)

With the continuing advancement in Shale technology, oil supplies are expected to keep growing thru 2020. Reuters — “The United States will remain the world’s top source of oil supply growth up to 2020, even after the recent collapse in prices, the International Energy Agency said, defying expectations of a more dramatic slowdown in shale growth.” (U.S. oil output ‘party’ to last to 2020: IEA)

Bloomberg — “The oil market seems slightly oversupplied and another downward move is possible in the first half of this year, Ian Taylor, chief executive officer of Vitol Group, said Tuesday. There are no signs of slowing U.S. output even as the country’s drillers idle rigs, he said. Oil inventories in industrialized nations may climb near a record 2.83 billion barrels by the middle of the year because supplies remain abundant, the International Energy Agency said in a report.” (World’s Biggest Oil Trader Warns Crude Prices Could Dive Again)

11:33 am est. Oil retesting the $50 range as glut issues prevail. Reuters — “Oil stockpiles in member countries of the Organization for Economic Cooperation and Development, which groups the world’s richest nations, may approach a record 2.83 billion barrels by mid-2015, said the IEA, which advises the West on energy policy.”(Oil rebound falters as IEA hints at record-high stocks)

3:02 pm est. Oil ended the day down, driven by a bearish report from the International Energy Agency. Reuters — “It’s the battle of the oil outlooks playing out here,” said John Kilduff, partner at New York energy hedge fund Again Capital LLC. “The IEA report is a good reminder that there’s still a lot of supply to come and it doesn’t give much hope for the bulls who say we’ve hit bottom and are now on the way up.” “While the supply-demand balance in oil was expected to tighten by end-2015, the IEA cautioned that “downward market pressures may not have run their course just yet.” (Oil falls sharply as IEA expects inventories to rise)

2/11/2015

Iraq, Kuwait and Iran joined Saudi Arabia in cutting oil price to protect market share. Bloomberg — “This is an effort by some producers to protect market share,” Sarah Emerson, managing principal of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts, said by phone Tuesday. “It’s really straightforward; cutting prices is how you keep your foot in the door.” (OPEC Producers Cut Oil Prices to Asia in Battle for Market Share)

The oil industry is restructuring while other industries benefit from lower oil prices . — Bloomberg — “The global oil industry has cut more than $40 billion in spending and fired 50,000 or more workers to cope with oil prices that sank below $50 for most of January. The damage to oil companies has been balanced by gains for other industries, from airlines to pizza parlors, which have benefited from lower fuel costs and more money in consumers’ pockets. “Energy has been hit,” while other industries from transportation to manufacturing have done well, said Rob Desai, an oilfield services analyst at Edward Jones in St. Louis. “This is just a really good lesson in diversification.” (Crude’s Pain Is Others’ Gain as Consumer Boost Outweighs Layoffs)

Caught in the Crude production cross-hairs are high cost oil producers, from non-OPEC nations. Bloomberg — “High-cost regions from aging North Sea fields to untapped resources in East Siberia and deep-water projects off Latin America will suffer the most from the clash, say Standard Chartered Plc, Citigroup Inc. and BNP Paribas SA.” “What’s going to tighten the market for next year and the year after will be the longer-lasting damage done to the rest of non-OPEC,” Paul Horsnell, an analyst at Standard Chartered in London, said by phone.”( Oil Producers Outside OPEC Caught in Crossfire With Shale)

7:57 am est. Oil appears to be back on track, the downward trend, as investors rediscover the oversupply issue. In essence trading the market has taken a pause as inventory and oversupplies levels hit the headlines. Reuters — “The supply growth in 2015 is likely to continue unabated, albeit at a somewhat lower rate,” Fereidun Fesharaki at Facts Global Energy said in a market note. “This all means a weak market in 2015 and even lower oil prices. Demand rebound will not save the oil market.”(Oil slips toward $56 on expectations oversupply to linger)

3:42 pm est. U.S. stockpiles at records highs, nearly 418 million barrels, U.S. crude stocks rose almost 5 million barrels last week. Reuters — “It proves that the price retracement we had on the capital expenditure cuts and falling rig counts may have been premature,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.” (Oil down after record U.S. crude stocks, Brent below $55)

2/12/2015

Goldman presented an interesting analysis of the oil markets and the reasons why oil prices will remain low through the end of the year. That said, this will be a traders market, expect prices to bounce around, as volatility will remain high. Bloomberg — “Goldman Sachs released an intriguing analysis on Wednesday that shows what many already suspected: The big culprit in the oil crash has been an abundance of oil flooding the market. A massive supply shock in the second half of last year accounted for most of the decline. In December and January, slowing demand contributed to the continued sell-off. Goldman was able to quantify these effects. “ (Goldman: Here’s Why Oil Crashed — and Why Lower Prices Are Here to Stay)

8:28 am est. Oil heads back to $56 level on dollar weakness. Market conditions are ideal for trading Bloomberg — “Volatility in the oil market has jumped to the highest level since the financial crisis, with prices swinging in a wide range this month following the near 60 percent crash between June and January.” (Oil bounces back toward $56 as dollar weakens)

3:32 pm est. Trading will dominate the market as it tries to find a bottom. News will drive the market as it did today; Dollar weakness and industry cuts were the forces at work in today’s trading. Reuters — “Gains were fueled in part by the weaker U.S. dollar, with the dollar index .DXY falling nearly 1 percent after reports showing U.S. retail sales fell 0.8 percent last month and weekly jobless claims rose above 300,000.” Gains were fueled in part by the weaker U.S. dollar, with the dollar index .DXY falling nearly 1 percent after reports showing U.S. retail sales fell 0.8 percent last month and weekly jobless claims rose above 300,000.”(Oil jumps on weak dollar, industry cuts in jobs, spending)

2/13/2015

A little fact bulls should bear in mind, as lower rig counts drive prices up. On the other hand this just adds to the volatility ideal for trading the markets. Bloomberg — “While companies have idled 151 rigs in five shale formations since reaching a peak of 1,157 in October, they’ll need to park another 200 for growth to stall, according to data from the U.S. Energy Information Administration. Output there will reach a record 5.468 million barrels a day in March even though the number of rigs exploring for oil is the lowest since 2013. The spending cuts led to speculation that U.S. gains would slow, eroding a global supply glut that sent prices tumbling last year. Oil has jumped 17 percent since closing at a six-year low of $44.45 a barrel on Jan. 28. Improving technology and a focus on the most promising acreage has made the rig count, a closely watched barometer of drilling activity, a less reliable indicator of future output.” (U.S. Rigs Are Being Idled, but the Oil Boom Is Not Ending)

6:43 am est. Prices on the rise as more cutbacks drive lower supply expectations. Reuters — ” Besides Apache’s update, Royal Dutch Shell’s RDSA.L chief executive said on Thursday supply might not be able to keep up with growing demand as companies reduce budgets, and France’s Total (TOTF.PA) announced investment and job cuts.”Seeing today’s prices, supply will probably not keep pace with this growth. It may even decline, as prices are close to cash costs,” said Shell Chief Executive Ben van Beurden.” ( Oil tops $60 for first time in 2015, industry cutbacks support)

This is a traders’, as opposed to an investors, market. Trading Pattern:The trading sentiment is driven by industry cuts and dollar weakness. The market pulls back on inventory (oversupply) numbers. The current trading strategy is to long the market and take profits before inventory numbers are reported. This works as long as volatility remains high.

The best way to make money in this market is to ride the sentiment wave, trade the market. There is an oversupply of oil so ride the long wave and pull back before any inventory reports. Jump back in on the other side of the report, on the dip. Bloomberg (Oil Climbs Above $60 First Time This Year as Supply Seen Slowing) Reuters — “Many analysts and traders believe there is a global oversupply of nearly two million barrels per day in crude oil. They say little has changed fundamentally to explain the rally of the past two weeks. Even so, oil prices have marched higher. Brent rose over 3 percent in Friday’s session, about 6 percent on the week and nearly 16 percent on the month. Gains heightened after its front-month contract switched on Thursday at a premium.” (Oil tops $60 for first time in 2015; oversupply persists)

3:11 pm est. Today’s rally was driven by additional rig reductions and Euro Zone growth optimism, as the market keeps pricing in future expectations lifting trading sentiment. Reuters — “ Some traders attributed Friday’s strength in oil to an unexpected acceleration in euro zone economic growth in the final quarter of 2014. The bloc’s largest member, Germany, particularly grew at more than twice the expected rate. Separately, the number of rigs drilling for oil in the United States fell by 84 this week to 1,056, the lowest since August 2011, a survey by oil services firm Baker Hughes showed on Friday.Still, the recent rally in oil prices has come amid record-high U.S. crude inventories.” (Oil tops $60 for first time in 2015; oversupply persists)

Further data showing why the decline in rig counts is irrelevant; technology and production techniques have become so efficient that output per well is increasing thus compensating for the less efficient rigs. The same scenario took place in Natural as production. See chartBloomberg — “Rig counts have long been used to help predict future oil and gas production. In the past week drillers idled 98 rigs, marking the 10th consecutive decline. The total U.S. rig count is down 30 percent since October, an unprecedented retreat. The theory goes that when oil rigs decline, fewer wells are drilled, less new oil is discovered, and oil production slows. But production isn’t slowing yet. In fact, last week the U.S. pumped more crude than at any time since the 1970s. “The headline U.S. oil rig count offers little insight into the outlook for U.S. oil production growth,” Goldman Sachs analyst Damien Courvalin wrote in a Feb. 10 report.” (This Chart Shows Why the Number of Oil Rigs May Not Matter Anymore)

2/16/2015

Bullish sentiment maintains its momentum into the new week, as traders ride the wave until the release of inventory numbers. On the other hand, investors are betting supplies will fall sooner than expect on Rig reduction, production interruptions in Libya and loading problems in Iraq. Bloomberg — “To maintain production growth you are going to have to drill more,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone Feb. 13. “There’s loading issues in Iraq and production issues in Libya. Some people were caught off guard. The fundamentals are changing here.”(Crude Oil Bears Betting on Supply Glut Miss Market Rally). However, there is no significant change in the supply dynamics.

Goldman reiterates its belief that lower prices are needed to cut output — supplies. Bloomberg — “Lower oil prices may be needed to balance the market because U.S. output could still expand by 600,000 barrels a day in the fourth quarter compared with a year earlier, Goldman analysts Damien Courvalin and Raquel Ohana said in a note Monday. The U.S. pumped 9.23 million barrels a day in the week to Feb. 6, the most in weekly Energy Information Administration records dating back to January 1983.” (Goldman Says U.S. Oil-Rig Slump Not Enough to Halt Output Growth)

Oil prices climb as of 11:40 am GMT London time today is a holiday in the U.S… Bloomberg –“ The reduction in drilling rigs was relatively strong,” Olivier Jakob, managing director at Petromatrix GmbH, said by e-mail from Zug, Switzerland. “We know that the drop in production is going to come later this year.”( Crude Trades at Two-Month High as Drilling Slows in U.S.)

2/17/2015

While oil continues rallying, data show some of the upward momentum is attributable to hedge funds covering their short positions. Bloomberg — “Money managers’ net wagers on rising prices rose 13 percent to 158,974 contracts in the week ended Feb. 10, the highest since the early days of last year’s oil slump on July 8, according to figures from the London-based ICE Futures Europe exchange. The change was driven by a reduction in bearish positions, rather than fresh bullish bets, signaling traders remain cautious that the price recovery will endure, according to Saxo Bank A/S.” “Hedge funds managed to preempt a strong weekly performance,” Ole Hansen, an analyst at Saxo Bank A/S in Oslo, said by e-mail. “It was all driven by short covering, which basically tells us that funds are still not convinced that this is the right time to go long.”( Hedge Funds Turn Most Bullish on Brent Oil in Seven Months)

10:24 am est. Volatility continues to drive the market as traders take their cue from other commodities, taking prices lower. Reuters — “Silver fell by up to 5 percent and gold snapped a three-day rally. Investors in those commodities remained cautious after a breakdown of debt talks between Greece and euro zone finance ministers “ “I think it all started in silver with squeezing out of long positions, then spilled over to gold and then to oil,” said Carsten Fritsch, commodities analyst at Commerzbank.” (Oil reverses gain, falls below $61 as other commods weigh)

As expected, Oil inventory numbers increased. I think the early fall in prices can be attributed to traders taking profits before the report. As I stated previously, expect traders to take profits before the report and buy on the other side of the report after prices fall. This shows the market is being driven by trading as oppose to investors believing in the rally.

3:35 am est. Oil resumes its upward climb, after digesting global inventory increase. Reuters –“Threats to Middle East crude production and the falling U.S. oil rig count seemed to spur market bulls despite global inventory data suggesting an oversupply of up to 2 million barrels per day, analysts and traders said. “We’re in this mode where the market continues to discount bearish news,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “Certainly there is some positive news out there about Libya and rest of the Middle East, but I don’t see anything that’s overly bullish.” (Oil up from early sell-off as Brent sets 2015 high)

2/18/2015

As we’ve said, sentiment (trading) is behind the rally, with fundamentals taking a back seat. UBS is adding its concern that prices will reverse course due to increasing supplies. They see no reduction in U.S. production hence oil inventories are expected to remain at records levels. Bloomberg — “The highest U.S. oil production in three decades won’t be curtailed by the idling of rigs and inventories will keep expanding, according to UBS. The rally has been based on sentiment rather than the fundamentals of supply and demand, Commerzbank says. As storage space fills up, producers will need to discount to sell barrels, Bank of America predicts. “Oil prices should again come under pressure,” said Giovanni Staunovo, an analyst at UBS in Zurich who expects Brent to reach $40 in the next three months. “Production is likely to rise further and inventories will continue to rise. This means the market will remain oversupplied in the first half of 2015.” (Oil Rally Seen Reversing as Rising U.S. Supply Deepens Glut)

10:00 am est. Traders pull back as market is seen as ahead of itself. Reuters — “The lack of follow-through higher yesterday is a worry and there’s plenty of reason to be neutral here and observe carefully,” PVM Oil Associates director and technical analyst Robin Bieber said. Oil prices have risen more than 35 percent since hitting an almost six-year low of $45.19 in January, with the ascent fueled by industry spending cutbacks and falling U.S. rig counts.” (Oil falls towards $61, rally’s sustainability in question)

1:49 PM est. Reality checks the rally, glut concerns reappear. Reuters — “”We have more supply coming from here with the refinery maintenance season in swing, and that’s prompting some people at least to ask if the market has overstretched itself with the rebound,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.” (Oil down 3 percent as supply glut raises questions on rally)

3:30 PM est. Oil fell as the market anticipates U.S. inventory report. We expect to see a continuation in the buildup. Is the price fall profit taking or reality coming to grips that the market is overvalued? In essence, will trading resume on the other side, buying on the dip? It’s hard to justify current price valuations, even form a trading perspective. Time to sit on the side lines! Reuters — “The selloff came ahead of supply estimates due at 4:30 p.m. ET (2130 GMT) from industry group American Petroleum Institute that could show a build of over 3 million barrels of crude last week. “ (Oil tumbles; supply glut raises doubts about month-long rally).

2/19/2015

Much attention given to the reduction in onshore rig counts while most offshore production remains on track; see the economics between the production methods. Bloomberg — “It’s a different calculus for prolific deep-water wells, which can produce far greater quantities of crude over a longer time span than a typical onshore well. The new wells are the latest step in a long-term development plan where much of the investment — in pipelines, platforms and subsea processing systems — already has been made.” (Rigs Running Hot Offshore as Shale Scales Back)

One of the largest shale producers in the U.S., EOG Resources Inc. plans to reduce production given the current production climate. This is a significant development (though expected)that can have a major impact on supplies in the last half of 2nd to 3rd Q. Bloomberg — “The biggest, fastest-growing oil producer in the U.S. said it plans to halt output growth this year, delivering a signal that shale companies are beginning to do what it takes to reduce oversupplies.” “The company joins Apache Corp. in its plan to pump about the same volume of oil as last year. The cutbacks are a sign that shale producers can slow down a lot more quickly than forecasters are expecting, said Michael Scialla, a Denver-based analyst at Stifel Nicolaus & Co.” (Fastest Growing Shale Producer Is Going To Halt Output Growth).

A lack of demand and increase competition has decreased OPEC’s export numbers. Bloomberg — “2014 was a tough year for Saudi Arabia and OPEC,” said John Sfakianakis, head of Middle East at Ashmore Group Plc, the London-based money manager specializing in emerging markets. “Demand is sluggish, the U.S. is importing less, China’s economy is not growing by double digits, and supply from outside OPEC was not slowing down.” (Saudi Arabia’s Oil Exports Fell in 2014 in ‘Tough Year’)

6:20 am. Est Oil continues lower on U.S. inventory estimates. The question remains is this profit taking or is the market heeding the oversupply call? My take is we are going to a lower trading level — range to justify the oversupply numbers. Reuters — “U.S. crude stocks rose by 14.3 million barrels last week, data from industry group the American Petroleum Institute (API) showed after Wednesday’s settlement, compared with analysts’ expectations for an increase of 3.2 million barrels.” (Oil falls sharply after U.S. crude inventories rise)

3:38 PM est. Oil bounced off its lowers as inventory levels weren’t as bad as expected. It appears the market will continue to be a traders market; any bullish news (i.e. another drop in rig counts) will set it off, meaning it will trade upside (buying on the dip). Reuters — “U.S. commercial crude oil inventories rose 7.7 million barrels last week to a record 425.6 million barrels, , the U.S. Energy Information Administration (EIA) said. It was the sixth straight week levels were at a seasonal record peak. [EIA/S] The build was more than double the 3.2 million barrels expected by analysts in a Reuters poll, but far below the 14.3 million barrels estimated on Wednesday by industry group American Petroleum Institute” (Oil down but sharply off early loss; stock build less than feared)

2/20/2015

9:40 am est. Oil trading above $60, as markets awaits rig count. The expectation is the number will drop likely nudging prices higher as market volatility continues. Reuters — “”A further sharp decrease in the oil rig count is expected … which points to declining U.S. oil production in the second half of the year,” said Commerzbank analyst Carsten Fritsch in a note to traders.”This does nothing to change the considerable oversupply on the oil market in the short term, however,” he added.” (Oil steadies above $60, U.S. rig count expected to fall)

The rig count fell less than expected containing the acceleration in price on oversupply concerns. Reuter — “After many bets that crude would rally on Friday from another plunge in the rig count, and short-covering before the expiry of the front-month in West Texas Intermediate (WTI) futures, the action was in refined products instead.” (Oil ends mixed after mild rig count drop, heating oil spikes).

Crude supply continues to climb, temporally taking the wind out of bullish trading sentiment. Bloomberg — “Crude oil in storage in the U.S. has jumped to the highest levels in at least 80 years, according to a Bloomberg Industries analysis. The EIA this week reported that U.S. inventories rose 7.7 million barrels to 425.6 million. That’s more than 20 percent higher than the five-year average. “ (Another Big Reason to Think Oil Prices Aren’t Going Up Soon)

2/23/2015

Oil trading around $60 level as supply and rig count drives the market. Bloomberg –““It’s very much a production- or supply-driven story right now in oil,” Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a Bloomberg Television interview. “The demand side is actually quite flat and we’re seeing a lot of supply in the system.” (Oil Holds Weekly Loss Near $60 as Libya Adds to Surplus)

With oversupply concerns Oman is pushing production to the limits Bloomberg — “Oman, the biggest Middle Eastern oil producer that’s not a member of OPEC, is boosting crude output to as much as possible with the global price rout over, Salim Al Aufi, undersecretary of the oil and gas ministry, said.” (Oman Producing All-Out on Oil as Price Rout Seen Over)

Hedge Funds betting on market turning. Bloomberg — “People are starting to realize that all the slashing of budgets, the layoffs and the declining rig counts are going to have an impact,” said Phil Flynn, a senior market analyst at the Price Futures Group in Chicago. “The debate is whether the bottom is in or not, and a lot more hedge funds are betting that it probably is.” (Hedge Funds Raise Bullish Oil Bets as Drillers Idle Rigs: Energy)

6:48 am est. Oil prices fall below $59 as oversupply issues back on in the forefront Reuters — “The term structure of oil continues to weaken and inventories keep piling up,” Bank of America Merrill Lynch said in a note.” (Oil prices fall as dollar strengthens and oversupply adds pressure)

Shale oil producers cut backs are faster and deeper than previously estimated. This could lead to an earlier reduction in production output affecting the size of the glut. Reuters — “For one, companies are cutting costs deeper and faster than before as Wall Street investors increasingly place a premium on capital discipline rather than just production growth. Some also say the nature of shale makes it easier for companies to defer work and wait for prices to recover. The wells that drove the U.S. energy boom of the last decade rapidly deplete, so overall output will fall unless new holes are constantly bored and oil extracted via hydraulic fracturing, or fracking. “The thing that has surprised me … is that companies large and small, financially strong, financially weak have really cut capital spending much quicker than I have seen before,” said Bruce Vincent, who retired as CEO of Swift Energy Co this month after 40 years in the industry.” (U.S. shale oil’s crash diet likely to bring forward output dip)

3:53 pm est. Oil fell on oversupply concerns, however trading the market remains in play as buying on the dips has quicken indicating an increasing bullish sentiment Reuters — “While high supply was pressuring crude prices, the market also was seeing quick “buying on dips,” evidence that bulls were in more control than a few months ago, traders said. After losses of between 9 and 18 percent each month from October to December, Brent consolidated in January and is up about 11 percent month-to-date.”There is the notion that a bottom has been set at $55 for Brent and $45 for WTI, and there are enough buyers out there each time the market tests those levels,” said John Kilduff, partner at New York energy hedge fund Again Capital.” (Oil falls 2 percent on glut worries; heating oil up on tight supply)

2/24/2015

AS I said 2/3/2015 expect Oil to retest the low trading ranges, WTI $45–50 and Brent $55 — $60. There are back in the high end of the range, expect prices to bounce in and out of their respective ranges (high side) before hitting the lower end of the range. Bloomberg — “West Texas Intermediate for April delivery gained 19 cents to $49.64 a barrel in electronic trading on the New York Mercantile Exchange at 11:30 a.m. London time, reversing an earlier loss of 77 cents. The contract closed at $49.45 a barrel on Monday, the lowest since Feb. 11. Futures have decreased 6.6 percent this year.” “Brent for April settlement advanced 67 cents to $59.57 a barrel on the London-based ICE Futures Europe exchange. The contract fell $1.32 to $58.90 on Monday, the lowest close since Feb. 12. The European benchmark crude traded at a premium of $9.79 to WTI. The spread reached $10.24 yesterday, the widest since March.” (Oil Trades Near 2-Week Low as U.S Supply Seen Rising From Record)

8:09 am est. Oil trading to upside as bull and bear tug of war continues over supply issue. Reuters — “Brent crude oil reversed early losses to trade back above $59 a barrel on Tuesday as Libya’s largest oilfield stopped production, and as traders awaited U.S. oil inventory data to see whether it would show another large increase.” (Oil rebounds above $59 after Libya’s largest field shuts)

Private Equity snapping up oil asset bargains Reuters — “Clearly what you’re seeing in the energy market with the cataclysmic fall in oil prices — halved in such a short period — I think you will have haves and have nots,” said Leon Black, founding partner at Apollo. “We along with others in our industry are dusting off (opportunities),” added Black, speaking at the annual private equity SuperReturn conference in Berlin.” (New oil rush? Private equity starts to buy into energy assets)

5:50 pm est. Oil ended the day on the down side in anticipation of the U.S. inventory report. Reuters — “The supply dynamic will be reinforced by the inventory reports and the data are simply too compelling to ignore, and it has consistently undermined the recent rallies,” said John Kilduff, partner at Again Capital LLC.” (Oil turns lower on expectations of crude oil inventory rise)

2/25/2015

Oil companies hit by lower revenue are restructuring their balance sheets by selling assets and or raising debt. M&A activity should start increasing as prices levels off the industry will re-structure to the new pricing reality. Bloomberg — “The company is able to raise more debt and may also issue new shares, Chief Executive Officer Karl Johnny Hersvik said in an interview after presenting fourth-quarter results. The Trondheim, Norway-based company can solve its funding issues without selling assets, which include a share in Johan Sverdrup, Norway’s biggest discovery in decades, he said. “We’re trying to create the optimal capital structure, at the lowest possible cost to our shareholders,” Hersvik said. “We view our asset base as the basis for our funding. So it wouldn’t necessarily be logical to start selling.” (Billionaire Roekke’s Det Norske Reviews Funding as Oil Drops)

7:10 am est. Oil raises as Saudis see demand firming; data showed china’s factory output increased, slightly, this month. Reuters — “Brent crude oil rose to around $59 a barrel on Wednesday after data showed Chinese factories were producing more than expected and Saudi Arabia’s oil minister said oil demand was growing. China’s factory sector has expanded slightly this month, according to the flash HSBC/Markit Purchasing Managers’ Index. The index reached a four-month high of 50.1 in February, just above the 50 level that separates growth in activity from contraction. A Reuters poll had forecast a reading of 49.5.”(Oil rises to $59 as Saudis say demand growing)

U.S. inventory rose to an 80 year high. This will probably be ignored as bullish sentiment seems bent on pricing in production reduction. Expect volatility to remain high as trades take advantage of trading opportunities. Bloomberg — “Crude oil in storage in the U.S. jumped 2 percent, to 434 million barrels, according to EIA weekly data released today, Feb. 25. The increase of 8.43 million barrels was more than double the median estimate in a Bloomberg survey of analysts and was the biggest increase in a month.”

11:27 am. est. Prices recovered after the inventory report, buy on the dip presented an ideal opportunity for trading the market. Reuetrs — “The report is relatively bullish, despite the large crude oil inventory build,” said John Kilduff, partner at Again Capital LLC in New York. “The drawdowns in the refined product categories represent an offset and are supportive.”

3:35 pm est. Oil climb 5% driven by bullish sentiment and trading opportunity as the market tries to find a bottom. Reuters — ”They want to find out where the floor price is. I think they are indicating that we are not that far off the floor in the current price,” said Simon Wardell, oil analyst at Global Insight.” (Brent crude up 5 percent as Saudi sees improved demand for oil)

2/26/2015

Are the Saudis preparing to take a victory lap? Did their strategy work? Not cutting production in the face of a growing oil glut or will technological (shale & fracking) production efficiency be their Achilles-heel? I think, in the end technological efficiency will prevail. Reuters — “The Saudis are saying — look, everything is happening the way it needs to happen. Others are cutting capex, production growth is slowing and low prices are stimulating demand,” said OPEC watcher Yasser Elguindi from economic consultants Medley Global Advisors.” (Saudi satisfaction with ‘calm’ oil markets signals $60 anchor)

9:46 am. Est. Oil climb over $62 as bulls over reach the market, on demand and lower production expectations. Reuters — “ The price has rallied more than 35 percent from a near six-year low of $45.19 reached in January, supported by signs that lower prices are starting to reduce investment in U.S. and other non-OPEC supply. (Oil edges higher towards $62, ample supplies still weigh)

12:37 pm est. oil fell off its high. This is a traders market; expect prices to bounce around as traders ride the volatility wave building their profit margins Reuters — “Crude oil futures fell on Thursday, as rising inventories in the United States pressured both Brent and U.S. contracts and countered expectations for recovering demand.” “The Brent market is much more reactive to an almost daily dose of geopolitical headlines that are demanding at least some element of risk premium,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note. (Oil falls as rising U.S. inventories continue to weigh)

3:31 pm est. oil held its downward fall as traders take profits. Reuters — “Brent April crude LCOc1 fell $1.58, or 2.56 percent, to settle at $60.05 a barrel, off a $62.63 intraday peak. On Wednesday, Brent surged 5 percent.” (Oil retreats as rising U.S. inventories continue to weigh)

The number of oil rigs dropped by 33 for a total 986 since October 14. Bloomberg — “But production isn’t slowing yet, and new efficiencies in U.S. drilling and pumping may make raw numbers of rigs in the field misleading. The U.S. will pump 9.3 million barrels a day this year, the most since 1972, despite the fewest rigs in the field in almost four years, according to the Energy Information Administration.” (US Oil Rigs Get Hammered for the 12th Week)

1:54 pm est. Oil advanced on the heels of the rig report, showing a drop of 33, boosting reduction in production expectations. Bloomber — “The oil rig count is down for a 12th straight week,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “The market has reacted to the drop in rigs and capital expenditures, and now wants to see it reflected in inventories.”(Oil Futures Poised for First Monthly Advance Since June)

4:08 pm est. Oil ended the day higher Reuters — “Brent crude LCOc1 rose $2.53 to $62.58 a barrel. February’s 18 percent gain was the biggest monthly percentage rise since May 2009.“U.S. crude CLc1 rose $1.59 to settle at $49.76, managing a 3.1 percent February gain. Both Brent and U.S. futures briefly pared gains after Baker Hughes Inc (BHI.N) data showed its U.S. oil drilling rig count fell only 33 to 986 this week.” (Oil up sharply, posts first monthly gain since June)

3/2/2015

Hedge funds are raising their bearish bets on oil to an all-time high, speculating prices will fall on oversupply concerns. Bloomberg –“Money managers increased short positions in West Texas Intermediate crude by 17 percent in the seven days ended Feb. 24, U.S. Commodity Futures Trading Commission data show. Net-long positions slid to the lowest in seven weeks. Stockpiles in the U.S. have risen for seven consecutive weeks to a record 434.1 million barrels. Domestic production is continually topping weekly records, reaching 9.29 million barrels a day during the report period, while an unprecedented decline in oil drilling rigs is showing signs of slowing.”(Bearish Oil Wagers Surge to Record as Glut Keeps Growing: Energy)

6:19 am est. Oil fall on oversupply concerns and a stronger dollar.Reuters — “Libyan production is up and Iraqi exports are on the rise,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates, saying crude markets were likely to fall further.” (Oil falls under $62 on dollar, supply concerns)

9:01 am est. Oil continues its decline on rising concerns that WTI crude stockpiles will continue to increase despite falling rig counts. Bloomberg — “People are starting to understand that even though we are seeing dramatic rig count falls, we are not seeing U.S. production come off at all,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We have a lot of bearish fundamentals.” (Oil Drops on Concern Rising U.S. Output Will Add to Glut)

4:11 pm est. Oil fell 5% on oversupply concerns Reuters — “I think we’ve been subjected to a reality check after the fake rallies of last week,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The reality is there’s a huge surplus of oil not only in the United States, but also globally, and it’s growing.” (Oil tumbles on Iran, Libya; worry about high supply returns)

3/3/2015

Oil storage capacity is nearing its limit sooner than expected, adds another dimension to glut concerns. Reuters-“Shorthanded as “JK” in market jargon, U.S. West Texas Intermediate for April delivery (known as “J”) were $2.38 a barrel cheaper than those for May (“K”) on Friday, a gap that likely signals the early onset of another milestone in the great oil supply glut, running out of space in Cushing, Oklahoma, delivery point for the New York Mercantile Exchange contract. “We feel that we may break the $44 level, we might even see a $3 handle,” said Tariq Zahir, an analyst at Tyche Capital Advisors. “Maybe not next week, but Cushing continues to fill massively.” (It’s no JK: Oil spread blow-out portends new price slump)

A reality check, a price range of $50 — $60 per barrel for Brent is seen by some of the industry insiders. Bloomber — “A growing consensus is emerging from the likes of BP Plc, the International Energy Agency, shale wildcatters and even the Saudis that a near-term recovery to $100-a-barrel crude isn’t in the cards. Instead, expect a range of $50 to $60 for at least the next few years.” (L-Shaped Oil Recovery Flattens V-Shaped Market Optimists)

9:06 am est. Oil rose on new fighting in Libya, essentially trading on the news. Reuters –“Rival Libyan forces carried out tit-for-tat air strikes on oil terminals and an airport, reviving fears over supplies from the OPEC member and helping Brent recover above the $60 level that has anchored prices since mid-February. Oilfields and ports are increasingly a target in Libya’s conflict, which pits two rival governments and their armed forces against each other. Forces claiming allegiance to Islamic State have also targeted oilfields and pipelines.” (Oil trades near $61 on Libya clashes)

11:59 am est. Brent trading higher on increase fighting in Libya and WTI spread play. Traders betting WTI will decline before U.S. inventory report, taking advantage on Libya’s conflict to increase the spread.Reuters — “Brent jumped almost 3 percent, trading firmly above the $60-a-barrel support level, as rival Libyan forces carried out tit-for-tat air strikes on oil terminals and an airport, reviving fears over supplies from the OPEC member.” (Oil up on Libya; U.S. crude volatile before inventory data).

5:26 pm est. Oil end higher as the news, not fundaments, drove Brent prices to $61.02 Reuters — “His speech may have reinforced the geopolitical tensions around Iran, though I don’t believe this rebound has legs given the fundamental picture of oil oversupply,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.” (Oil up as Netanyahu blasts Iran, Libya forces strike terminals)

3/4/2015

Saudis showing confidence that demand is on the rise increased the price of oil to their customers. Is this a sign that prices have bottom out? Or are Saudis promoting their desire to keep prices at the $60 level? Is this the end of the price war? Let’s see how this plays out. Reuters — “Saudi Arabia’s oil minister Ali al-Naimi, who led OPEC’s change in direction, said last week that oil demand was growing and that markets were “calm”, which some analysts said demonstrated he was happy with oil’s recovery since January and that it vindicated his policy.”(Saudi Arabia ups official oil prices amid signs of stronger demand).

4:10 am est. Brent dips but holds above $60, Saudis target price. Reuters — “This is a sign that prices have bottomed out because it means Saudi is confident in raising prices without being afraid of losing market share,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.” (Brent dips, holds above $60 after Saudi price increase)

8:41 am est. Saudis see Oil prices stabilizing as demand increases. It appears Saudis are tryin to put a floor at $60. The question is, are the fundamentals there, a balance in supply and demand? Reuters — “Going forward, I hope and expect supply and demand to balance and for prices to stabilize,” Naimi said. “Global economic growth seems more robust.” (Saudi Arabia expects oil price to stabilize)

U.S. inventories rose by 10.3 million barrels, analyst expected an increase of 4.2 million, this is rather bearish news. However, the bulls have been ignoring the fundamentals and speculating on production slowing given the falling rig numbers. Let’s see if the sentiment changes. (U.S. oil stockpiles rise twice as much as expected in week: EIA)

3/5/2015

Fundamentals ignored; Oil on the rise. This is clearly a traders market, news seen driving the price, in this case a lack of an Iranian deal moves prices higher. Reuters — “Tehran’s ambassador to the International Atomic Energy Agency (IAEA) said on Wednesday no deal had been reached on the duration of any possible final agreement with world powers on Iran’s program. That allayed investors’ fears of an imminent rise in Iranian oil supply.” (Brent above $61 as Iran news offsets U.S. stockpiles)

Small investors are fueling volatility as they pour money into ETFs, creating an ideal platform for traders. Reuters — “Billions of dollars are pouring into oil exchange-traded funds as investors, many of them small savers more familiar with stocks than commodities, risk big losses and focus on the chance of huge rewards. Five of the biggest oil ETFs have seen their assets more than quadruple since July to $5.4 billion as the oil market has had a roller-coaster ride, collapsing by 60 percent then rallying by almost a third.” (Volatility draws billions into oil funds)

12:04 pm est. Oil remains to the up side, Iran non deal seems to be the market mover, even with an up dollar. “Concerns about deteriorating oil supplies from Libya and Iraq boosted crude prices even before the New York session. Without new bullish factors apparent in U.S. trading hours, the market stayed afloat on buying from those convinced it had hit bottom since the June-January selloff that had knocked 60 percent off crude prices, analysts said.” (Oil up despite strong dollar, U.S. stance on Iran)

4:48 pm est. Oil ended lower as traders trading the market take profit. Reuters — “It was extremely choppy day in oil, which shouldn’t have been the case, given there were overwhelmingly bearish factors compared to positive,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.” (Oil falls in volatile trade on supply worries, dollar and Iran)

3/6/2015

Oil off an running as traders take advantage of the latest news, fighting in northern Iraq and Libya. Reuters — “Fighting has escalated in northeast Iraq where Islamic State militants have set fire to oilfields to deter Shi’ite militiamen and Iraqi soldiers from advancing. In Libya, worsening security conditions have led to the closure of 11 oilfields.” (Oil climbs to $61 on Mideast supply concerns)

Oil producers are beginning to default on their debt, missing interest payments. Bloomberg — “Less than seven months after raising $175 million in a junk-bond offering, American Eagle Energy Corp. said Monday that it wouldn’t make its first interest payment on the debt. Instead, it hired two advisers — Canaccord Genuity Group Inc. and Seaport Global Holdings LLC — to negotiate with bondholders on a plan to restructure its debt, according to three people with knowledge of the situation who asked not to be named because the matter is private. The holders of the notes are left to consider how to maximize recovery of their investment, either by giving the company more time to try to become profitable or by pushing it into default.” (An Oil Firm That Raised Money Seven Months Ago Just Missed Its First Bond Payment)

Rigs fell in greater numbers than expected. However no indication if they were marginal or high producing wells. Bloomberg –“Drillers idled 64 oil rigs (excluding gas rigs), dropping the number to 922, Baker Hughes reported on Friday. The rig count is down 43 percent since October, an unprecedented retreat. The median forecast from a Bloomberg survey of 20 #RigCountGuesses on Twitter was for a decline of 20 rigs.” (Oil Rigs Get Slammed for the 13th Week)

Oil ended the week on the downside given a stronger dollar. Traders not wanting to be long the market, going into the weekend, took profits as this continues to be a trader’s market. Reuters — “Worries about the security of Libyan and Iraqi crude supplies, which had put a floor beneath the market in early trade, also took a backseat. A strong dollar makes oil, quoted and traded in the greenback, costlier for holders of the euro and other currencies. The dollar rocketed to 11-/12-year highs against a basket of currencies .DXY after the U.S. government reported the U.S. jobless rate fell to 6–1/2-year lows.” (Oil in biggest weekly drop since January on dollar, rate-hike fear)

3/9/2015

5:27 am EDT. Oil falls as stronger dollar and fundamentals, oversupply and weak demand, move prices lower. Reuters –“Oil inventories are rising across the world as production outstrips demand, offsetting geopolitical tensions in the Middle East and the risk of output cuts in Libya and Iraq.” (Oil drops toward $59 on dollar, stock builds)

AS we’ve indicated, the trend continues to point to the fundamentals (lack of Demand & Oversupply –even as rigs fall) as the major determinate of the market price. This in turn has led Hedge Funds to cut their bullish bets on oil, even as oil produces cut cost and reduce rig numbers. Bloomberg — “Speculators pared their net-long position in West Texas Intermediate crude by 19 percent in the week ended March 3, U.S. Commodity Futures Trading Commission data show. Short wagers increased to a record for a second week. Oil producers are spending less, idling rigs and delaying wells to stem output that the government predicts will reach a four-decade high this year. That’s having little effect so far, with U.S. crude inventories expanding by 10.3 million barrels in the week ended Feb. 27, the most since 2001.” (Hedge Funds Are Losing Faith in Oil Rally While Inventory Swells).

Brent ended the day lower with WTI moving higher as traders exit the spread trade on the news that China reduced Crude imports. Bloomberg — “Brent for April settlement declined $1.20 to end the session at $58.53 a barrel on the London-based ICE Futures Europe. It was the lowest close since Feb. 12. The volume of all futures traded was little changed from the 100-day average at 3:01 p.m. in New York. WTI for April delivery rose 39 cents, or 0.8 percent, to settle at $50 a barrel on the New York Mercantile Exchange. Volume was up 23 percent from the 100-day average. The U.S. benchmark crude settled at a $8.53 discount to Brent, compared with $10.12 at Friday’s close.” (Brent Oil Falls on Chinese Data: WTI Gains on Slower Supply Gain)

3/10/2015

4:37 am EDT. Brent and WTI opened lower as the dollar advancesReuters — “Brent and WTI continue to trend sideways, with WTI facing more volatility. Brent has been descending for the past few days and we believe that it is hovering near a support level,” said Singapore’s Phillip Futures in a research note on Tuesday” (Brent slips toward $58 on firm dollar; China data checks losses)

Libya to increase its oil output this week — Reuters “Libya is set to export more than two million barrels of crude oil this week from two ports in the east where output has topped 245,000 barrels per day, oil officials said on Monday.” “Output from four fields including Sarir, the country’s largest, has reached 243,000 to 245,000 bpd, said Omran al-Zwai, spokesman for state firm Arabian Gulf Oil Company (AGOCO) which dominates production in eastern Libya.” (Libya to export over 2 million barrels of oil from east this week)

10:07 am EDT. Dollar rise is pressuring commodity prices causing oil to fall. Reuters — “Traders and analysts said there was a risk of further falls as speculative net long positions were so high, particularly in Brent, whilst the fundamental picture remained one of weakness with no sign of any slowdown in production. “In order to balance the market we need the supply glut to be brought down, by rising demand or lower supply,” Ole Hansen, senior commodity strategist at Saxo Bank, said. (Brent crude dips below $58 on strong dollar and supply)

Inventory concerns and a soaring U.S. dollar pushed oil lower. Reuters –“”Brent is looking increasingly heavy with a decline likely to lowest levels in almost four weeks expected within the next couple of sessions,” oil analysts at Jefferies said in a note.” (Dollar rally sinks oil; Brent down more than U.S. crude)

3/11/2015

As expected (see 2/3/2015 & 2/24/2015) oil prices are retesting the lower end of their respective ranges as the fundamentals and a strong dollar exert pressure on the market. Reuter — “The U.S. dollar hit a fresh 12-year high against the euro on Tuesday, trading at $1.0637 against the single currency. A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.

Russia’s crude oil exports are also set to rise this year, Energy Minister Alexander Novak said, despite some expectations of a plunge in production due to lower prices following the crash from above $100 a barrel last year.” (Brent oil hits one-month low below $56 on dollar rally)

On 12/24–25/2014 we indicated to keep an eye on M&A activity as prices settle into a range or as companies put themselves on the market. Well here is the first casualty Bloomberg — “A decision by Whiting Petroleum Corp., the largest producer in North Dakota’s Bakken shale basin, to put itself up for sale looks to be the first tremor in a potential wave of consolidation as $50-a-barrel prices undercut companies with heavy debt and high costs.” (Get Ready for Oil Deals: Shale Is Going on Sale)

9:08 am EDT. Oil rebounded off the lower end of the range, Brent ($55 — $60) recovering to $57.01 per barrel. Reuters — “Brent for April delivery LCOc1 hit a one-month low of $55.92 a barrel before recovering to trade up 62 cents at $57.01 a barrel by 1248 GMT(0848 DST). It dropped $2.14, or 3.66 percent, in the previous session. West Texas Intermediate for April delivery CLc1 climbed 34 cents to $48.63 a barrel, after falling $1.71, or 3.42 percent, on Tuesday. Its discount to Brent was $8.38 a barrel, rising after hitting its narrowest point in a month on Tuesday.” (Brent crude oil rebounds from one-month low to $57).

11:21 am EDT. U.S. oil stock continues to build as The Energy Information Administration said U.S. crude stocks rose by 4.5 million barrels more than was expected, putting spread back in play. Reuters — “The increase included a 2.3-million-barrel build at the Cushing, Oklahoma delivery point of the U.S. crude contract, also known as West Texas Intermediate or WTI. “The fear of global supply glut that sent crude prices to six-year lows continues to hang over the market,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. “We have not seen signs of enough lower production resulting from capital spending and drilling cuts.” (Brent rebounds as U.S. stock rise triggers spread play)

4:10 pm EDT. Brent’s floor seems to be holding in the $55 — $60 range as traders play the spread. WTI traded down on inventory concerns and spread play. Reuters — “Brent’s front-month LCOc1 settled up $1.15 at $57.54 a barrel, rebounding from a one-month low under $56. Much of the gains came in the last hour of trade, when Brent jumped almost 70 cents within seven minutes. U.S. crude’s front-month CLc1 closed down 12 cents at $48.17.” (Brent up, US crude down, widening spread after stockpile build)

3/12/2015

6:21 am EDT. Brent climbs on weaker dollar, as traders play the spread, WTI decreased on inventory concerns increasing the spread to $10.Reuters — “Bearish sentiment towards WTI caused by the build in U.S. crude stocks helped to widen the spread, limiting the gains in WTI, said Yusuke Seta, a commodity sales manager at Tokyo’s Newedge Japan.” (Brent oil climbs above $58 as dollar weakens)

U.S. crude glut is overwhelming storage capacity to the point producers may cut prices to refineries to move product. This can led to another drop in WTI prices signaling a floor for production levels. This event will mark the turning point in the market, causing prices to rebound.Bloomberg — “If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping.” (The U.S. Has Too Much Oil and Nowhere to Put It)

A new twist may alleviate some storage capacity concerns, with the reopening of Houston Shipping Channel and possible end to the refinery strike. Reuters — “ The reopening of the Houston Shipping Channel for oil imports and the potential nearing of a deal to end a U.S. refinery workers strike contributed to market bearishness, traders said. “The ship channel opening allows crude to get to refineries and the expectation is that with margins strong, refiners will produce as much as they can and this is putting some pressure on oil futures,” said Phil Flynn, analyst at Price Futures Group in Chicago.” (Oil reverses early gains despite weaker dollar as supply weighs)

2:52 pm EDT. Supply concerns keep driving WTI lower making the spread play more appealing Reuters — “U.S. crude fell after market data provider Genscape estimated a stock build of 2.2 million barrels since Friday in the Cushing, Oklahoma, delivery point for oil, traders said. The estimate came after U.S. government data showing Cushing stocks rose by 2.3 million barrels in the week to Friday.” (Oil down as supply woes offset dollar, Brent-U.S. spread near week high)

3/13/2015

The fundamentals haven’t changed weak demand and continuing oversupply, thus maintaining price pressure to down side. Relief is still targeted for the 2nd half of 2015. In essence nothing fundamentally has changed since OPEC declared its intent to stick with high production, putting pressure on prices, to collapse Shale production. Since then markets have been in trade mode and will continue to response to noise until fundamentals show signs of change. Reuters — “On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however,” the Paris-based IEA said in its monthly report. “Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.” (IEA sees renewed pressure on oil prices as glut worsens).

5:45 am EDT. Prices under pressure on fundamentals, retesting the lower end of their trading rangers on IEA report. Reuters — “Brent for April LCOc1 was down 30 cents at $56.78 by 0530 ET. U.S. crude CLc1 was down 20 cents at $46.85. “The market will be more balanced in the second half, but there is still a massive oversupply in the first half,” said Barbara Lambrecht, analyst at Commerzbank in Frankfurt.””We still expect oil prices to fall in the coming weeks due to rising inventories,” she added. (Brent crude oil slips under $57 as IEA sees worse glut)

1:23 pm EDT. Oil prices hit the lower end of their respective rangesReuters — “Brent LCOc1 fell $1.40, or 2.5 percent, to $55.68 a barrel by 1:09 p.m. EDT, after hitting a one-month low at $55.37. It was on track to a 7 percent drop on the week, its largest decline since mid-January.” (U.S. crude slumps 4 percent on stronger dollar, glut warning) If prices break their resistance price levels without bouncing back, new resistance benchmarks will be in play specifically Brent ($50 — $55), WTI ($40 — $45). However, if prices bounce off of the current resistant levels, prices will retest (bounce around) the lower end of the range. That said, the 2nd half of 2015 remains the expected turning point, of the market.

Rigs fell for the 14th straight week as non-economic producing, less efficient, wells fall. Bloomberg — “Drillers idled 56 oil rigs (excluding gas rigs), dropping the total to 866, Baker Hughes reported on Friday, March 13. The oil rig count is down 46 percent since October, an unprecedented retreat. Oil is headed for its biggest weekly decline since January as production continues to outpace demand and threatens to max out storage capacity. Prices of WTI crude have fallen more than 9 percent this week, to around $45 a barrel, wiping out a rebound in prices that started in late January.” (Oil Rigs Tumble for the 14th Week)

4:30 pm EDT. The trend remains intact, despite the bulls’ effort over the last month, as fundamentals prevail. Reuters — “ Global oil prices tumbled on Friday and fell 9 percent on the week, hit by a renewed rally in the dollar and a warning by the International Energy Agency (IEA) that the oil glut is growing.” Benchmark Brent oil settled near a one-month low below $55 a barrel and U.S. crude settled near a 2–1/2 month low under $45. “We aim to break the year’s low in crude next week,” said Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Hollow, New York. Brent fell to $45.19 in January, while U.S. crude dropped to $43.48.” (Oil drops 9 percent on week on stronger dollar, glut warning)

3/16/2015

Oil prices continue to exhibit weakness, Brent trading below $55 level on global glut concerns. Reuters — “World stockpiles are rising at a rate of 1.6 million barrels per day (bpd), French bank Societe Generale estimates, and it forecasts the build will accelerate to 1.7 million bpd in the second quarter.”Another wave of weakness hit the oil markets last week, and we expect it to continue,” Societe Generale oil analyst Michael Wittner said.” (Oil drops on Iran nuclear talks, ample stocks)

Investors are now heeding the fundamentals as they cut bullish bets to the lowest level in two years. Bloomberg — “Hedge funds and other money managers reduced their net-long position in West Texas Intermediate crude by 2.5 percent in the seven days ended March 10, U.S. Commodity Futures Trading Commission data show. Short wagers rose to a record.” “Oil supplies at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest storage hub, have more than doubled in three months. Tanks nationwide are almost two-thirds full, and the International Energy Agency said March 13 that the glut raised the risk of more price slumps. Production has climbed even as companies idle drilling rigs at a record pace.” (Speculators Least Bullish on Oil Since 2013 as Stockpiles Swell)

OPEC U.S. prices to stay low through the end of 2015 before it has a significant impact on U.S. production. Reuters -”As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015.” (OPEC says low oil prices may hit U.S. output by late 2015)

12:18 pm EDT. Brent falls 3%, WTI at a 6 yr low as fundamentals prevail.Reuters — “The U.S. is aflood with oil and other production points around the world are not letting up in their output. The question is how much more oil can we take before the storage tanks hit capacity?” said Gene McGillian, senior market analyst at Tradition Energy in Stamford, Connecticut.” (Brent down 3 pct, U.S. crude at 6-yr low on growing stocks, Iran talks)

4:09 pm EDT. Oil price ended the day lower. Oversupply remains the issue. Reuters — “The U.S. is aflood with oil and other production points around the world are not letting up in their output. The question is how much more oil can we take before the storage tanks hit capacity?” said Gene McGillian, senior market analyst at Tradition Energy in Stamford, Connecticut. (Oil down 2 percent, U.S. crude hits six-year low on growing stocks, Iran talks)

3/17/2015

Oil continues trending lower. Brent trades below $54 over growing glut.Reuters — “Prices on the other side of the Atlantic fell for a sixth session to just above a six-year low, keeping their discount to Brent at near $10, a trend that analysts say could deepen. “The oil market is currently oversupplied, driven in part by the success of North American shale,” Morgan Stanley said.” (Brent falls below $54 to reverse earlier gains as glut worries drag)

Federal Reserve indicates oil lut continues raise despite fall in price.Bloomberg — “The Fed’s oil extraction index clocked in at a seasonally adjusted 179.8 in February. That’s up 0.4 percent from January and 14.4 percent from a year ago. As Morgan Stanley economist Ted Wieseman put it in a note to clients, the supply/demand imbalance in the oil market “isn’t being addressed yet by lower U.S. supplies.” (Oil Prices May Have Further to Fall)

9:37 am EDT. Oil establishes a new trading range Brent $50-$55; WTI $40-$45 with the trend remaining to the down side. Reuters — “OPEC members are still staunchly producing…and demand from Europe and China are really struggling to pick up,” said Kash Kamal, senior research analyst with Sucden Financial. “The overall tone is quite bearish.” Brent LCOc1, which fell as low as $52.57, was trading at $52.99, down 45 cents, by 1317 GMT. The April contract that expired in the previous session closed down $1.23 after hitting $52.50 earlier on Monday, its lowest since Feb. 2. U.S. crude CLc1, or West Texas Intermediate (WTI), hit a fresh six-year low of $42.63 a barrel before recovering to $43.34, down 54 cents.” (Crude oil weaker, higher U.S. inventory expected)

3:44 pm EDT. Brent ended the day higher, trading off a weaker dollar, traders covering short positions; setting a new trading range, as market awaits Inventory reports Reuters — “The American Petroleum Institute (API), an industry group, will issue its weekly inventory report at 4:30 p.m. EDT (2030 GMT), ahead of Wednesday’s official data from the U.S. Energy Information Administration (EIA).” Brent’s new front-month May contract finished the session at $53.51 a barrel, up 7 cents from the close of $53.44 for the April contract, which expired on Tuesday. U.S. crude settled at $43.46, down 42 cents. Technical charts show brittle support for U.S. crude at above $40, suggesting it could fall to between $37 and $32.” (Brent up, U.S. crude down in volatile trade; stockpiles eyed)

3/18/2015

American Petroleum Institute reported U.S. crude inventories rose by 10.5 million barrels, analysts had expected a 3.8-million-barrel increase. The report pushed prices lower Reuters –” Brent for May delivery LCOc1 was down 47 cents to $53.04 per barrel by 0956 GMT after ending the previous session up 7 cents at $53.51. U.S. crude for April delivery CLC1 fell $1.41 to $42.05 per barrel, its lowest price since 2009.” (Brent slips after industry data shows U.S. stocks at new record high)

Global glut is expected to increase as China slows its build-up reserves and Asian refineries pause for spring maintenances. Reuetrs — “China’s purchases to fill its strategic petroleum reserves (SPR) had been one of the main drivers of Asian demand since August of last year, with the No.2 oil consumer taking up cheap crude to fill its tanks despite slowing economic growth. Yet China could pause its reserve purchases soon as tank sites reach their limits and new space only becomes available later this year.” (Global oil glut set to grow as China slows crude imports)

Oil demand: There is a strong correlation between oil demand and the transportation sector. From a demand perspective it’s important to understand this relationship as demand from this sector is expected to increase in the near term. Reuters — “Cars, trucks, airlines, railways and shipping accounted for 71 percent of total U.S. oil consumption in 2013, according to the U.S. Bureau of Transportation Statistics. Petroleum-derived fuels, including gasoline, diesel, jet fuel and fuel oil, met 97 percent of the transportation sector’s energy needs.” (Transport sector set to give big lift to oil demand: Kemp)

7:23 am EDT. Crude prices trending down Reuters — “Brent for May delivery LCOc1 was down 62 cents at $52.89 per barrel by 1058 GMT after ending the previous session up 7 cents. U.S. crude for April delivery CLc1 fell $1.25 to $42.21 per barrel, after hitting a six-year low of $42.05 earlier in the session.” (Brent oil falls below $53 as industry data shows U.S. stocks at record high)

The U.S. inventory continues to grow Bloomer — “Stockpiles rose 9.6 million barrels, or 2.1 percent, to 458.5 million barrels last week, the EIA reported today. Analysts had expected an increase of 4.4 million barrels. The amount of oil the U.S. is cranking out also rose, for the sixth consecutive week, to a rate of 9.42 million barrels a day. Oil investors have been glued to the levels of storage tanks, which have been climbing steadily since the oil-price crash started last year. American stockpiles are more than 25 percent above their five-year average. Inventories aren’t likely to max out, but even the possibility of that happening is adding pressure to an oversupplied oil market” (U.S. Oil-Storage Glut Expands Faster Than Expected)

12:25 pm EDT. U.S. crude continues its decline on inventory report, however Brent increases on spread play. Reuters — “Brent was up 23 cents at $53.74 a barrel by 12:21 p.m. EDT (1621 GMT). It had fallen almost 90 cents earlier. U.S. crude fell $1.10 to $42.36, after hitting a six-year low of $42.03 earlier.John Kilduff, a partner at New York energy hedge fund Again Capital, said the EIA numbers on U.S. crude builds were “too big a factor to ignore”.”Speculation over storage capacity limits will only increase,” he said.” (Oil markets diverge after another big U.S. stock build, await Fed)

4:12 pm EDT. Oil prices trading off of a weaker dollar ended the day up 5%. The weaker dollar presented a trading opportunity and not a sustainable rebound. The trend remains to the downside. Reuters — “Oil prices jumped as much as 5 percent on Wednesday as the dollar fell after the Federal Reserve indicated it preferred a more gradual path to normalizing U.S. interest rates despite being open to the first rate hike in almost a decade. Brent LCOc1 closed up $2.40, or 4.5 percent, at $55.91 a barrel. It had rallied more than $3 at one point, rebounding from an earlier drop of nearly $1. U.S. crude CLc1 settled up $1.20, or almost 3 percent, at $44.66 a barrel. It had fallen more than $1 in Wednesday’s morning trade after the U.S. government said crude inventories rose 9.6 million barrels to a new record of 458.5 million barrels in the week ended March 13.” (Oil up 5 percent as dollar falls on worry of slow U.S. rate hike)

3/19/2015

5:33am EDT. Market gets a reality check from Kuwait Reuters — “Brent crude oil fell back to $55 a barrel on Thursday after Kuwait said OPEC had no choice but to keep production steady, refocusing the market on global oversupply as the dollar recovered from sharp losses in the previous session.” (Oil falls to $55 as Kuwait comments refocus on oversupply)

India set to buy Iraqi oil to fill its reserves. Reuters — “India’s oil ministry on Tuesday instructed state refiners Indian Oil Corp and Hindustan Petroleum Corp Ltd to each seek two very large crude carriers (VLCC) of Basra oil for arrival in May-June, totalling 8 million barrels, two sources familiar with the matter said.” “It could weaken the price of Brent-linked crudes as traders were expecting India to buy sweet oil for its SPR.

“On the other hand it would be good news for Iraq, which has been struggling to find buyers because of the deteriorating quality of Basra,” Haq said.” (Exclusive: India to import first oil to fill strategic reserves — source)

Just to reiterate, oil storage companies have and continue to profit from the glut. Bloomberg — “While not nearly as famous as giant oil producers like Exxon Mobil Corp. and Royal Dutch Shell Plc, storage companies including Vopak NV, Kinder Morgan Inc., Oiltanking GmbH and Magellan Midstream Partners LP are among those benefiting from rising demand for onshore tanks — and higher prices to rent limited space.

“Storage is king,” said Jean Francois Lambert, global head of commodity finance at HSBC Holdings Ltd. in London. “Good tanking at the right location could make money.” (In a World Awash With Crude Oil, Storage Companies Are Kings)

12:05 pm EDT. Oil prices trending lower on stronger dollar and Kuwait’s comments. Reuters — “Oil prices fell on Thursday as a rebounding dollar and Kuwait’s stance that OPEC had no choice but to keep producing in an oversupplied market undercut a rally from the previous day.” “It’s dollar play all over again today,” said Phil Flynn, analyst at the Price Futures Group in Chicago. “The fact that the oil market is oversupplied is a given, so the only real variable now are currency moves and how they impact commodities demand.” (Oil falls back on dollar, Kuwait stance that OPEC won’t slow output)

4:35pm EDT. Oil ended the day lower on fundamentals and weaker dollar, Reuters — “Brent closed down $1.48 at $54.43 a barrel, after falling $2 at one point. U.S. crude CLc1 settled down 70 cents at $43.96, sliding more than $1.90 earlier.”(Oil falls as dollar up, Kuwait sees OPEC output steady)

3/20/2015

Oil holds its lower trend and is on track for its third consecutive week of losses. Reuters — “Continuously high OPEC supplies, rising U.S. production and inventories are putting pressure and the market is still looking for a floor,” he said, adding he “wouldn’t be surprised” if the current month contract dropped to around $50 in coming weeks.” (Brent oil falls towards $54 on OPEC output, Iran)

Oil industry, especially OPEC, is at the cross-roads as production economics changes. Reuters — “U.S. shale drilling may be slowing, but not fast enough for OPEC to change policy at its June meeting or to prevent oil prices maybe falling more, in the view of the group’s Gulf members.” “”These two years, 2015–16, are still a discovery, everybody is talking about the economics of tight oil but nobody is talking with certainty… you have to wait and see,” said a source from a Gulf OPEC producer.” (OPEC’s Gulf core steels for longer wait, lower prices in shale struggle)

U.S. Shale producers are looking to investors for cash life-line. Bloomberg — “Tapping equity markets has become the best option for companies such as Dallas-based RSP Permian Inc., which announced March 17 it’s seeking to raise as much as $232 million by selling additional shares. Calgary-based Encana Corp. and Noble Energy Inc. of Houston also have issued shares in the past two months to reduce debt. That brings funds raised in the first three months of the year to about $8 billion, more than 10 times the total in the same period last year. As the continued slide in oil prices further crimps cash flows, banks are pressuring these companies to shore up their capital and reduce debt to lower servicing costs and provide wiggle room.” (Shale Producers Have Found Another Lifeline: Shareholders)

Supply Side: The Russian factor samovars, or teapots. Bloomberg — “Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners — known as teapots to those in the industry — get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who’s followed the country’s energy industry for more than 20 years. That would equate to 5 percent growth in shipments, the most in at least a decade.”(Here’s the Next Biggest Threat to Global Crude Oil Prices).

10:36 am EDT. Oil rose as dollar moves lower. It’s back to trading the market as traders cue off the dollar. Reuters — “Brent crude rose above $55 a barrel on Friday and the U.S. benchmark rose by 4 percent after the dollar weakened, causing oil to reverse earlier losses on persistent oversupply concerns.” (Brent oil rises above $55 as weaker dollar offsets supply woes)

Drillers drop 41 more oil rigs (excluding gas rigs) for a total of 825. However, as we’ve been saying, don’t be misled Bloomberg — “production isn’t slowing yet, and new efficiencies in U.S. drilling and pumping may make raw numbers of rigs in the field misleading. The U.S. will pump 9.3 million barrels a day this year, the most since 1972, despite the fewest rigs in the field in almost four years, according to the Energy Information Administration.” (Oil Rigs Fall for the 15th Straight Week and Twitter Nails it Again).

3:26 pm EDT. Oil prices jumped with U.S. crude up 4 percent as the dollar fell. Reuters — “In our view, today’s strength is paper market tightness, unrelated to the physical market,” Tim Evans, energy futures specialist in New York for Citi Futures said, referring to the general view that there was too much oil in the world. Brent’s front-month May contract closed up 89 cents, or 4 percent, at $55.32 a barrel. It rose 1.2 percent on the week. U.S. crude for April settled up $1.76, or 1.6 percent, at $45.72. It gained 2 percent on the week.” (Oil jumps on weaker dollar; U.S. crude up 4 percent)

3/23/2015

6:04 am EDT. Oil moved lower on OPEC comments that they wouldn’t cut production unless other producers outside of OPEC did so and a stronger dollar. Reuters — “Analysts at Barclays forecast on Monday that if OPEC production held near current levels of near 30 million barrels per day (bpd), the market surplus would expand from 0.9 million bpd to 1.3 million bpd. Oil prices have see-sawed, weighed down by concerns of oversupply but boosted by swings in the strength of U.S. dollar ahead of the expected end of years of zero interest rate policy in the United States later this year.” (Oil falls under $55 after Saud Arabia sticks to its guns)

U.S. Refiners going directly to the source, wells, to get a better quality of Crude, as oppose to storage facilities were a blended Crude cocktail is obtained. This leads to an increase in margin profits. Reuters — Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. ““Phillips 66, the nation’s fourth-largest refiner, has added trucks and offloading equipment at several of its refineries to help reduce its reliance on oil coming from Cushing, Oklahoma, the nation’s biggest crude oil crossroads and storage hub. Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field. Phillips 66 executives say operations at its 200,000-barrel-per-day refinery in Ponca City, Oklahoma, only 62 miles (100 km) from Cushing, have improved since it began getting more of its crude directly from wells in the Mississippian Lime shale patch nearby.” (U.S. refiners turn to tanker trucks to avoid ‘dumbbell’ crudes)

The average price of regular gasoline at U.S. pumps declined 3.93 cents, in the two weeks, as U.S. Crude fall to a 6 yr. low. Bloomberg — “Gasoline fell as oil, which makes up a majority of the fuel’s cost, dropped last week to the lowest level since 2009. Lower crude prices in combination with strong gasoline output from U.S. refineries contributed to the decline, according to Trilby Lundberg, the president of Lundberg Survey.“Oil and gas supplies are so ample and more than sufficient to accommodate U.S. gasoline demand,” Lundberg said in a telephone interview Sunday. Prices at the pump “could drop by a few more pennies per gallon.” (Pump Prices in U.S. Slide as Crude Oil Tumbles to Six-Year Low)

11:13 am EDT. Back to trading oil off of dollar weakness, Brent up 55 cents at $55.87 a barrel at 1436 GMT, WTI crude was up 34 cents at $46.91. Reuters — “Oil prices have seesawed in recent days, weighed down by oversupply concerns but boosted by the weakening of the dollar ahead of the expected end of years of zero-interest rate policy in the United States later this year.” (Oil rises to near $56 as weaker dollar offsets Saudi output)

Schlumberger adapting to new industry reality is executing investment strategies based on cash flow generated from production. Reuters — “Going forward, we believe financial prudence, where investments are limited to the cash flow generated by production, will be the new normal for U.S. tight-oil developments,” he said at the Scotia Howard Weil Energy conference in New Orleans. Outside of North America, Schlumberger expects the oil and gas industry’s international spending on exploration and production to drop by 10 to 15 percent in 2015, continuing a trend seen last year. That means, he said, “the global oil market is clearly heading for a tightening … in the second half of this year.” Schlumberger, which has seen its share price fall by about a third since July, would be positioned to take advantage of any uptick in demand for its range of oilfield services, from drilling to fracking, Kibsgaard said.He emphasized that Schlumberger has been generating more free cashflow than its two main competitors, Halliburton Co (HAL.N) and Baker Hughes Inc. (BHI.N), which are in the process of merging. (Schlumberger sees prudence as new normal for U.S. shale oil)

2:00 pm EDT. Traders taking profits push prices lower. Reuters — “”The dollar is under pressure, and we saw buyers coming into the market as a result,” said Tradition Energy senior analyst Gene McGillian.” (Brent crude oil turns lower on fears of oversupply)

3:55 pm EDT. The market remains in trade mode as prices bounce around while trades take advantage of price volatility. Reuter — “U.S. crude futures settled 88 cents up at $47.45 on Monday, a 1.9 percent climb. The price of Brent rose more than 1 percent to settle up 60 cents at $55.92 per barrel. Oil got a boost as the U.S. dollar fell further, adding to its steepest weekly drop in 3–1/2 years. Market watchers have been unwinding long dollar positions since the Federal Reserve indicated last week that a U.S. interest rate hike is likely to come later rather than sooner.”(Oil rises more than 1 percent, boosted by weaker dollar)

3/24/2015

Trading takes a back seat for a minute as fundamentals reappear; sluggish demand, weak Chinese PMI numbers, and oversupply, record output from Saudis pressuring prices lower. Reuters — “Oil prices dropped on Tuesday after activity in China’s factory sector fell to an 11-month low and as Saudi Arabia said its production was close to an all-time high. Considering that the preliminary PMI figures for major crude importers turned out much lower than estimates … we expect both WTI and Brent to end-off today lower,” Singapore-based Phillip Futures said on Tuesday. The PMI drop in China followed an overnight report that Saudi Arabia, OPEC’s biggest producer, was now pumping around 10 million barrels of crude oil per day, a near all-time high and some 350,000 bpd above the figure Saudi Arabia gave to OPEC for its February output.”(Oil drops as Saudi output nears record, China demand worries drag).

Price volatility driven by record inflow of money into investment funds, as Investors bet on prices rebounding, is creating a whip saw effect in the market giving a false sense of prices stabilizing. Reuters — “Those investors and hedge funds, betting on a reversal of oil’s long rout, poured billions of dollars into exchange traded products at the tail end of the slide last year, providing unexpected support that helped prices stabilize. Even as concerns about U.S. storage capacity triggered renewed slide over the past week investors have stuck with the view that a bottom might be in sight, pouring more money into financial products backed by oil futures. There is a risk, however, that their bets could unravel and send oil prices tumbling again because of a market constellation where spot prices may head lower, but storage bottlenecks make futures contracts months ahead more expensive.” (Oil ETF investors, not just OPEC, hold sway over crude market)

5:31 am EDT. Oil prices held below $56 on fundamentals. Reuters — “Brent futures LCOc1 for May delivery were trading down 20 cents at $55.72 at 0856 GMT, while U.S. crude CLc1 dropped 31 cents to $47.14 a barrel. Its discount to Brent CL-LCO1=R widened to $8.58 a barrel. The Chinese data followed comments from OPEC kingpin Saudi Arabia that it is pumping around 10 million barrels of crude per day, close to an all-time high and some 350,000 bpd above the figure it gave OPEC for its February output.”

6:44 Brent rebounds on dollar weakness. Reuters — “The dollar slipped 0.25 percent against the euro, extending losses from the previous session and providing a boost to dollar-priced commodities, which tend to move inversely to the U.S. currency. Brent futures LCOc1 for May delivery were trading up 64 cents at $56.56 by 0620 EDT, while U.S. crude CLc1 rose 60 cents to $48.05 a barrel. Its discount to Brent CL-LCO1=R widened to $8.51 a barrel.” (Oil rebounds towards $57 as weaker dollar overshadows China slowdown)

5:13 pm EDT Reuters — “Brent crude oil fell on Tuesday as the dollar regained its footing against the euro and fears of global oversupply persisted, while U.S. crude was buoyed by strong domestic economic data. Brent futures for May delivery LCOc1 settled at $55.11 per barrel, down 81 cents. U.S. crude oil rose 6 cents to settle at $47.51 CLc1.” (Brent slides, U.S. crude holds flat on resilient dollar)

3/25/2015

5:40 am EDT. American Petroleum Institute reported U.S. Crude rose by 4.8 million barrels in the week to March 20, adding to the oversupply trend. However prices are trading up, given record inflows of money into bullish ETF funds from investors, though the price trend remains to the downside. Reuters — “Analysts from the International Energy Agency and the Organization of the Petroleum Exporting Countries estimate that world oil demand is now running at more than 1.5 million barrels per day below supply on average and say the market is unlikely to balance until the second half of this year. That means several more months of rising inventory levels and the risk of more pressure on oil prices.” (Oil steadies above $55 as U.S., Chinese stocks fill)

Industry insiders are sliding their time horizons for prices to rebound to levels before the market collapsed. Reuters — “Oil prices could hit $100 a barrel by the end of next year, U.S. oil magnate T. Boone Pickens said on Tuesday, revising his previous forecast which said they would reach that level as early as this year.” (Oil to reach $100 a barrel by end of 2016: Pickens)

Price pressure remains high as storage capacity runs low. Reuters — “Stocks “may soon test storage capacity limits”, the International Energy Agency worried in its latest monthly Oil Market Report. “That would inevitably lead to renewed price weakness,” it added. The view is shared by many bearish hedge fund managers and oil analysts, who have watched the steady climb in U.S. oil inventories for 15 consecutive weeks.” (Tank tops? Cushing isn’t the whole oil market: Kemp)

7:26 am EDT. Oil prices trading higher as Germany’s business confidence rises. Reuters — “Germany, Europe’s largest economy, saw business morale rise for the fifth month in a row in March, hitting its highest since July 2014, Ifo’s business climate index showed. Business morale also rose in France to its highest for nearly three years. Brent crude oil LCOc1 was up 18 cents at $55.29 a barrel by 1117 GMT. U.S. light crude oil CLc1 was down 29 cents at $47.22 per barrel.” (Brent oil rises as euro zone morale boost offsets oversupply concern)

Squeezing extra space for storage pushes profit limits. Bloomberg — “That’s where the extra space comes in. There’s the normal “working” capacity. And then there’s “contingency” space, a buffer between the working storage and the tank tops that typically sits empty to keep oil from spilling out. The company that built most of the tanks at Cushing, Oklahoma, the biggest U.S. oil hub, says the buffer is about 3 to 5 percent of storage space. That’s equivalent to about 20 million barrels of room in tanks across the country.“Their sole orientation is capturing the contango, and they’re pushing it as much as possible,” Rashed Haq, vice president at consultant Sapient Global Markets, who worked with a trader in November to model the use of his contingency space, said by phone March 17. “The difference between the working capacity and the tank top could be 1 percent, but that’s 1 percent of margin. That’s pure profit. That’s in the millions.” (The 20 Million Barrels of Pure Profit Sitting in U.S. Oil Tanks)

9:03 am EDT. Trading off dollar weakness crude rises. Reuters — “The euro was up 0.6 percent against the dollar, the currency in which crude oil futures trade. The dollar lost 0.5 percent against a basket of currencies, making dollar-traded commodities more attractive for holders of other currencies. Brent crude oil was up 74 cents at $55.85 a barrel by 1236 GMT. U.S. light crude oil was up 35 cents at $47.86 per barrel.” (Brent oil rises as euro gains against dollar)

U.S. Stockpile rose, for the 11th consecutive week, by 8.2 million barrels for a total of 466.7 million barrels. Bloomberg — “Investors have been closely watching the oil gather in storage tanks, which has been rising steadily since the oil-price crash started last year. Stockpiles are more than 25 percent above their five-year average. Inventories aren’t likely to max out, but even the possibility of coming close is adding pressure to an oversupplied oil market.” “The oil storage in tank farms may rise to about 73 percent, leaving plenty of excess room, according to an analysis distributed today by Morgan Stanley. The buildup of stocks will continue to weigh on investor sentiment, but there should be plenty of room left to prevent a “disaster scenario,” according to the report.” (Oil in Storage Rises More Than Expected Again)

3:11 pm EDT. Oil moved higher, in spite of climbing U.S. stockpiles as it traded off dollar weakness and increase fighting in Yemen. Bloomberg — “Benchmark Brent oil LCOc1 settled up $1.37, or 2.5 percent, at $56.48 a barrel. It had gotten to $57.17 earlier. U.S. crude, also known as West Texas Intermediate, or WTI, CLc1 finished up $1.70, or 3.6 percent, at $49.21 a barrel. The session peak was $49.46. “Fundamentally, it should be a more bearish day in oil after the EIA numbers,” said Tariq Zahir, fund manager and partner at Tyche Capital Advisors in Laurel Hollow in New York. “But there are more buyers than sellers, with people trying to get to the $50 level in WTI.” (Oil up 3 percent on weak dollar, speculative buying, Yemen)

3/26/2015

Oil surges on a knee jerk reaction to accelerated fighting in Yemen.Reuters — Saudi Arabia and Gulf region allies launched military operations including air strikes in Yemen on Thursday, officials said, to counter Iran-allied forces besieging the southern city of Aden where the U.S.-backed Yemeni president had taken refuge. Brent futures LCOc1 were up $2.39 at $58.87 by 0923 GMT, off a session high of $59.78. U.S. crude CLc1 was up $2.18 at $51.39 a barrel, having reached $52.48 earlier in the session. “Geopolitical risk like this has been on the back burner for a while because we’ve been focusing on global oversupply,” said Ole Hansen, head of commodity strategy at Saxo Bank. “This news has not made the oversupply go away. The upside potential is limited unless something escalates. We need to see how this unfolds over the next couple of days,” he said. (Oil prices surge after Saudi air strikes in Yemen)

Anxieties around escalating tensions in the region, Middle East, exacerbating wider sectarian conflict are the major apprehension.Reuters — “There is a big confrontation between Iran and Saudi … This is more evidence that the geopolitical risk in the Middle East has become chronic,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo. Yemen exports about 1.4–1.5 million barrels of Masila crude each month, mainly to China. But a Chinese trade source said that volume was relatively small and could easily be replaced with West African crude.” “Yemeni oil flows through the Marib pipeline, its main export route, at a rate of around 70,000 barrels per day (bpd). Before a series of attacks by tribesmen began against it three years ago, the pipeline carried around 110,000 barrels per day to Ras Isa, an export terminal on the Red Sea. Tribal conflicts and al Qaeda insurgency are disrupting oil and gas exports in other parts of the economy. Saudi Arabia has warned foreign ships from approaching Yemeni ports which could cut the Middle East producer’s crude exports.” (China a big buyer of Yemen oil as export risks rise)

Oil Demand: Transportation sector fuel demand at a record high as economy recovers. (See 3/18/2015 Oil Demand) Reuters — “Traffic on U.S. highways has hit a new record as the economy recovers and the lower cost of gasoline and diesel encourages more travel. Cars and trucks drove a record 3.050 trillion miles on U.S. highways in the 12 months ending in January, passing the previous peak of 3.039 trillion set in the 12 months to November 2007, according to the Federal Highway Administration (link.reuters.com/vyj44w). “”Global demand is definitely growing much stronger than expected. In December, January and especially February ‎it was beyond what forecasts anticipated,” the delegate said. Traffic data tends to confirm that demand is indeed rising much faster than before.” (Record traffic is boosting U.S. fuel demand: Kemp)

12:22 pm EDT. Market remains in rally mode on fears conflict could spread. Reuters — “The military operation against Houthi rebels, who have driven the president from Yemen’s capital Sanaa, has not yet affected oil facilities of major Gulf producers. But fears the conflict could spread has stoked concerns about the security of Middle East shipments, even as analysts and commentators doubt the probability of an all-out war amid continued signs of crude oversupply. Benchmark Brent oil jumped 5 percent early in the session before giving back some of that in European trade as the dollar rebounded from Wednesday’s drop, making commodities denominated in the greenback costlier in other currencies. [USD/]

In New York, Brent LCOc1 was up $2.30, or 4 percent, at $58.78 a barrel by 12:00 p.m. EDT as the dollar held its strength, particularly to the euro EUR=. U.S. crude CLc1 rose $1.60 to $50.81. (Oil up after Saudi air strikes in Yemen; dollar limits gains)

3:12 pm EDT. Reuters — Oil jumped about 5 percent on Thursday, rallying a second straight day, after air strikes in Yemen by Saudi Arabia and its Gulf Arab allies sparked fears of a bigger Middle East battle that could disrupt world crude supplies. Brent LCOc1 settled up $2.71, or 4.8 percent, at $59.19 a barrel. U.S. crude CLc1 finished up $2.22, or 4.5 percent, at $51.43. Oil prices rose 3 percent on Wednesday on a weak dollar. (Oil up 5 percent after Saudi strikes in Yemen; dollar limits gains)

3/27/2015

5:46am EDT. Lessening worries receded over the threat of disruptions to Middle East supplies given escalation in fighting in Yemen. Reuters — ”Goldman Sachs said the bombing of Yemen would have little effect on oil supplies as the country was only a small crude exporter and tankers could avoid passing its waters to reach their ports of destination. North Sea Brent crude LCOc1 was down $1.05 at $58.14 a barrel by 0920 GMT after hitting an intraday low of $57.76. U.S. crude CLc1 was down $1.05 at $50.38 a barrel. The Saudi-led coalition launched more air strikes on Friday against targets in the Yemeni capital of Sanaa, controlled by Shi’a Houthi fighters allied to Iran.” (Oil falls more than $1 as Middle East supply fears ease)

The run up in oil prices was more attributed to short covering rather than major concerns about oil disruption in the region. Reuters — “The jump in oil prices over the past 24 hours therefore says more about the positioning of major financial players in the oil markets than the risk to global oil supplies. Prior to the onset of the air strikes, hedge funds and other money managers had amassed the largest short positions in oil-linked derivative contracts on record. As recently as March 17, hedge funds held futures and options contracts equivalent to 209 million barrels of oil linked to U.S. crude prices and another 95 million barrels linked to Brent prices, according to regulators, betting on a further fall in oil prices. Many bearish hedge fund managers and oil analysts were convinced the rapid rise in crude oil stocks, especially in the United States, would cause a further fall in prices. But when the market is stretched in this way, either short or long, it is very vulnerable to any unexpected news in the other direction. (Yemen fuels short-covering rally in oil)

Rigs fell the least in 15 weeks. Is the oil drill crash tapering? Does it matter? Technology has made production more efficient to the point where using fewer drills hasn’t diminished production. Bloomberg — “But production isn’t slowing yet, and new efficiencies in U.S. drilling and pumping may make raw numbers of rigs in the field misleading. The U.S. will pump 9.3 million barrels a day this year, the most since 1972, despite the fewest rigs in the field in almost four years, according to the Energy Information Administration.” (Oil Rigs Decline by Smallest Number in 15 Weeks)

3:42 pm EDT. Traders using any excuse to take profits, as oil prices fall 5%. Reuters — “Yemen’s conflict looked less likely to disrupt Middle East crude shipments and investors turned their focus to talks for a potential Iran nuclear deal that could put more supply on the market. Brent settled down $2.78 at $56.41 a barrel. U.S. crude settled $2.56 lower at $48.87. Both fell further after the market settled. “The bulls caved after sensing an Iranian nuclear deal might happen by the weekend. Nobody wants to go home long oil on a Friday, with news like this,” said Tariq Zahir, fund manager at Tyche Capital Advisors in Laurel Hollow in New York” (Oil dives 5 percent as worries about Iran talks trump Yemen)

3/30/2015

5:57 am EDT. Oil starts the week lower on dollar strength and possible nuclear deal with Iran. Reuters — “Brent crude LCOc1 was down 40 cents at $56.01 a barrel by 0938 GMT as the market began to price in a deal with Iran. U.S. crude CLc1 was down 80 cents at $48.07. Oil markets are well supplied and recent figures show global production outstripping demand by around 1.5 million barrels per day (bpd), filling oil inventories. “Further downward pressure may come at any time from a nuclear agreement with Iran,” said Michael Wittner, analyst at Societe Generale. “If a framework agreement is reached, we would expect an immediate bearish knee-jerk reaction in the markets, with oil prices quickly losing on the order of $5.” (Oil prices drop on possible Iran deal, dollar)

Fund Managers are coming to grips with the reality that oil prices will remain low into 2016. Reuters — “Hodges, who runs the $2.1 billion Hodges Small Cap fund, is now starting to concede that oil prices will stay low for as long as a year or more because of a global glut. Even the air strikes Thursday in Yemen by Saudi Arabia and its Gulf Arab allies, which prompted a one-day 5 percent boost to the price of oil, presented “a traders move” and doesn’t signal a sustained move up, Hodges said. Oil fell 6 percent today to about $48 a barrel. Instead of looking for a bounce back this year, Hodges is now on the hunt for companies that can take advantage of low prices and are strong enough to withstand a year or more of waiting for oil to be more profitable for producers. It could be two or three years before oil goes back above $70 a barrel, he said.” (Once-bullish fund managers start to capitulate on oil prices )

From a risk perspective, the market is in trade mode and not a sell/buy and hold environment either in a short to medium horizon. Bloomberg — “Hedge funds and other money managers cut their net-long position in West Texas Intermediate crude by 3.8 percent in the seven days ended March 24, U.S. Commodity Futures Trading Commission data show. Futures jumped more than 8 percent in the next two days before dropping 5 percent on Friday as shipping groups said there were no disruptions for now.” (Oil Speculators Focused on Glut Miss Surge as Bombs Hit Yemen)

4:19 pm EDT. Trading off the prospect of an Iranian Nuclear deal Crude prices ended the day lower. Reuters — “Iran and negotiators for the world powers have made progress in their discussions, according to officials following the talks in Lausanne, Switzerland, and many investors believe there will be some sort of an agreement to free Tehran from at least part of the U.S.-led sanctions that have restricted its oil exports.” “”I myself am convinced that this market should be trading a lot lower. But we’re reacting to headlines, and after Friday’s selloff, anything even remotely positive to the bulls could lead to a surfeit of short-covering.” Benchmark Brent oil settled down 12 cents at $56.29 a barrel, after falling $1.21 earlier. U.S. crude finished down 19 cents at $48.68, having slid by $1.26 earlier.” (Oil down as Iran races for Tuesday deadline on nuclear deal)

3/31/2015

4:15 am EDT. Oil extended losses, on the possibility Iran would add to the oversupply glut, pending a possible Nuclear deal and stronger dollar. Reuters — “Iran has built up significant oil inventories and could immediately increase exports if sanctions are lifted,” analysts at ANZ said in a note. Shipping sources say Iran is storing at least 30 million barrels of oil on its fleet of supertankers, as Western sanctions keep a lid on sales. Brent oil LCOc1 was 72 cents lower at $55.57 a barrel by 0807 GMT. The contract had settled down 12 cents on Monday. U.S. crude CLc1 was down 84 cents at $47.84 a barrel, after closing 19 cents lower.” (Oil extends losses as deadline for Iran nuclear deal looms)

5:49 am EDT. Oil continued it’s decent on the final day of nuclear negotiations; if an agreement is inked, Iran’s oil stockpile would be on the market, adding additional downward price pressure. Reuters — “If the flood gates to Iranian crude open, (prices) will probably test this year’s lows again,” Daniel Ang, analyst at Singapore-based brokerage Phillip Futures, told Reuters Global Oil Forum. Iran could increase oil production by around 500,000 barrels per day (bpd) within six months if sanctions are removed, and by an additional 700,000 bpd within another year, according to estimates by Facts Global Energy.” (Oil drops to $55 as Iran nuclear talks intensify)

An Iranian agreement will intensify Asian market share competition between Iran and Iraq. Reuters –“Big Asian refiners, some with plants used to dealing with Iranian oil grades, see themselves buying more from Tehran if sanctions hurdles are removed. They remain customers but the scale of their purchases has been limited by logistical, insurance and diplomatic factors linked to sanctions. China is the main buyer of both Iraqi and Iranian crude.” “If they reach a consensus on the nuclear issue… and the U.S., the West relax controls on Iran’s oil sales, I believe China’s crude imports from Iran will increase,” Wang Dongjin, vice chairman and president of PetroChina, said on Thursday. “If that happens, it will provide more bargaining power to China in terms of importing oil from the entire Middle East,” he said. (More Iran oil post-sanctions, aimed at Asia, may hurt Iraq)

Oil demand: Rising demand from the transportation sector is prompting refineries, motivated by higher profit levels, to buy more crude on the cheap to meet the demand. Reuters — “It is fuel demand, though, that caught markets by surprise as consumers across the world responded with surprising fervor to tumbling prices. The results is that many refiners are outbidding storage-seeking traders for crude, cashing in on some of the highest margins since 2007. U.S. gasoline demand surged 6 percent in January alone, the fastest growth rate since 1993, according to government data, as Americans drove a record number of miles for the month. “If this trend continues toward the summer driving season, margins should support extremely high U.S. refinery run rates,” Barclays analysts said in a report on Monday. Gains in big emerging Asian markets have also surprised, especially as gasoline growth has overtaken that of diesel, traditionally the main driver of the region’s demand. (U.S. may skirt oil storage crisis as drivers hit the road)

OPEC oil output rose in March to its highest level since October as Iraq’s production rebounds — Reuters “OPEC supply has risen in March to 30.63 million barrels per day (bpd) from a revised 30.07 million bpd in February, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants. “Demand might be a bit stronger than expected at the beginning of the year, but I don’t think it is strong enough to absorb the entire oversupply,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “There’s still oversupply in the market, which is reflected in the inventory builds.” (OPEC oil output hits highest since October on Iraq, Saudi)

4:12 pm EDT. Brent Crude ended lower, down 12% for the month. -Reuters “In Tuesday’s session, prices ended off the day’s lows as the United States, Britain, France, Germany, Russia and China faced difficulty in reaching a preliminary nuclear accord with Iran before a Tuesday midnight deadline at the talks in Lausanne, Switzerland. Brent oil LCOc1 settled down $1.18, or 2.1 percent, at $55.11 a barrel, after falling to $54.72 during the session. U.S. crude CLc1 finished down $1.08, or 2.2 percent at $47.60, off its earlier low at $47.28. In the past three sessions alone, oil has lost more than 7 percent on heightened fears that a nuclear deal for Iran would raise the global glut in oil.” (Oil extends losses on Iran talks; Brent ends March down 12 percent)

4/1/2015

5:22 am EDT. Brent trading under $55 on speculation an Iranian nuclear deal will be reached. — Reuters “Talks between Iran and six world powers to settle a dispute around Tehran’s nuclear program extended beyond a Tuesday deadline. Efforts to reach a framework deal were scheduled to continue on Wednesday morning in the Swiss city of Lausanne. Brent crude for May delivery LCOc1 was down 31 cents at $54.80 a barrel by 5.02 a.m. ET. U.S. crude for May delivery CLc1 was trading 53 cents lower at $47.07 a barrel. “If you get an agreement, there is the likelihood of Iranian oil being allowed to hit an already oversupplied oil market and drive prices lower,” said Michael Hewson, chief markets analyst at CMC Markets.Iran currently produces around 2.8 million barrels per day (bpd), according to a Reuters survey, although Western sanctions limit exports to 1 million bpd. It keeps around 30 million barrels of crude on its fleet of oil tankers ready to be sold if possible.” (Oil prices slip under $55 as Iran talks extend beyond deadline)

China’s oil storage in question, its impact on imports and its effect on market price pressure. Reuters — “It’s widely accepted in the oil market that China is importing more crude than it actually uses, or re-exports as refined products, and that the extra is flowing into both strategic and commercial storage sites. What is less known is how much capacity is left in these tanks, when they are likely to be full and the rate at which new facilities are being built. A trading executive at top Chinese refiner Sinopec weighed into the issue on March 25, saying China’s commercial and strategic storage is almost full. Perhaps showing how sensitive the issue is, the executive requested not to be named despite speaking to reporters at an industry event. If the Sinopec official is correct, it almost certainly will lead to slower growth in China’s crude imports, thus putting downward pressure on global prices given China’s status as one of the few centers of significant demand growth.” (China oil storage flows key for crude imports: Russell)

Oil Demand: A reminder; Transportation sector’s demand for fuel is growing globally, in response refiners encouraged by high profit margins, are rushing to buy crude in response to rapid rise in U.S. travel and soaring Chinese demand for vehicular fuel. Reuters — “It is fuel demand, though, that caught markets by surprise as consumers across the world responded with surprising fervor to tumbling prices. The results is that many refiners are outbidding storage-seeking traders for crude, cashing in on some of the highest margins since 2007. U.S. refiners processed 15.5 million barrels per day (bpd) of crude in the week to March 22, a record for this time of year and nearly 450,000 bpd above last year’s previous high, government data show. They are expected to restart nearly 400,000 bpd of refining capacity this week and almost 300,000 bpd the week after as spring maintenance season winds down early, according to data from IIR Energy made available to Reuters.” (U.S. may skirt oil storage crisis as drivers hit the road)

Reminder — see 2/27/2015 (OPEC maybe losing market share to Mexico) — Saudis facing more competition for Latin American producers — Bloomberg — “Ships carrying oil from Mexico docked in South Korea this year for the first time in more than two decades as the global fight for market share intensifies. Latin American producers are providing increasing amounts of heavy crude to bargain-hungry Asian refiners in a challenge to Saudi Arabia, the world’s largest exporter and the region’s dominant supplier. “By diversifying, more Asian refiners will be able to reduce the clout that Saudi Arabia has on the market,” said Suresh Sivanandam, a refining and chemical analyst with Wood Mackenzie Ltd. in Singapore. “They will be getting more bargaining power for sure.” (The Saudis Are Losing Their Lock on Asian Oil Sales)

WTI Crude rallies on report that U.S. crude production declined from its highest levels. Bloomberg — “Futures rose as much as 3.6 percent in New York. Output fell 36,000 barrels a day to 9.39 million in last week, the Energy Information Administration said. That’s down from 9.42 million on March 20, the most in weekly estimates that started in January 1983 by the Energy Department’s statistical arm. Crude stockpiles gained 4.77 million barrels to 471.4 million as gasoline supplies fell 4.26 million to 229.1 million. “The market really wants to believe this is the start of a sustained drop in production,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $126 billion of assets, said by phone. “I don’t see it though and think we’ll continue to see supplies build.” (Iran Nuclear Envoys Seek Impasse Solutions After Deadline Missed)

Oil climbed 5% on lower production report, fuelling speculation that we may be at the cusp of production levels. Reuters — “Crude production in the United States dropped 0.4 percent to 9.4 million barrels per day (bpd) in the week to March 27, the first weekly decline since the end of January, data from the Energy Information Administration showed. Domestic inventories rose 4.8 million barrels last week to 471.4 million barrels, hitting record highs for a 12th straight week, the EIA said. [EIA/S]” (Oil jumps after U.S. output drop as Iran talks drag)

4/2/2015

Oil slips on extension of Iran’s nuclear negotiations. Reuters — “Negotiations on Tehran’s disputed nuclear program have stretched well beyond a self-imposed March 31 deadline, with diplomats saying the chances of a preliminary accord in the next few hours are finely balanced. Tehran is hoping for a deal that will end crippling economic sanctions and allow it to sell millions of barrels of oil, some of it stored at sea in supertankers and ready for delivery.” (Oil eases below $57 as Iran, big powers negotiate)

Supply: The drop in the number of rigs in production is at pivotal point where it can begin to affect production. Reuters — “Energy producers responded quickly to a steep drop in oil prices over the last six months, idling nearly 800 rigs, or 50 percent of a 1,609 peak hit in October. But the decline, which followed a 7-month oil price rout, has slowed in recent weeks, a sign that the rig count could be approaching its low point. Some reckon that a 50–60 percent drop is as far as it will fall. “Production companies are in a holding pattern for now,” said Eric Lee, analyst at Citi in New York. “It could be the beginning of the flattening of the decline in the rig count.” (U.S. oil rig count approaches low point after large drop)

U.S. Inventories remain on an incline for 12th straight week, while gasoline stocks fell more than four times than expected. Reuters –“Crude inventories rose 4.8 million barrels to 471.4 million in the week to March 27, compared with analysts’ expectations for an increase of 4.2 million barrels. Gasoline stocks fell 4.3 million barrels, far more than analysts’ expectations in a Reuters poll for a 943,000-barrel drop. Gasoline demand over the past four weeks was up 1.9 percent from a year ago. “The large decline in gasoline inventories is notable, as is the four-week average demand of 9 million barrels per day, which is strong,” said John Kilduff, partner, Again Capital LLC in New York. “Clearly, there is a demand response underway by consumers to the low retail price.” — See Demand: on 3/18, 3/26, 3/31 & 4/1. (U.S. crude inventories at record highs, gasoline supplies tumble: EIA)

Oil tumbled ~ 5% on Iranian nuclear framework of a “future comprehensive deal” to be agreed by June 30 at which time the sanctions would be lifted. Reuters — “Iran is banking on a deal that would remove Western sanctions on its oil exports. The OPEC nation produces about 2.8 million barrels per day, according to a Reuters survey, but exports only 1 million bpd because of sanctions. It is keeping about 30 million barrels of crude on a fleet of tankers ready to be shipped when allowed, into a market already flooded with supply.” (Framework for final deal reached at Iran nuclear talks)

4/3/2015

With the framework accord, Iran isn’t expected to increase its exports until 2016. Reuters — “By ensuring that sanctions remain intact until Western powers are satisfied Tehran is adhering to the terms, and giving negotiators until June 30 to hammer out a comprehensive agreement, the deal offers little chance for any significant increase in exports until 2016. While global Brent oil prices tumbled as much as 5 percent on Thursday to $54 in anticipation of a deal that could allow Iran to begin selling more crude within months, traders later began weighing the timing of that return. Brent traded at more than $55 a barrel by day’s end. Verifying compliance by Iran, once the world’s fifth-largest oil producer, will “likely take many months after implementation, which itself is likely to slip from the June 30 target,” said Bob McNally, president of energy research group Rapidan Group and a former adviser to President George W. Bush.”(Nuclear deal means more Iran oil — just not this year)

Oil ended down 4% (4/2) in a knee-jerk reaction to the Iranian framework agreement — Reuters “Brent oil fell nearly 4 percent on Thursday after a preliminary pact between Iran and global powers on Tehran’s nuclear program, even as officials set further talks in June and analysts questioned when the OPEC member will be allowed to export more crude.” “I think the market over reacted and is now sitting back a little to think there is a lot more work to be done,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.” (Oil falls nearly 4 percent after tentative nuclear deal for Iran)

4/6/2015

Saudis raise prices in Asia — Bloomberg — “State-owned Saudi Arabian Oil Co., known as Saudi Aramco, raised official selling prices for Asia for a second straight month as refiners that buy its crude earned more for turning oil into gasoline and diesel. The country’s oil minister said global demand was improving as lower prices boost use.“The drive for Aramco to raise prices is the improvement in the refining margin for gasoline and diesel,” Essam al-Marzouk, a Kuwait-based analyst and former vice president for Europe at Kuwait Petroleum International, said by e-mail Sunday. “The Saudis have established good market share in Asia and are less worried by competition from other producers than they used to be early in the year.” (Saudis Raise Oil Pricing to Asia as Refining Margins Improve)

5:11 am EDT. Brent up as Saudis increased their prices to Asian customers, suggesting increase demand. I often wonder if the Saudis are gaming the market. — Reuters “Oil futures climbed more than $1 a barrel on Monday, after Saudi Arabia raised its prices for crude sales to Asia for the second month running, signaling improved demand in the region.” (Oil up more than $1 after Saudi’s Asia price hike)

Demand: Keep watching, Transportation sector and Refiners (see Demand: 3/18, 3/26, 3/31, 4/1 & 4/2) — Bloomberg “Refiners are poised to make gasoline at a record pace this year, keeping the biggest U.S. crude glut in more than 80 years from overflowing storage. They’re enjoying the best margins in two years as they finish seasonal maintenance of their plants before the summer driving season. They’ll increase output to meet consumer demand and they’ve added more than 100,000 barrels a day of capacity since last summer, when they processed the most oil on record.” (Record Gasoline Output to Curb Biggest U.S. Oil Glut in 85 Years)

Are lower oil prices and a stronger dollar, having a major negative impact on corporate balance sheets? As reflected in the poor jobs report. Keep an eye on this earning season. — Bloomberg “First-quarter earnings per share for companies in the Standard & Poor’s 500 Index may have fallen about 5.8 percent, according to estimates compiled by Bloomberg, in the first year-over-year decline since 2009’s third quarter. As earnings season gets its unofficial start this week with Alcoa Inc., the biggest drag will come from a 63 percent profit decline at energy companies. Oil prices have fallen by about half from a year ago as companies pumped their way into a global glut, and the dollar’s climb of about 25 percent against a basket of currencies since last summer has chipped away at revenue for companies such as United Technologies Corp. “There are all these cross currents going on right now heading into earnings season,” said Todd Lowenstein, who helps manage $16 billion at HighMark Capital Management Inc. “You’re going to have at least on paper a technical earnings recession, meaning two consecutive quarters of negative growth, in the first and second quarters.” (Oil Slump Pushes S&P 500 Toward First Profit Decline Since 2009)

On the other side of the coin, small cap companies are expected to withstand the oil dollar head winds better than their big cap counter parts. — Bloomberg “Falling profit expectations for larger companies have diverted investors’ attention to the smaller ones, which reap more of their business from North America, says Randy Frederick at Charles Schwab Corp. “As we go into earnings season, the most impacted will be those in the energy sector and those with international exposure, which would be bigger companies,” said Frederick, managing director of trading and derivatives at Charles Schwab. “Smaller companies tend to be underexposed to international sales.” (Hedge Funds Pare Russell 2000 Shorts as Cost of Protection Drops)

1:09 pm EDT. Oil jumps 5% on slower U.S. inventory buildup and realization Iranian Crude wouldn’t be hitting the market until sometime next year. — Reuters “People betting on Iran’s oil arriving tomorrow realize they may have to wait up to a year,” said Phil Flynn, analyst at Price Futures Group in Chicago. Oil extended gains after industry intelligence group Genscape reported that stockpiles at Cushing, Oklahoma, barely rose last week, according to traders. It would be the smallest increase since November at the delivery point for the U.S. crude contract traded on the New York Mercantile Exchange.” (Oil leaps 5 percent on tempered Iran view, slower U.S. inventory rise)

3:29 pm EDT. Oil ended the day up 5% on same issues, Iran and U.S. Inventory. Reuters — “Brent May crude LCOc1 rose $3.17, or 5.77 percent, to settle at $58.12 a barrel, its biggest one-day percentage rise since surging 7.8 percent on Feb. 13. U.S. May crude CLc1 rose $3, or 6.11 percent, to settle at $52.14, the biggest percentage gain since gaining 7 percent on Feb. 3.” (Oil jumps 5 percent on tempered Iran view, slower U.S. inventory rise)

4/7/2015

Oil prices to remain under pressure for months to achieve a slowdown in U.S. output growth, Goldman — Reuters “Goldman said in a research note it expected U.S. crude inventories to top out in April and subsequently draw down at 350,000 barrels per day during May-September, when demand for fuel to power cars and air conditioners is at its greatest. Still, the bank said it saw little upside for its $40 a barrel forecast over the next three months as inventories would likely rise again by October, pressuring prices into 2016. “Prices need to remain low in coming months to achieve a sufficient and sustainable slowdown in U.S. production growth,” the bank said, adding that the U.S. production outlook for 2016 makes its forecast for $65-a-barrel oil next year look too high. (Oil prices fall; Iran, China to discuss supplies)

After reaching a framework nuclear deal, Iran and China in talks to quickly ramp up exports once scansions are lifted. Reuters — “China, Iran’s largest trade partner and oil client, has bought roughly half of Iran’s total crude exports since sanctions against Iran were tightened in 2012. Iran, once the No.2 exporter of the Organization of the Petroleum Exporting Countries (OPEC), is looking to ramp-up its exports quickly after sanctions are lifted. Ahead of Zanganeh’s visit, Amir-Hossein Zamaninia, Iran’s deputy oil minister for commerce and international affairs said that he and his colleagues would discuss China’s oil and gas projects in Iran. Officials from state-run National Iranian Oil Company (NIOC) will meet with China’s biggest crude buyers. The NIOC and other officials are expected to meet with regular customers Unipec, the trading arm of top Asian refiner Sinopec Corp, and state trader Zhuhai Zhenrong Corp, which started taking Iranian crude in the mid-1990's when Tehran sought to repay arms purchases with oil.” (Iran oil officials in Beijing to discuss oil supplies, projects)

Cheap oil dragging down property values in Energy hubs. — Bloomberg — “More than $1 trillion in U.S. real estate debt from the last decade’s property boom is starting to come due as oil prices stagnate, squeezing property owners in cities and towns centered around the energy business. “It is going to be harder and more costly for borrowers in energy hubs to refinance loans in today’s environment, versus when oil was $100 a barrel,” Andy McCulloch, an analyst at Newport Beach, California-based Green Street, said in an e-mail. “Just how much harder or costly will depend.” Even as U.S. commercial real estate values surge past records set in 2007, with cash from around the globe pouring into the best buildings in the biggest cities, lenders are becoming more cautious in regions that rely heavily on the oil industry for growth. That could create higher hurdles for borrowers that need to refinance mortgages in places such as Texas and North Dakota, according to Andrea Bryan, a managing director at New York-based financial-services consulting firm NewOak Capital LLC. (Cheap Oil Is Squeezing Property Owners in Energy Hubs)

Saudis raises prices in May to Asia — Reuters “Saudi Arabia, the world’s top crude exporter, raised the prices for all the grades it will sell to Asia in May, increasing levels for the second straight month as robust refining margins supported demand in the region. “Even though it’s a slight increase, overall it’s still a discount,” said Shunling Yap, a senior oil and gas analyst at BMI Research. “There is still competition for the Asia market, even though it is also a sign that some of the production elsewhere is less able to compete in the market right now.”(Saudi Arabia raises crude prices to Asia for May for second month)

4/8/2015

Downward pressure on oil prices as glut remains a concerns. — Reuters “Oil prices fell towards $58 a barrel on Wednesday as industry data showed a larger-than-expected weekly increase in U.S. stockpiles and as Saudi Arabia reported record output in March”. “We’re going to need to see a very big uptick in demand to offset that supply,” Ben Le Brun, analyst at OptionsXpress in Sydney, said. “There is a glut of supply in oil at the moment.” (Oil falls on U.S. stock build, record Saudi output)

Consolidation within the industry beings as Royal Dutch Shell (RDSa.L) agreed to buy smaller rival BG Group (BG.L) for $70 billion in the first major oil industry merger in more than a decade. — Reuters “Anglo-Dutch Shell will pay a mix of cash and shares that values each BG share at around 1,350 pence ($20), the energy companies said on Wednesday. This is a hefty premium of around 52 percent to the 90-day trading average for BG, setting the bar high for any potential rival bidders. The biggest merger this year will give Shell access to BG’s multi-billion-dollar operations in Brazil, East Africa, Australia, Kazakhstan and Egypt. These include some of the world’s most ambitious liquefied natural gas (LNG) projects.” (Shell offers 50 percent premium to buy BG for $70 billion)

As we head into earning season, low oil prices and strong dollar is expected to dampen the balance sheets, of multi-national and energy base companies. — Reuters “Though there has been some selling in recent weeks, there’s been no panic dumping of stocks, even though forecasts for S&P 500 first-quarter earnings have tumbled since Jan. 1, thanks to the surging dollar, falling oil prices and another severe winter. The earnings season unofficially kicks off Wednesday with results from aluminum company Alcoa (AA.N). Among some key early results, JPMorgan Chase (JPM.N) is due to report next week along with other banks and General Electric (GE.N). First-quarter S&P 500 earnings are projected to have declined by 2.8 percent from a year ago, which would make the quarter the worst for results since the third quarter of 2009, not long after the United States emerged from the Great Recession, according to Thomson Reuters data. (Wall Street sanguine as it heads into worst earnings season in six years)

7:00 am EDT. Oil falls on U.S. stockpile buildup. — Reuters “Oil prices fell towards $58 a barrel on Wednesday as industry data showed a larger-than-expected weekly increase in U.S. stockpiles and as Saudi Arabia reported record output in March. The decline in prices followed a rally on Tuesday, when U.S. crude approached 2015 highs following strong jobs data and government forecasts for lower U.S. crude production growth and higher global demand for oil.”(Oil falls on U.S. stock build, record Saudi output)

One of the main reasons the Oil market is so erratic is the record in-flow of money and bullish sentiment, by the average investor, as reflected in $5.4 billion ETFs long the sector. — Bloomberg “Exchange-traded funds tracking oil and gas shares have absorbed $5.4 billion in 2014, the most inflows among 12 groups tracked by Bloomberg. In the options market, contracts that pay off should an ETF tied to the Dow Jones U.S. Energy Sector Index fall are at the lowest level since early January. Strategists are forecasting a 63 percent contraction in first-quarter earnings for energy companies in the S&P 500, after predicting expansion as recently as October, Bloomberg data show. That shift, spurred by an almost 60 percent drop in crude, presents an opportunity for investors looking for companies that might be able to beat profit predictions, said Terry Morris of National Penn Investors Trust Co. “It wouldn’t surprise me if we find out that we’ve notched expectations down a little too far,” Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust, said by phone. “You may see energy companies report terrible earnings but rise because it’s already built in.” (ETFs Show $5.4 Billion Riding on Recovery in U.S. Energy Stocks)

WTI stockpile increased more than expected, 10.9 million barrels, Analyst predicted 3.4 million. Reuters “U.S. crude stocks surged by nearly 11 million barrels last week, the biggest gain in 14 years, as imports jumped, while gasoline stocks unexpectedly increased and distillate inventories dipped, data showed on Wednesday. Crude inventories USOILC=ECI rose by 10.9 million barrels in the last week, compared with analysts’ expectations for an increase of 3.4 million barrels, according to data from the Energy Information Administration.” (U.S. crude oil stocks surge 11 million barrels, biggest rise since 2001)

Oil prices plunge 6% on very bearish inventory numbers. — Reuters “U.S. crude oil inventories surged 10.95 million barrels — three times more than expected — to a modern-day record 482.39 million last week, U.S. government data showed, the biggest one-week increase since 2001. Stockpiles in Cushing, Oklahoma, rose by 1.2 million barrels, much more than expected. The data added to earlier losses triggered by comments that Saudi oil production rose to 10.3 million barrels per day (bpd) in March, the highest monthly total on record. Brent May crude fell $3.55, or 6 percent, to settle at $55.55 a barrel. U.S. May crude fell $3.56, or 6.6 percent, to settle at $50.42 after closing at nearly $54 a barrel on Tuesday, the highest close since Dec. 30. The U.S. data were “very bearish,” said John Kilduff, partner at Again Capital LLC in New York. The rise in crude stocks was fueled in part by a 869,000-bpd increase in imports. Gasoline inventories rose 817,000 barrels, compared with analysts’ expectations for a 1.0 million-barrel drop, as refiners increased capacity utilization” (Oil dives 6 percent from 2015 high as stocks swell, Saudis pump)

4/9/2015

When is oil production expected to peak? Reuters — “Energy industry intelligence service Genscape uses cameras placed along pipelines to gauge energy use by the big pumps needed to force crude down the pipe, another source of real-time data that helps calculate production figures, said Jodi Quinnell, manager of crude analytics at Genscape. The company expects production to peak at 9.5 million bpd in April — slightly above EIA’s 9.44 million estimate — before heading down.” (U.S. oil output is falling! Or maybe not — market’s data quandary)

Energy Information Administration (EIA), U.S. crude production will peak this month, according to revised forecasts “Output will average 9.37 million barrels per day (bpd) in April and the same in May before falling to 9.33 million bpd in June and 9.04 million bpd by September, the EIA predicted in the April edition of its Short-Term Energy Outlook (STEO). Production is expected to peak a month earlier and 10,000 bpd lower than the EIA forecast in the January STEO, reflecting continued low wellhead prices and a sharper-than-expected slowdown in new well drilling.”( U.S. oil production is probably peaking right now: Kemp)

5:45 am EDT. Prices rebound 2% on high volatility. Reuters — “Brent crude LCOc1 was up $1.50 at $57.05 a barrel by 5.37 a.m. EDT, while U.S. crude CLc1 was up $1.25 at $51.67. Both benchmarks dropped around $3.50 on Wednesday. “Brent fell to the bottom of its $55 to $60 trading range yesterday and has consequently turned higher,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank. “Huge volatility has been the name of the game in the past few days,” Fritsch added. Close-to-close price volatility for Brent is at levels last seen during the height of the global financial crisis of 2008/2009, Reuters data show.”

Refinery production efficiency is generating and changing the shipping business (supertankers) landscape. Reuters — “Vessels previously used for crude are starting to carry products instead and new vessels are being purpose-built to carry larger quantities of oil products more efficiently.

Trading powerhouses such as Vitol, Total and Shell have already booked vessels that can carry as much as 1 million barrels — more than three times the typical size for oil products — to criss-cross the globe, sailing from the Middle East to Ecuador, Morocco to Japan and back again.”(Refineries revolution to spur use of oil products supertankers )

Financial institutions that sold protection (hedges) to oil production drillers are expected to make good if prices continue to remain low. — Bloomberg “For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market — as long as prices stay low. Though it’s difficult to determine who will ultimately lose money on the trades and how much, a handful of drillers do reveal the names of their counterparties, offering a glimpse of how the risk of falling oil prices moved through the financial system. More than a dozen energy companies say they buy hedges from their lenders, including JPMorgan, Wells Fargo, Citigroup and Bank of America. Danielle Romero-Apsilos, a Citigroup spokeswoman, said the bank actively hedges and manages its risk. Representatives of JPMorgan, Wells Fargo and Bank of America declined to comment.” (The Oil Industry’s $26 Billion Life Raft)

How is the shipping sector changing? Bloomberg — “Private-equity investments in shipping plunged 55 percent last year from a record $7.5 billion in 2013, and there have been no new deals reported in 2015, according to Marine Money, an industry newsletter.” “Oaktree invested more than $2 billion in tankers, bulkers and container ships through debt and equity since 2010, according to data compiled by Marine Money. Oaktree, based in Los Angeles and managing $90.8 billion, declined to comment via Alyssa Linn, an external spokeswoman at Sard Verbinnen & Co. “They realize they’re not going to make those returns in the time frame they’re used to,” Harry Theochari, the global head of transport for law firm Norton Rose Fulbright in London, said generally of private-equity investors in shipping. “You may find private-equity guys dumping and moving on if they see any kind of upturn.” “Supertankers got a boost as the 47 percent collapse in oil prices since June stimulated demand, with rates rebounding to an almost four-year high at the end of 2014. Still, daily rates for the ships, also known as very large crude carriers, are now just $34,476, compared with $148,000 in 2008. Rates to hire carriers of liquefied natural gas, once a bright spot in the slumping industry, are now the lowest since 2010 as new vessels joined the fleet before facilities to export the fuel were finished, according to data from Poten & Partners Inc., a New York-based shipbroker. The Baltic Dry Index, a measure of costs to ship iron ore, coal and grains, reached a record low in February.” (Private Equity’s Big Bet on Shipping Falters as Deal Boom Ends)

3:31 pm EDT. Reuters — “Oil prices rose on Thursday on strong German economic data and uncertainty about negotiations on Iran’s nuclear program, even as a strong dollar curbed oil’s bounce a day after futures tumbled 6 percent. Brent crude rallied 4 percent intraday as European equities strengthened on German industrial output and trade data and Greece’s repayment of a loan to the International Monetary Fund.” (Oil up on Iran, German data, but strong dollar curbs rise)

4/10/2015

5:27 am EDT. Prices lower on fundamentals — Reuters “Most of the fundamental factors are still pointing to lower prices,” said Eugen Weinberg, analyst at Commerzbank. “At the moment, we have an oversupply of more than 1 million barrels per day.” (Oil slips further below $57, still heads for weekly gain)

Is the Shell deal a signal prices are at a level, where we can expect an increase in M&A activity? Reuters “Things may be changing,” said Rich Eychner, an equity research associate at Raymond James in Houston. “Since the meltdown, the bid-ask spread has been too wide. So maybe this is hinting some deals could start moving forward.” There are literally dozens of shale oil and gas companies in the United States. Many have responded to the oil price slide by announcing spending cuts of 25–70 percent in a bid to conserve cash and show investors they have staying power.” (Shell’s BG purchase could be catalyst needed for U.S. shale deals)

Shell’s deal another nail in coal’s coffin as Gas reign supreme. — Bloomberg “Consider Royal Dutch Shell Plc’s recent $70 billion acquisition of BG Group Plc — clearly a huge bet that natural gas will prove to be its cash cow of the future. The petroleum industry’s move toward gas is hardly new — the hydraulic fracturing shale revolution is in its second decade, after all. Still, Shell’s move is an emphatic confirmation that some among the Big Oil family firmly believe gas will play a growing role in meeting the energy demand of emerging countries such as China and India that are trying to move away from dirtier coal.” (Shell’s Bet on Gas Underscores Big Oil’s Push to Replace Coal)

Iran rising concerns regarding OPECs production strategy — Reuters “It seems (OPEC’s strategy of not cutting output) does not work well, because prices are coming down,” Zanganeh told Reuters on Thursday during a visit to Beijing. “We haven’t witnessed stable situations on the market.” Iran was among the OPEC members that wanted an output cut at OPEC’s last meeting, in November. But the Gulf OPEC members, who account for more than half of the group’s output, refused to cut without the participation of non-OPEC producers.” (OPEC’s no-cut strategy is not working, Iran says)

Oil discovery in UK is estimated at 158 million barrels per square mile. — Reuters “We think we’ve found a very significant discovery here, probably the largest (onshore) in the last 30 years, and we think it has national significance,” the company’s chief executive said in the BBC interview. The company described the Weald Basin discovery as “a potentially strategic asset for the UK” and went on to say “the key thing about this discovery is about what Britain and the British government want to do about this strategic asset” (Oil wells in England’s green and pleasant land: Kemp)

1:42 pm EDT. Oil ends the week on the upside, pushed by bullish sentiment — Reuters After posting a loss last week, Brent was on track for its third weekly gain in four weeks and U.S. crude was on pace to post a fourth consecutive weekly rise. “The latest agreement with Iran does not open the floodgates for a significant return of Iranian oil on the market as many had feared,” said Harry Tchilinguirian, head of commodity markets strategy and oil strategy at BNP Paribas. (Oil rises, heads for weekly gain as Iran tensions support).

Shale production cutbacks continue as the largest number of rigs, 42, was cut in any month. — Bloomberg “Drillers idled 42 oil rigs (excluding gas rigs), reducing the number to 760, Baker Hughes reported on Friday. The rig count has dropped 53 percent since October, an unprecedented retreat, as the decline in oil prices has made production less profitable. The median forecast from a Bloomberg survey of 11 #RigCountGuesses on Twitter was for a reduction of 9 rigs. But production isn’t slowing yet, and new efficiencies in U.S. drilling and pumping may make raw numbers of rigs in the field misleading. The U.S. will pump 9.2 million barrels a day this year, the most since 1972, despite the fewest rigs in the field in almost four years, according to the Energy Information Administration.” (Oil Rigs Tumble Again, Showing the Cuts Aren’t Over Yet)

4/13/2015

5:48 am EDT Oil up nearing $59 mark; the market will be in trade mode, as volatility is high, expect prices to bounce around on bullish sentiment, decreasing production and bearish oversupply issues. — Reuters “We found a bit of a momentum this morning,” said Ole Hansen, head of commodity strategy at Saxo Bank. “The U.S. rig count once again focused people’s minds on the imminent reduction of production. The market’s choosing to not focus on the ample supply we have at the moment.” Prices rose by more than a dollar between 0715 GMT and 0810 GMT (12.10 a.m. ET) on Monday, which was a result of traders covering short positions, said analysts. “If the market rises a lot then a lot of short covers come into the market. It’s the same when prices fall,” said Ken Hasegawa, commodity sales manager at Newedge.” (Oil rises towards $59, supported by U.S. drilling slowdown)

Heavy long inflow of money into the market, as bulls bet production finally will slow. — Bloomberg “Hedge funds boosted net-long positions on West Texas Intermediate crude by 30 percent in the seven days ended April 7, the biggest jump since October 2010, U.S. Commodity Futures Trading Commission data show. Long bets rose to a nine-month high, while shorts tumbled 21 percent. U.S. crude output and inventories may peak this month amid a record drop in rigs exploring for oil, Goldman Sachs Group said. Refiners returning from seasonal maintenance will add about 500,000 barrels a day of demand by July, the Energy Information Administration forecast, helping ease the biggest glut in 85 years. “We’re starting to see production flatten out and soon should begin to see it decline,” Mike Wittner, the head of oil market research at Societe Generale SA in New York, said by phone April 10. “We’ve seen an incredible drop in the rig count.”( Oil Bulls Boost Wagers by Most Since 2010 as Output Seen Peaking)

If sanctions are dropped, Iran isn’t expected to be at full production before 2020. — Reuters “World oil markets will not see a significant rise in Iranian supplies for up to five years even if the OPEC member and world powers clinch a final nuclear deal by end-June, Fatih Birol chief economist and future head of International Energy Agency (IEA) said. While the likelihood of an immediate jump in Iranian supplies looks slim, the chance of a steep fall in deliveries from other regions is rising as IEA estimates companies will cut investments by as much as $100 billion in 2015 in oil exploration and production due to lower prices.” “In three to five years we may see stronger (oil production) growth coming from Iran assuming Iran and global powers strike a final deal in June,” Fatih Birol, who will head the IEA from September, told Reuters in an interview in New Delhi. (IEA sees sharp rise in Iran oil output in 3–5 years post nuclear deal)

Oil Companies’ balance sheets sensitivity to price changes — Reuters “A Reuters examination of corporate filings by some of the biggest players in the industry, including BP (BP.L), Shell (RDSa.L) and France’s Total (TOTF.PA), shows the sensitivity of these companies’ earnings to changes in oil prices has risen in recent years. This means that for every dollar the oil price drops, their profits sink more than they might have done five years ago. Of course, that wasn’t the plan. Choices made by several oil majors that built more exposure to prices into their portfolio, mainly through the kinds of contracts they opted to sign, was aimed at enjoying prices that were historically high.” (Oil companies’ profits hit by quest for crude price exposure )

Oil companies reorganizing their balance sheets to new lower oil price reality — Reuters “ConocoPhillips has hired Wells Fargo (WFC.N) to sell some of its noncore U.S. assets, the people said on Monday. These assets include oil and gas properties in the Rockies, East Texas, South Texas and Northern Louisiana, according to one of the people. While the value of the assets up for sale could not be learned, industry sources said they expected ConocoPhillips to sell between $1 billion and $2.5 billion worth of noncore assets in the United States A couple of other big companies have also started to explore a sale. Anadarko Petroleum Corp (APC.N) has put a few hundred million dollars worth of East Texas acreage up for sale with Citigroup Inc (C.N), according to people familiar with the matter. Anandarko and Citigroup representatives did not respond to requests for comment.” (Exclusive: ConocoPhillips to launch U.S. asset sales — sources)

4:05 pm EDT. Oil closed off its intra-day highs as traders take profits. — Reuters “Brent May crude rose 6 cents to settle at $57.93 a barrel, having swung between $57.46 and $59.54. U.S. crude rose 27 cents to settle at $51.91, well off its $53.10 peak just below its 100-day moving average at $53.18. It was last above that key technical level in July 2014.” (Oil edges up as Iran uncertainty, Yemen turmoil support)

4/14/2015

4:31 am EDT. Oil rose, on the first true bullish sign that production appears to be slowing, infinitesimally. Though the transportation sector’s demand is increasing, don’t expect a significant up move, the market will remain in trade mode. — Reuters “The U.S. Energy Information Administration (EIA) said on Monday it expected U.S. shale production to fall by 45,000 barrels per day (bpd) to 4.98 million bpd in May. Shale production has helped boost U.S. oil output by more than 4 million bpd since 2010 and has been a key factor behind the collapse in world oil prices over the last year.” “It’s a small change, just a drop in the ocean, but an excuse to buy,” said Carsten Fritsch, analyst at Commerzbank. “A lot of speculative financial investors think oil is cheap and are looking for a reason to get into the market.” (Oil above $58 on U.S. shale output report, Mideast)

However as prices recovery, production can return swiftly — Bloomberg “The relief may prove temporary as U.S. drillers are building a backlog of drilled wells that they plan to hydraulically fracture and place into service as soon as prices rebound. Analysts including Wood Mackenzie Ltd. have estimated that the inventory has grown to more than 3,000 uncompleted wells. “U.S. production can return quickly with any price recovery,” Adam Longson, an analyst at Morgan Stanley in New York, said in an April 13 research note. “A backlog of uncompleted wells, falling service costs, hedging opportunities and plenty of capital on the sidelines should all support investment, perhaps more than the market expects.” (Shale Oil Boom Could End in May After Price Collapse)

Retail investors seem to be, backing off their long positons (bottom fishing), running for the exits. Will this hold? given the new production indication, slowly beginning to ease. — Reuters “Outflows from four of the largest oil-specific exchange traded funds, including the largest U.S. Oil Fund, reached $338 million in two weeks to April 8, according to data from ThomsonReuters Lipper. That is the first two-week outflow since September and the biggest since early 2014, marking a turnaround from heavy inflows in December and January on bets that oil prices would quickly rebound from six-year lows. If the exodus gathers pace it could signal new pressure on crude oil prices that had begun to stabilize at around $50 a barrel this year following their 60 percent plunge, says John Kilduff, a partner at energy fund Again Capital LLC in New York. Retail investors may have been “trying to bottom fish and got washed out with the recent new low,” he said. Global oil ETF holdings were equivalent to 150 to 160 million barrels’ worth of crude oil futures as of last week, according to ETF Securities. That would represent as much as 30 percent of open interest in the most-liquid U.S. oil futures contract, which saw record open interest of 530,000 lots in March, although some of those fund holdings are in other contracts.” (Look out OPEC! Oil ETF investors head for exit, risking new slump)

China oil export numbers climb to its largest outflow since 2006. — Reuters “China exported 750,000 tonnes of crude oil in March, its largest volume since 2006, in a possible sign the world’s second largest crude importer is running out of storage capacity. The figure could also reflect transfers of crude oil stored in China by Chinese trade partners, such as Iran. The outbound shipments, which amount to 177,000 barrels per day (bpd), left March net imports at 6.1 mln bpd, the lowest net level since last October, up just 11 percent on the year, according to Reuters calculations.” (China March crude oil exports highest since 2006)

Is the market beginning to stabilize? — Reuters “In crude, the narrowing spreads for both Brent and West Texas Intermediate (WTI) indicate a closer balance between supply and demand in the second half of the year than in the first.”(Futures prices point to more balanced oil market in second half: Kemp)

3:08 pm EDT. Reuters — “Crude oil futures rose on Tuesday on signs of falling U.S. oil production, weakness in the dollar and tensions in the Middle East, particularly Yemen. North Dakota’s February oil production fell 15,000 barrels per day (bpd) versus January, monthly data showed on Tuesday, though the number of producing wells hit a record high. “Today’s (U.S.) led crude spike was spurred primarily by supportive supply side headlines suggesting a quicker production response to rig declines than previously anticipated,” said Jim Ritterbusch, president at Ritterbusch & Associates.”

4/15/2015

U.S. Oil production is expected to rise more than estimated a year ago, new forecast from the U.S. government — Reuters “U.S. crude oil production will peak at 10.6 million barrels per day in 2020, a million barrels more than the high forecast a year earlier, according to the annual energy outlook by the Energy Information Administration, the statistical arm of the U.S. Energy Department. Crude production will then moderate to 9.4 million bpd in 2040, 26 percent more than expected a year ago, the agency said. The reference case in the report forecasts Brent prices LCOc1 of $56 a barrel in 2015, rising to about $91 a barrel in 2025, $10 a barrel less than levels expected a year ago. The report uses the 2013 value of the dollar as its measure. Despite lower prices, higher production will result mainly from increased onshore oil output, predominantly from shale formations, the agency said.” (U.S. crude oil output to soar till 2020 despite price rout: EIA)

Oil market continues to be in trade mode. Trading off of today’s events — Reuters “Brent crude oil prices rose above $59 a barrel on Wednesday amid tension in the Middle East and signs of a dip in U.S. production, but gains were capped by a report from the International Energy Agency (IEA) indicating that supplies would take longer to tighten than previously expected.” “Prices were supported by uncertainty in the Middle East, where fighting continues in Yemen. A Saudi-led campaign of air strikes against Iran-allied Houthi rebels threatened to turn into a ground intervention after Egypt said it had discussed military manoeuvres with Saudi Arabia and other Gulf allies. In the United States, North Dakota’s February oil production fell 15,000 barrels per day (bpd) versus January, although the number of producing wells hit a record high. That followed an Energy Information Administration report forecasting U.S. shale production would fall by 45,000 bpd to 4.98 million bpd in May, which would be the first monthly decline in four years. (Oil above $59 on Middle East, U.S. output, but IEA report caps gains)

The fundamentals are indication tat supply will continue to an issue through 2015, despite increasing demand says the International Energy Agency. — Reuters “The agency raised its forecast for global oil demand growth in 2015 for a second consecutive month, citing strong pockets of consumption in Europe, India and the United States. Global oil demand is rising faster than projected, but so is supply, and the IEA, which advises industrialized countries on energy policy, rolled back its prediction of when the market would tighten. “Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on,” the IEA said in its monthly report.”( IEA says oil supply boost may defer market tightening)

OPEC sticking to their production strategy — Bloomberg “OPEC production climbed by the most in almost four years as Saudi Arabia, Iraq and Libya boosted output amid a stronger outlook for global oil demand, according to the International Energy Agency. The Organization of Petroleum Exporting Countries raised output by 890,000 barrels a day to 31.02 million a day in March, the biggest monthly gain since June 2011, the IEA estimated. Preliminary data suggest output may rise further this month, it said. The agency cut its prediction for U.S. and Canadian oil supply growth in the second half of the year.” (IEA Sees OPEC Supply Jumping Most in Four Years on Saudi Surge)

Is the anticipated slowdown in Shale production beginning to manifest itself? — Bloomber “The projected production drop is small, just 1 percent. Yet investors took note, pushing oilfield stocks to the top five spots in the Standard & Poor’s 500 Index on Tuesday, led by rig operators Ensco Plc and Diamond Offshore Drilling Inc. The decline lags the idling of rigs because of a backlog of already-drilled wells that have gradually been coming online. “OPEC’s plan is playing out and price is correcting the oversupply,” said Michael Scialla, an analyst at Stifel Nicolaus & Co. in Denver, in a telephone interview. (Shale Output Is Falling Faster Than Expected)

3:26 pm EDT. — Reuters “Oil prices rallied and U.S. crude jumped nearly 6 percent to a 2015 peak on Wednesday after government data showed crude oil inventories in the United States rose less than expected last week. Though hitting a record level for a 14th consecutive week, U.S. crude inventories rose only 1.3 million barrels to 483.69 million, the smallest build since the week ending Jan. 2, the Energy Information Administration said on Wednesday. That build was below expectations for a 4.1 million barrel rise in a Reuters survey of analysts.”( Oil surges after lower than expected U.S. inventory rise)

4/16/2015

5:41 am EDT. As expected oil surges on the slights hint that production is slowing. Despite the optimism, oversupply still remains an issue. Look for a new trading range ($60 — $65) as prices are pumped up to ~ $64 — $65 or on the high side ($65–70)as some think, before trades take profits. I would take profits @ $64. — Reuters “”This whole rally was primarily due to drops in U.S. crude production. We see the four-week average for crude production turning negative for the first time since July ‘14,” it added. Reuters technical analyst Wang Tao told Reuters Global Oil Forum that Brent could rise toward $70 a barrel in the near term, but that a sharp downturn could happen after that.U.S. oil prices jumped on Wednesday after U.S. inventories built up more slowly than expected, although still to a new record. Talks between major oil producers also triggered speculation of production cuts, even though most analysts said these were unlikely.” (Brent crude oil hits 2015 high as U.S. output slows)

Some OPEC members are putting pressure on Saudi Arabia to cut production. This has no chance of working — Reuters “”Until and unless I hear a producer say they’re willing to contribute cuts, I think this is all about trying to spook or shame Saudi Arabia into doing what it has steadfastly said it will not — cut unilaterally,” says Bob McNally, president of The Rapidan Group energy consultancy.” (OPEC diplomacy up from Moscow to Caracas; action unlikely )

Saudi Arabia led OPEC’s production in March. — Bloomberg “The nation boosted crude output by 658,800 barrels a day in March to an average of 10.294 million a day, according to data the country communicated to the Organization of Petroleum Exporting Countries’ secretariat in Vienna. That’s about half the daily production from the Bakken formation in North Dakota that’s among the fastest-growing regions for shale drilling in the U.S.” “Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” OPEC’s Vienna-based research department said. “Given expectations for lower U.S. crude oil production in the second half of the year, these higher refinery needs will be partially met by crude oil stocks, reducing the current overhang in inventories.” (Saudi Arabia Adds Half a Bakken to Global Oil Market in a Month)

12:19 pm EDT. Brent retreated, never made it to $64, as oversupply and profit taking pressured prices. — Reuters “Wednesday’s data showing the small build in U.S. crude oil stocks followed reports indicating production in the United States, including in shale play powerhouse North Dakota, was beginning to pull back as the price retreat since June weighs on producers. Talks between OPEC and other major producers triggered speculation about deals to cut production and supported oil prices on Wednesday, though most analysts said an agreement was unlikely. Reuters technical analyst Wang Tao told Reuters Global Oil Forum that Brent could rise towards $70 a barrel in the near term, but that a sharp downturn could happen after that.”( Oil ebbs from 2015 high; OPEC reports jump in output)

2:27 pm EDT. Oil traded above $64 on Yemen escalating conflict and weaker dollar, again an excuse to pump prices higher, time to take profits. — Reuters “While a relatively minor oil producer, Yemen’s escalating conflict raises concerns about neighboring top oil exporter Saudi Arabia. Brent crude for June delivery was up $1.18 at $64.50 a barrel at 2:10 p.m. EDT (1810 GMT), rallying from a $62.00 low and reaching a 2015 peak for front-month Brent of $64.95. U.S. May crude rose 64 cents to $57.03, hitting a 2015 high of $57.42 after recovering from a $55.07 intraday low.” (Oil turns higher, rallies to 2015 high on Yemen conflict)

4/17/2015

5:24 am EDT. Oil back below $64 as oversupply concerns weight on market — Reuters “Oil eased below $64 a barrel on Friday as evidence this week of rising crude supplies from OPEC members outweighed signs of a slowdown in U.S. output and Middle East tensions. Brent crude was still within sight of its 2015 high reached on Thursday and has rallied 16 percent in April, supported by conflict in Yemen and the prospect that lower prices are starting to curb U.S. shale output. At 5 a.m EDT, Brent crude for June LCOc1 was down 75 cents at $63.23 a barrel. Brent reached a 2015 high of $64.95 on Thursday. U.S. crude for May CLc1 was down 82 cents at $55.89 a barrel. Pressuring prices on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report that its March production jumped 810,000 barrels per day (bpd) to 30.79 million bpd, led by Saudi Arabia. (Oil slips below $64 as ample supplies weigh)

OPEC’s output surge in March adding to oversupply concerns.- Reuters “OPEC said its oil output surged in March, adding to a global glut, despite more evidence that the producer group’s strategy of letting prices fall to hurt other producers is taking effect. OPEC’s report may reinforce the perception that major producers are staking out market share ahead of a potential rise in Iranian exports following its framework accord with world powers over its nuclear program. Thanks to lower output from the United States and other rival producers due to the oil price drop, the Organization of the Petroleum Exporting Countries said demand for its oil this year would be 80,000 barrels per day (bpd) higher than previously thought. (OPEC oil output surge boosts surplus, despite higher demand)

Refineries continue to take advantage of cheap oil, coming back unusually early from the maintenance season to maximize profit potential. — Reuters “Refinery run rates normally begin to rise around now as maintenance ends and refineries come back online, but this year production is rising unusually early and fast. Increased runs are helping to limit the build up of crude inventories in commercial storage, boosting near-dated oil futures and flattening the forward curve, especially for the U.S. oil benchmark WTI. U.S. refineries processed an average of 16.212 million barrels per day (bpd) last week compared with an average of just 14.767 million at the corresponding point over the previous ten years.”( U.S. refineries start to absorb surplus crude stocks: Kemp)

Fundamentals are pointing to market stabilizing — Reuters “The U.S. oil market has firmed up into its best shape this year, as ebbing fears of an inventory overflow and renewed hedging in far-distance futures flattens the forward curve — another possible sign that a months-long rout is really over. On Wednesday, the discount for June U.S. crude oil futures on the New York Mercantile Exchange versus December jumped 47 cents to settle at $3.21 a barrel, the tightest spread in nearly five months and less than half what it was a month ago. The discount of December 2015 to December 2016 tightened by 58 cents to settle at $2.73 a barrel, its smallest since November. The narrowing spreads will likely be a welcome sign for oil bulls and members of the Organization of Petroleum Exporting Countries (OPEC), who often look at the shape of the curve as a clearer indication of fundamentals. U.S. crude prices also rose on Wednesday, closing at their highest this year.” (U.S. oil curve flattens as drillers hedge, storage fears ebb)

4/20/2015

Saudi Arabia stick to their production strategy as output increases, keeping downward pressure on prices. Are they going for the kill? — Reuters “There are worries among some producers that growing output from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) could snuff out a recent rebound in oil prices, particularly with economic growth in key consumer China the slowest in six years in the first quarter. OPEC had said its overall output surged to 30.79 million barrels per day in March, up 810,000 bpd from the previous month, with demand higher than expected due to lower prices.” (Exclusive: Naimi says Saudi oil production near record high in April)

Venezuela looking to compete with U.S. Crude is creating a new blend, their heavy Crude with light oil from other OPEC allies. — Reuters “The proposal, which would expand on a pilot scheme involving Algerian oil last year, envisions supplying refineries built for medium-grade crudes rather than the light oil that has become plentiful as a result of the North American shale boom, said the head of state oil company PDVSA, Eulogio del Pino.” (Venezuela proposes novel OPEC oil blending deal to fight for market share)

4:50 am EDT. Oil Trading below $64 as Saudis output near record high as defend market share. — Reuters “I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million,” Naimi told Reuters on Monday in South Korea’s capital Seoul, where he is due to attend a board meeting of the state oil firm Saudi Aramco [SDABO.UL]. Naimi earlier this month said Saudi Arabia produced 10.3 million bpd of crude in March, eclipsing a previous record of 10.2 million bpd, in what is seen as a move to defend market share against non-OPEC competition, including the United States.” (Oil pares early gains as Saudi output remains near record high)

As Saudis pursue their strategy, it doesn’t appear to be driving investors away from U.S. Crude; money to invest hasn’t dried up. — Bloomberg “They’re no dummies, Gladbach says. One of the biggest mysteries of the oil market crash is why the money hasn’t dried up. The collapse in crude prices was supposed to devastate companies and spook investors after wiping more than $200 billion off the balance sheets of U.S. and Canadian producers. It didn’t. As industry luminaries gather at the IHS CeraWeek Energy Conference in Houston this week to ponder the implications of $50-a-barrel crude, the money keeps piling into oil, with hedge funds, buyout firms and asset managers rushing to claim a spot at the table. “There is just so much money,” said Gladbach, who noted that more than $100 billion has been raised and set aside for energy investments by the likes of Blackstone Group LP and Carlyle Group LP. (Investors Who See ‘Froth’ in Market Go All In for Oil )

12:05 pm EDT. Market remains in trade mode. — Reuters “Oil prices rose on Monday after data showing a partial draw in stockpiles at the delivery point for U.S. crude helped steady a market weighed earlier by near record highs in Saudi production. Tensions in the Middle East and a drop last week in the number of rigs drilling for oil in the United States also put a floor beneath U.K. North Sea Brent and U.S. crude futures, traders said.” (Oil up on partial draw in U.S. crude stocks, Saudi tensions)

4/21/2015

4:38 am EDT Brent remains in the trading range $60 — $65, though geopolitical tensions, seaways around Yemen, remain a major concern.Reuters — “Brent crude oil steadied around $63 a barrel on Tuesday, not far below the 2015 high, supported by worries that a civil war in Yemen could destabilize the Middle East, affecting oil supplies. Oil has climbed around 15 percent this month due to concern over the conflict in Yemen, Saudi Arabia’s southern neighbor. The seaways around Yemen are some of the most important for the international oil trade with access points to the Red Sea and Suez Canal as well as the Middle East Gulf.” (Yemen conflict keeps Brent crude oil around $63)

Abu Dhabi plans to invest over $25 billion in the next five years on boosting its offshore oil production. — Reuters “The plan is part of the United Arab Emirates’ strategy of increasing its crude oil output potential to 3.5 million barrels per day by 2017–18. The UAE’s actual current production is around 2.8 million bpd. “We want to build ‎capacity from production and from number of wells and infrastructure. Our current plan as ADNOC (is to reach) 3.5 million bpd and to sustain it,” Qasem al-Kayoumi, manager of ADNOC’s offshore division of the exploration and production directorate, told reporters. (Abu Dhabi to invest over $25 billion in offshore oilfields: ADNOC official)

BP sees oversupply issue weighing on prices beyond 2015. Reuters — “It could take as long again for that stock to come down,” Spencer Dale told the FT Commodities Global Summit.” (BP sees oil stock overhang weighing on prices beyond 2015)

Iraq’s oil exports have slipped to 2.92 million barrels per day (bpd) thus far in April — Reuters “If sustained, Iraq’s exports this month will be just short of the record of 2.98 million bpd set in March. Another strong month from Iraq adds to signs of continued high output from major members of the Organization of the Petroleum Exporting Countries. Exports from Iraq’s southern terminals have averaged 2.50 million barrels per day (bpd) in the first 19 days of April, according to shipping data seen by Reuters and an industry source, down from 2.71 million bpd in March.” (Iraq oil exports slip so far in April, still near record)

12:44 pm EDT Oil remains in the range, ~ $63, on Yemen conflict — Reuters “Brent crude oil steadied around $63 a barrel on Tuesday, not far below the 2015 high, supported by worries that a civil war in Yemen could destabilize the Middle East, affecting oil supplies.” (Yemen conflict keeps Brent crude oil around $63)

3:57 pm EDT Oil prices at lower end of the range as Saudis end Yemen bombing operations. — Reuters “Oil prices fell on Tuesday after Saudi Arabia announced the end of its military campaign in Yemen, easing tensions in the Middle East, and traders expected another weekly build in U.S. crude stockpiles.” “UK North Sea Brent crude, the more widely used global benchmark for oil, fell $1.37, or 2.1 percent, to $62.08. “The market’s gone up quite a bit lately and was due for a correction, so the Saudi announcement was a step in the right direction in the sense that it diffuses some of the tensions in the Middle East,” said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.” (Oil down as Saudis end Yemen bombing; traders eye crude build)

4/22/2015

3:05 am EDT. Brent falls, on lessen tension in Yemen. However keep an eye on increasing demand from the transportation sector (locally & globally see Demand: 3/18, 3/26, 3/31, 4/1 & 4/2) — Reuters “Oil prices extended declines from the previous session on Wednesday as tensions in the Middle East eased after Saudi Arabia ended an air strike campaign in Yemen, but industry leaders said the market could rebound as attention turned to rising demand.” “”We will probably see one more dip in the second quarter but prices probably won’t go below this year’s lows,” said Ian Taylor, head of the world’s top oil trader, Vitol VITOLV.UL. “Gasoline is coming back with a vengeance. Refining margins are not as bad as we had feared,” he said. Growth in demand outside the United States was impressive in India, South Africa and Europe, he added.” (Oil prices drop as Middle East tension eases)

Saudi’s overproduction strategy may eventually accomplish their end goal as big oil companies fear much higher prices in 5–10 yrs. -Bloomberg “Oil companies are warning there will be a price to pay — a much higher price — for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced $114 billion in spending cuts on the industry. Energy giants from Exxon Mobil Corp. to Royal Dutch Shell say they’re taking a much more cautious approach to approving projects that cost billions and take years to complete. That’s setting the table for a future oil-price shock when a growing world population drives higher demand, said oil executives and financiers at the IHS CeraWeek Energy Conference in Houston. “What we decide today will have an effect on the future,” Patrick Pouyanne, chief executive officer of Total SA said Tuesday during the event. Postponing spending on mega-projects that usually deliver significant quantities of oil or gas “will have an impact. This could affect supply in three or four years.” (Big Oil’s Latest Fear: A Price Shock After Spending Cuts)

Energy companies desperate for funding, find a lifeline in the Bond Market. — Bloomberg “Halcon Resources Corp., run by one of the architects of the U.S. shale boom, sold $700 million of bonds Tuesday that pay junk yields while pledging assets to back the debt. The Houston firm joins explorers Energy XXI Ltd. and Goodrich Petroleum Corp. in leading almost $10 billion of second-lien bond offerings in the U.S. this year, a record pace for issuance of such securities, according to data compiled by Bloomberg. The firms are getting a lifeline as banks shrink credit lines that are tied to the value of oil reserves. They’ve been able to pile on new debt because their existing obligations — most of which were issued at the height of the shale boom — exclude borrowing restrictions typically demanded by junk-bond investors. Those debtholders are now being punished because the new creditors are getting a stronger claim on assets.” “Companies are willing to pay for liquidity,” said Christian Hoffmann, a money manager who helps oversee $65 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “Second-lien debt is a lever a lot of energy companies are pulling to access liquidity at a time when it’s not always easy to access capital markets.” (Oil Companies Are Getting a Second Chance in the Bond Market)

11:14 am EDT. Oil prices up on slower U.S. crude production. However Stockpile rose by 5.3 million barrels last week . — Reuters “The EIA said on Wednesday that U.S. production declined by 18,000 barrels per day (bpd) last week, a fall of 0.19 percent. “It’s another decline in production and the market is certainly anxiously awaiting more of those, at least people who are on the long side,” said Dominick Chirichella, senior partner at New York’s Energy Management Institute. U.S. crude stocks, however, rose by 5.3 million barrels last week, higher than the 2.9-million-barrel build expected by analysts in a Reuters survey, to a record 489 million barrels. “ (Oil prices lifted by U.S. production decline)

3:23 pm EDT. Brent closed higher on renewed fighting in Yemen. On the other hand U.S. crude fell as traders focused on stockpile buildup. — Reuters “On Wednesday, Brent settled up 65 cents at $62.73 a barrel after the White House said the situation in Yemen remained unstable and more work needed to be done in the region. U.S. crude ended down 45 cents at $56.16 a barrel. U.S. crude initially rebounded from the session low after the government-run Energy Information Administration (EIA) reported a drop of 18,000 barrels per day (bpd) in output last week, the second straight week of lower production. (Brent up on more Yemen bombing; U.S. crude dips after stock build)

4/23/2015

4:38 am EDT. Oil prices fall, trading off of oversupply concerns, despite reports of fall production numbers. — Reuters “But some experts said the weekly government data is misleading and that output probably hasn’t started falling yet, despite a lower number of rigs drilling for oil. “We still see a fundamental excess of crude supplies persisting, at least for the next few months,” analysts at BNP Paribas said in a note, pointing to little prospect for significant increases in crude demand amid already high refinery run rates. Executives at the CERA industry gathering in Houston said with costs of fracking a shale well in the United States falling faster than expected, producers could keep working in oilfields that just months ago looked uncompetitive after the oil price crash. (Oil prices edge lower on rising U.S. inventories)

Market set to rebalance, increasing demand against falling production, in 1st -2nd Q 2016. — Reuters “Coupled with a fall in shale output in the second half of the year, as the decline in the U.S. rig count takes effect, that should be enough to bring the oil market near to balance by early 2016. Worldwide consumption will increase by a little over 1 million bpd in 2015, according to forecasts published this month by both the International Energy Agency and the U.S. Energy Information Administration (EIA). Oil consumption is inextricably linked to the demand for transportation. The transportation sector accounts for 60 percent of oil consumption worldwide, OPEC estimated in its 2014 World Oil Outlook. (Strong demand to rebalance oil market by early 2016: Kemp)

The mechanics of oil trading, with lower prices, is expected to increase the volume of product traded as financing cost falls. — Reuters “Some of the world’s biggest oil trading houses say they expect increased volumes this year as a fall in oil prices ties up much less capital for trading than a year ago. Trading oil is expensive and requires big players to have billions of dollars of credit lines with dozens of banks, but a steep drop in oil prices means the value of a mid-sized cargo of crude oil has fallen from $115 million to $60 million and has therefore become cheaper to finance. The development has a slight downside, as traders are under-utilising banking lines and banks generally don’t like maintaining unused credit lines. Traders therefore need to come up with some solutions, including increasing volumes they trade, to help keep credit lines open for when they could badly need them in full again, if and when oil prices recover.” (Cheaper oil encourages top traders to drive up volumes)

9:58 am EDT. Oil market remains in trade mode driven by Middle East tensions in Yemen. — Reuters “Brent crude oil rose more than a dollar to above $64 a barrel on Thursday on heightened concerns over the security of Middle East supplies as a civil war escalated in Yemen. Warplanes from a Saudi-led coalition struck targets in and around the Yemeni cities of Aden and Ibb despite indications from Riyadh that its campaign against the Iran-allied Houthi movement would be wound down.” (Oil prices rise more than $1 on Middle East tension)

3:43 pm EDT. Oil finished up 3% on Yemen conflict, weaker dollar and speculation U.S. Output will slow. — Reuters “Crude oil prices settled up 3 percent on Thursday, hitting 2015 highs, while U.S. gasoline reached 5-month peaks after Saudi Arabia and its allies maintained a bombing blitz in Yemen that heightened concerns about the security of Middle East oil supplies. Oil buyers also stoked the rally with bets that U.S. crude output will shrink further after two straight weeks of declines. The weak dollar also supported oil and other dollar-denominated commodities. The euro gained more than 1 percent against the greenback, boosting oil demand from holders of the European currency.” (Oil hits 2015 high on Yemen worry; U.S. gasoline at Nov peaks).

4/24/2015

Major oil companies are expected to post weak earnings for the 1st Q, prompting additional cut backs. — Reuters “The industry is expected to reveal another set of grim earnings for the first quarter when benchmark Brent prices averaged $55 a barrel, almost half the level of a year ago. Exxon Mobil Corp., Royal Dutch Shell, BP and France’s Total have already responded by cutting 2015 capital spending by 10 to 15 percent, delaying and scrapping projects and cutting operating costs. And despite a sense among some industry executives that oil prices may have hit their 2015 lows following a decline in U.S. shale production, more cuts may be needed. Exxon, the world’s biggest listed oil company, has reduced 2015 capital spending by 12 percent to $34 billion. “We’ll see throughout the year whether we stay there (capex) or not, we’re seeing a lot of cost efficiencies,” chief executive Rex Tillerson said at the IHS CERAWeek conference.” (Oil firms face further cuts as low prices linger)

Asian prices may be pressured by Singapore’s increasing stockpile. — Reuters “Fuel oil stocks stored in the oil hub of Singapore are the highest in nearly two years as soaring Russian supplies are diverted from Europe, threatening to pressure Asian prices of the product that have rallied 10 percent this month. Low global crude prices have lifted refining margins and boosted production of products including fuel oil, which is used in shipping, power plants or refining. This has created bigger surpluses in Europe, where fuel oil is increasingly unwanted due to stricter emissions regulations, triggering an influx of sales to Asia. So much has gone into Singapore’s storage facilities that traders said they are sometimes blending better-quality stock into low-grade marine fuel oil. Singapore’s fuel oil imports from Russia alone grew by about 200 percent in the first quarter to 4 million tonnes from the same period in 2014.” (Russian fuel oil flows into Singapore, clouding price outlook )

A major disconnect between investors and fundamentals. Oil companies are preparing for longer duration of lower prices than investors are anticipating. — Reuters “Beaten down by a seven-month rout that slashed crude prices from over $147 a barrel last summer to $42 a barrel, producers are bracing for oil to remain at about $60 a barrel for as long as the next five years or so, according to executives gathered this week at the industry’s biggest annual conference. They are shedding staff and slashing spending because they reckon that prices will remain depressed. “We’re lower for longer,” said BP CEO Bob Dudley. But the financial community is already looking for the upside, buying up energy equities and plotting private equity acquisitions in a bet that the oil price cycle may turn more quickly than the industry expects.“There is clearly a gap in view between the strategics and the financial community,” David Asmus, a Houston-based partner at global law firm Morgan Lewis, said on the sidelines of the IHS CERAWeek conference in Houston.” (As drillers hunker down, Wall St sees quicker oil price bounce )

10:15 am EDT Oil trading higher on weaken dollar and strong economic indicators in Europe and Asia. The market continues to be in trade mode, prices are being pumped up before profit taking; large inflow of money, from retail investors, based on bullish sentiment is pushing the market. — Reuters “It’s been a pretty strong rally, so we’re seeing a correction at the moment,” said Olivier Jakob of PetroMatrix. The rise in futures over the last month shows a growing disconnect between oil producers and Wall Street over when slumping oil prices will recover, with the financial community betting that the oil price cycle may turn more quickly than the industry expects. Meanwhile, many analysts say the market balance does not support the recent price gains. Some oil majors are considering further spending cuts to deal with an extended period of low prices. “The hard facts are rather speaking for low prices,” said Eugen Weinberg of Commerzbank, pointing to high inventories in the United States and strong production from OPEC nations.” (Brent oil edges up, set for third straight weekly gain)

3:15 pm EDT. Brent traded at a 4 ½ month high as fighting escalates in Yemen and a weaker dollar. — Reuters “Brent settled up 43 cents at $65.28 a barrel after hitting a Dec. 10 high of $65.80. Brent also finished up for a third straight week, gaining 3 percent this week. U.S. crude closed down 59 cents at $57.15 a barrel, retreating from Thursday’s 2015 high of $58.41. It rose for a sixth straight week, its longest such stretch since the first quarter of 2014. This week’s gain was 2.5 percent.” “It’s a push-and-pull situation with the Yemen tensions giving Brent support while U.S. prices get pulled down as people steel themselves for another inventory rise next week,” said John Kilduff, partner at New York energy hedge fund Again Capital. (Brent at 4–1/2 month high; U.S. crude up for sixth week)

4/27/2015

Storage at Permian remains at record levels — Reuters “Stockpiles in the Permian have hit several records in the last four weeks, according to data from industry information provider Genscape. Investors have zeroed in on storage, waiting for declines in weekly inventory data to signal demand is rising or production is beginning to taper off. Stockpiles in Cushing, the delivery point for the U.S. futures contract, hit a record in the week to March 13, and Gulf Coast supply has been robust. Now a Permian backlog shows signs of an even bigger supply glut. Pipeline interruptions next month will compound already high inventories in the region that have grown because production has outpaced takeaway capacity.” (Traders alarmed oil glut is a strain on West Texas storage tanks)

2:35 am EDT. Brent had edged down 5 cents to $65.23 a barrel by 0623 GMT, and U.S. crude fell 14 cents to $57.01 a barrel. — Reuters “Sustaining the recent oil price rally requires firmer demand and a tangible supply response,” Barclays analysts said in a note. “The cart is moving ahead of the horse, and we take a cautious view on further price appreciation over the near term.” (Brent crude holds near 4–1/2 month high on U.S. rig count, Yemen)

Saudis appear too pleased with current price levels and market conditions. Did their strategy worked? — Reuters “Speaking to reporters in Saudi Arabia, Prince Abdulaziz Bin Salman Bin Abdulaziz described the oil market as “excellent”, suggesting the OPEC heavyweight was comfortable with current global conditions. “As the minister mentioned, the kingdom responds to demand and supplies oil to wherever the demand is and whoever asks for it,” he said. “We care about our market share, we care about maintaining our customers and we care about the stability of the market.” (Saudi high oil output based on demand, market ‘excellent’: Dep Oil Minister)

Slight signs of slowing WTI production are prompting hedge funds to pull their sort positions bets — Reuters “Hedge funds reduced their short position in West Texas Intermediate crude by 32 percent in the seven days ended April 21, driving the net-long position to the highest since July, U.S. Commodity Futures Trading Commission data show.” A record drop in rigs drilling for crude reduced production even as demand rose, boosting speculation that WTI has found a floor after the biggest rout since 2008. A 32 percent rally since March was also stoked by concern that the conflict in Yemen may disrupt traffic through the world’s fourth-busiest channel for shipping oil. “The falling rig count and the reduction we’re starting to see in output shows that the bottom has in fact been installed,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone April 24. “A lot of people are throwing in the towel.” (Oil Bears Routed by Spring Thaw in Prices as Drill Rigs Sit Idle)

3:52 pm EDT. Oil ends on the down on oversupply concerns; the markets remains a traders market — Reuters “U.S. commercial crude inventories have risen for 15 straight weeks to a record 489 million barrels even with the recent fall in drilling activity. [RIG/U] [EIA/S] “While the situation in Yemen and the falling U.S. rig count have supported, some caution remains because we have not seen evidence the cuts in drilling have translated into lower inventories,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.” (Oil slips as ample supply counters Yemen, drilling slump)

4/28/2015

5:45 am EDT. Oil trading lower on expectations that U.S. Crude inventory will increase. Prices at these levels looking for support; an indication that production is slowing to in adversely impact stockpiles. — Reuters “U.S. commercial crude stockpiles were expected to have risen last week for the 16th straight week, up from a record 489 million barrels, even though drilling activity fell, a preliminary survey by Reuters showed on Monday. “Crude oil has made a strong price recovery on the expectation that you would start to see lower U.S. production and also some strock draws,” said Olivier Jakob of Swiss-based consultancy Petromatrix. “We need to have some confirmation of that in the statistics before we can rally further.” (Oil falls as U.S. crude stockpiles set for another high)

As expected companies with strong refinery presence show the benefits, increase in earnings, from lower oil prices i.e. BP Total. — Reuters “Majors with high downstream exposure such as Royal Dutch Shell, Total or ExxonMobil should benefit from the strong global refining environment, which BP expects to last into the second quarter,” analysts from Edison Investment Research said in a note. Weaker refining margins so far in the second quarter as a result of higher crude oil prices mean next quarter’s results might not benefit so much from downstream, analysts said.”(Oil falls as U.S. crude stockpiles set for another high)

Lower oil prices taking its toll on Africa’s sub-Saharan oil producing countries — Reuters “Sub-Saharan Africa growth could slow to 4.5 percent this year from 5.0 percent in 2014, largely because of weaker oil prices, according to the IMF, which forecast growth rising to 5.1 percent in 2016. “For the eight oil exporters, (lower prices) will pose a formidable challenge and, with limited buffers, will require them to undertake significant fiscal adjustment,” said the IMF in its Regional Economic Outlook report. “Oil exporters are facing a challenging environment and their growth in 2015–2016 is expected to average 4.75 percent, substantially marked down from 7 percent expected in October 2014,” it said in the publication issued twice each year. (Lower prices to hurt Africa’s oil producers: IMF)

Asian oil demand shows strength, as Saudis step up their supplies. — Reuters “Asian demand for oil remains strong and we are ready to supply whatever is required. As the Asian population grows, and as the middle class expands, so the demand for energy will increase,” Naimi said in a speech in Beijing. “Oil will retain its pre-eminent position and Saudi Arabia will remain the number one supplier. We should not lose sight of these facts and the importance of our ongoing relationship,” he said.” (Asian oil demand strong, Saudi ready to supply more: Naimi)

4:00 pm EDT. Oil closes lower, market unable to overlook mounting stockpile. — Reuters “Oil prices remained under pressure on Tuesday as worries about record high U.S. crude stockpiles offset security scares in the Middle East and support from a weak dollar. Oil briefly rallied as Iranian forces boarded the Marshall Islands-flagged MV Maersk Tigris in the Gulf after firing warning shots across the bow of the ship. Saudi-owned Al Arabiya television initially said the vessel was a U.S. ship. “Tensions are so high in that region with the impending Iran-U.S. nuclear deal that any event implied to be U.S.-linked has an immediate effect on oil prices,” said John Kilduff, partner at New York energy hedge fund Again Capital. (Oil under pressure as high supply offsets Mideast tensions, dollar)

4/29/2015

Traders beginning to unwind their stockpiles, taking profits on Contano play. — Reuters “Oil major BP said it will gradually sell throughout 2015 more than $1.25 billion of oil it had stored earlier this year to seize on a futures market structure to boost profit. Traders including BP bought and stored oil throughout late 2014 and early 2015 after an oil price collapse as prompt prices dropped below those for further into the future, a market structure known as contango. Traders have been profiting from the contango by storing crude in the hope of reselling it at a profit at a later date or by simply locking gains via paper trading. (BP unwinding oil storage play as contango narrows)

4:56 am EDT Brent retains its trading range on oversupply concerns and Saudis’ reshuffling the line of royal succession. Reuters “King Salman bin Abdulaziz sacked his younger half-brother as crown prince and appointed his nephew, deputy crown prince Mohammed bin Nayef, as the new heir apparent. He also appointed his son, Prince Mohammed bin Salman, as deputy crown prince, and replaced veteran foreign minister Prince Saud al-Faisal with the kingdom’s Washington ambassador Adel al-Jubeir as well as appointing several other ministers. Saudi reshuffles often move oil prices as stability in the world’s biggest oil exporting country is key to global supplies. Traders and analysts said it was not clear how Saudi oil policy might be affected by the changes at a time when the oil market was oversupplied and facing a seasonal dip in demand. “I don’t think there’s been any disagreement about the idea of keeping up production, maintaining market share, refusing to be a swing producer,” Clement M. Henry, professor at Middle East Institute, National University of Singapore said. (Oil dips on oversupply after Saudi reshuffle)

Colombia’s economy, an oil casualty flies under the radar. — Bloomberg “While much attention is given to how the collapse in oil has wreaked havoc on all the usual suspects — countries like Russia and Venezuela as well as drilling companies across the U.S. and Canada — it is the paralyzing effect on Colombia’s economic expansion that is perhaps the most surprising. “Francisco Rodriguez, Bank of America’s Andean region economist, said his 2 percent growth forecast may even be too optimistic. If the central bank doesn’t cut interest rates to stimulate the economy, it could be closer to zero, he said.“There is no way for this not to have a massive effect on the Colombian economy,” Rodriguez said in a phone interview. The Andean country is no traditional oil power. With output of about 1 million barrels a day, it ranks just 19th in a list of the world’s biggest producers. In Latin America alone, there are three countries ahead of it.” (For Newest Latin American Oil Power, a Lesson in Booms and Busts)

Europe’s refineries profits coming to a head as prices and demand stabilize — Bloomberg “The surge in European refining margins, which jumped by the most in 4 years last quarter, cannot be sustained because the region still has surplus processing capacity, Total SA said Tuesday. The French oil producer joins refiners including Gunvor Group and Eni SpA who predicted this month that the favorable market won’t last. Strong gasoline demand and a high level of maintenance at refineries in the U.S. increased margins, Total said. Eni, whose first-quarter refining margins jumped sixfold, said Wednesday that lower demand, overcapacity, and increasing competitive pressure from imports will be “headwinds” for companies in the region. “European refiners are benefiting from a double whammy of lower crude oil prices and strong demand,” Hamza Khan, an Amsterdam-based senior commodity strategist at ING Bank NV, said by e-mail on April 28. “They will see a tough operating environment in the long run as new capacity comes online in the Middle East, the U.S. increases product exports and the price of crude recovers.” (Europe’s Biggest Oil Refiner Joins Those Predicting End of Boom )

Why it pays to do your own research. The experts sometimes just get it wrong. — Bloomberg “Here’s a look at some of the big calls made during the crash and how they’ve panned out. “ “They just don’t often come true” (These Titans of Oil Are Experts at Making Bold Predictions)

12:17 pm EDT. Oil prices at years high as first withdrawal for U.S. Cushing, Oklahoma hub. — Reuters “Oil prices hit their highest for this year on Wednesday after the first crude stock draw in five months at the U.S. Cushing, Oklahoma hub suggested an oil glut may be starting to ease. Government data showing a smaller-than-expected rise last week in crude inventories throughout the United States also aided sentiment, although some traders felt the market was ignoring bearish elements like higher production. Oil prices rose more than 2 percent, building to early strength that came from Wednesday’s leadership reshuffle announced at Saudi national oil company Aramco.” (Oil at 2015 highs after first stock draw in five months at U.S. hub)

4/30/2015

4:44 am EDT. Oil trading at 5 month high on weaker dollar — Reuters “The U.S. currency slipped to a two-month low against a basket of currencies as the euro and Japanese yen rallied, making oil less expensive for holders of other currencies. “The dollar has been the big factor,” said Bjarne Schieldrop, chief commodities analyst at SEB in Olso. “The dollar index broke below its 60-day moving average on Monday this week for the first time since July and it is only 1.1 percent away from breaking below its 120-day moving average at the moment,” he added. Brent crude oil was up 25 cents at $66.09 a barrel by 0830 GMT”. (U.S. oil hits 5-month high as dollar weakens)

Asian oil refinery margins are expect to come under pressure as prices stabilize but demand is likely to lessen profit decline. — Reuters “Higher margins over January to March amid weak global oil prices helped SK Innovation Co Ltd, which owns SK Energy — South Korea’s biggest refiner, swing to a profit of 321.2 billion Korean won ($300.61 million) from a 470.2 billion won loss in the prior quarter. The stronger margins were also driven by cuts in official selling prices by OPEC producers, as well as a U.S. cold-spell and refinery shutdowns, Chang Woo-seock, head of SK Energy’s corporate planning office told analysts. However, margins in Asia may now come under pressure due to a recovery in global crude prices that are set to post their biggest monthly gain in almost six years in April.” (South Korea’s SK Energy sees slight drop in Asia’s second quarter refining margins)

U.S. Crude inventories rose last week to hit a record high but the build was smaller than expected as supplies at the Cushing, Oklahoma, oil hub declined for the first time since November. — Reuters “Crude stockpiles rose 1.9 million barrels to 490.91 million in the week to April 24, compared with analysts’ expectations for an increase of 2.3 million barrels. Crude stocks at Cushing, the delivery point for U.S. crude futures, fell 514,000 barrels, the EIA said. The decline at Cushing was the first since Nov. 28, according to EIA data. U.S. crude for June delivery extended gains after the EIA report and was up $1.40 at $58.46 a barrel at 11:05 a.m. EDT (1505 GMT), after posting a fresh 2015 peak at $58.55. Brent June crude was up $1.06 at $65.70, having reached a 2015 peak at $65.92.” (U.S. oil hits 5-month high as dollar weakens)

OPEC’s April oil supply jumped to its highest level in more than two years. — Reuters “The increase from the Organization of the Petroleum Exporting Countries puts output further above forecasts of demand for OPEC oil in the first half of the year, although second-half demand is expected to be stronger. OPEC supply has risen in April to 31.04 million barrels per day (bpd) from a revised 30.97 million bpd in March, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. “We are in an oversupplied market, and this oversupply is unlikely to disappear any time soon,” said Eugen Weinberg, analyst at Commerzbank in Frankfurt.( OPEC oil output in April climbs to highest since 2012: survey)

Refinery profit margins help stem another producer loses. — Reuters “Exxon Mobil Corp (XOM.N) reported a smaller-than-expected drop in quarterly profit on Thursday as oil and gas output and refining results grew even as lower crude prices ate into earnings at the world’s largest publicly traded oil company. “It was a strong quarter,” said Brian Youngberg, analyst at Edward Jones in Saint Louis. “Their diversified model tends to hold up better in a weaker oil market and that is seen in this quarter.” (Exxon profit beats expectations on refining, output)

Oil prices are expected to remain weak for at least a year despite slowing production. — Reuters “Reuters monthly survey of 32 analysts predicted North Sea Brent crude would average $60 a barrel in 2015, up 80 cents from the projection in last month’s survey. The North Sea crude oil benchmark has averaged around $56 a barrel so far this year.” (Oil prices to stay weak for at least a year: Reuters poll)

3:12 PM EDT. Oil market had its best month, in 6 yrs., however the rally is ahead of its self. Fundamentals point to price levels in the $60 — $65 price range. — Reuters “But some were skeptical of a smooth continuation to the rally, citing disappointing U.S. economic growth in the first quarter and signs the Organization of the Petroleum Exporting Countries had no intention of slowing output. “It seems more likely that we will hit some speed bumps on this rally, given the unrelenting OPEC supply and the uneven U.S. economic data, which could cause dollar gyrations,” said John Kilduff, partner at New York energy hedge fund Again Capital. Brent LCOc1 settled up 85 cents at $66.69 a barrel, after reaching a 2015 peak of $66.93. It rose 21 percent for April. U.S. crude CLc1 finished up $1.05 at $59.63, hitting the year’s high of $59.78. It gained 25 percent for the month. The gains came as the dollar .DXY fell to a two-month low, making oil less expensive to holders of other currencies. (Oil has best monthly gain in 6 years but rally may hit ‘speed bumps’)

5/4/2015

Oil market resumes the week in trade mode as price hits highest levels in 2015. — Reuters “Oil rose towards $67 a barrel on Monday to reach a 2015 high, supported by expectations the supply glut will ease and after weak Chinese factory activity reinforced views that stimulus measures would be rolled out.” “The market is expecting the tightening in the second half of the year,” said Eugen Weinberg, analyst at Commerzbank. “We argue this dynamic is hardly fundamentally sound,” he said of the market’s recent rally.” (Oil hits 2015 high as traders look beyond ample current supply)

American oil and gas companies exploring investment opportunities in Iran with the possibility of sanction being lifted. — Reuters “Sheri-Moghaddam did not reveal any details, but added that some “European-American companies” have expressed readiness to invest in Iran’s new petrochemical projects.” “It is forecast that by the visit of (the) American delegation this week and in the case of lifting sanctions on Iran’s oil industry, we will witness involvement of major international American oil and gas companies in Iran in the future,” said deputy Oil Minister Abbas Sheri-Moghaddam. (U.S. oil delegation to visit Iran this week: Iranian official)

U.S. Shale producers face less headwinds with new oil-rail transportation regulations as lower prices are expected to slow future production. Reuters — “Oil producers have more to worry about than new rail regulations,” Cleo Zagrean, a transportation analyst with Macquarie Securities, said on Friday. The new regulations call for phasing out or upgrading the oldest variety of oil tank cars, DOT-111s, within three years, and retrofitting newer CPC-1232s within five years — a timeline that was shorter than generally expected last year but less aggressive than some analysts had recently feared. That should give rail companies and tank car owners enough time to implement certain provisions, and manage higher cost, without causing a massive shock to a network that now transports more than a 10th of the nation’s crude oil production.” (Oil slump tempers Bakken drillers’ worries over new rail rules )

Oil market has bottomed and Shale boom gone bust, says Astenbeck Capital Management — Reuters “We have now reached a turning point,” Hall said in a letter Friday to investors in Astenbeck Capital Management LLC, his commodities hedge fund. Growing demand and supply pullbacks “rendered all the doomsday forecasts self-defeating.” (The Shale Boom Has Already Gone Bust — At Least For Now)

4:00 pm EDT. Oil closed lower. — Reuters “Brent oil hit a 2015 high before settling down with U.S. crude on Monday as Saudi Arabia’s plan to halt bombing in Yemen eased tensions over the security of oil Middle East supplies. A stronger dollar, following the largest U.S. factory orders in eight months, had also weighed on crude. [FRX/] Even so, the price drop was cushioned by data from market intelligence firm Genscape showing a further tightening in supplies at the U.S. crude storage hub in Cushing, Oklahoma.” (Oil down after 2015 high; Saudis’ Yemen action and dollar weigh )

5/5/2015

Protesters shut down the eastern Libyan oil port of Zueitina, hampering exports, pushing Brent above $66. — Reuters “Zueitina was one of the few Libyan ports still exporting oil as many others have closed due to fighting or disruptions at oilfields since the ousting of former dictator Muammar Gaddafi. Libyan oil output is now less than 500,000 barrels per day (bpd), officials say, a third of what Libya pumped before 2010.( Oil near 2015 high above $66 after Libya port shuts)

Despite record budget deficit of $38.7 billion for 2015, Saudis are fiscally strong. — Reuters “Saudi Arabia’s financial position is very strong despite the plunge in oil prices since last year, and the kingdom is focusing spending on economuc development projects to stimulate the private sector, Finance Minister Ibrahim Alassaf said on Tuesday. In a speech to a major financial conference, Alassaf also said he was optimistic that the global economy was emerging from its slump, citing indicators from Europe and Japan. But he added that one couldn’t expect a return to growth levels of 10 years ago. Low oil prices are a challenge to oil exporting countries in general, including Saudi Arabia, but Riyadh is able to use its spending to avert the negative impact, Alassaf said.” (Saudi finance minister: our position is very strong despite cheap oil)

David Einhorn questions Fracking Producers production methods, says they are fiscally inefficient. — Reuters “Billionaire hedge fund manager David Einhorn, who often moves a stock simply by speaking its name, on Monday kicked off the year’s most prominent investment conference by laying out a case against oil frackers, arguing these companies drill “lots and lots of holes” and burn through plenty of cash. Einhorn, who often unveils short-bets against companies at these events, cited Pioneer Natural Resources Co as a particular offender at the 20th annual Sohn Investment Conference. “We call it the motherfracker,” he said, prompting investors to kick the share price down as much as 5.3 percent. The company should trade closer to $78 a share, he said, not the $166.50 the stock is trading at now. “Pioneer is burning cash and its reserves are not growing,” said Einhorn, who runs $11 billion Greenlight Capital, adding “Pioneer ought to stop touting estimates based on stale pricing.” The company is losing 20 cents of present value for every dollar it invests. Pioneer shares closed Monday at $168.33 a share, down 1.88 percent. (Greenlight’s Einhorn slams oil frackers at Sohn conference)

6:57 am EDT. Brent crude oil rose to $67 a barrel on closure of Libyan’s oil port. — Reuters “The protesters closed the pipeline to the port,” Mohamed El Harari, spokesman for state oil firm NOC, said, adding that several oilfields in eastern Libya would have to close.” Brent crude oil LCOc1 was up 55 cents at $67.00 a barrel by 1045 GMT, after touching a 2015 high of $67.10 on Monday. U.S. crude oil CLc1 was up 60 cents at $59.53 a barrel. The U.S. contract hit a 2015 high of $59.90 on May 1. “Momentum is key here,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. “The rally is feeding itself with a lot of money looking for buying opportunities.” (Oil firms to $67, near 2015 high, as Libya output slows)

3:15 pm EDT. Brent continues its climb. The inflow of bullish capital is pushing the market ahead of itself. — Reuters “”There’s plenty of producer hedging going on as well, and those production levels are not going to come down if demand projections are not met. This could simply mean we are setting ourselves up for another leg lower in prices,” Chirichella said.” (Oil hits 2015 highs as Libya output slows, Saudis raise prices)

5/6/2015

Bulls continue to push the market higher irrespective of fundamentals. The market is overbought, time to take profits. — Reuters “Oil prices rose more than a dollar to 2015 highs on Wednesday, as a month-long rally gained further impetus from a fall in U.S. crude stocks and conflict in the Middle East. Brent crude jumped by $1.36 to $68.88 a barrel by 0855 GMT, after hitting a 2015 peak of $69.14. “We haven’t seen hedge funds and money managers to be as optimistic and bullish as they are currently,” said Vyanne Lai, an oil analyst with National Australia Bank. “They are at their most bullish since July last year, when the oil market fundamentals haven’t really changed that much.” (Oil bulls drive crude to 2015 high on fall in U.S. stocks)

The market dynamics, have changed as seen by U.S. drillers. — Reuters “U.S. shale drillers, widely seen as having taken over from OPEC as the swing suppliers to the world, quickly adjusting production as prices ebb and flow, may have just put a $70 a barrel lid on oil. Just months after slashing spending and cutting back on rigs in response to a 60 percent price rout, major domestic producers including bellwether EOG Resources Inc and top Bakken producer Whiting Petroleum Corp are already starting to talk about the price at which they would ramp up production. Others, such as Devon Energy Corp and Noble Energy Inc., are pumping more oil than expected this year after the industry’s deepening drive for more efficient and productive wells yielded better-than-expected results. For some analysts, these are signs of a new price ceiling forming in oil markets and serve warning to traders that a new wave of shale supplies could be quickly unleashed if crude pushes much higher. For others they suggest that a second deep price slump may be looming as soon as next year. “ (U.S. shale firms, new oil swingers, may put a $70 cap on prices)

Did Saudis lose market share? Did their strategy work? — Reuters “China is the main buyer of Saudi crude and here the picture is mixed. In the first three months of the year China imported 12.75 million tonnes of crude from Saudi Arabia, or about 16 percent of its total, according to customs data. Saudi Arabia increased its volumes by 0.5 percent in the first quarter to about 1.034 million barrels per day (bpd), but this meant it was still surrendering market share as China’s overall imports grew by 7.5 percent. Big gainers in the first quarter were number three supplier Oman, with a 30.8 percent rise in its shipments to China over the same period in 2014, Russia with a 14.3 percent increase and Kuwait with a 47 percent jump. Iran, China’s fifth-biggest supplier in the first quarter, saw its volumes drop 1.9 percent, while second-ranked Angola experienced a 7.5 percent decline. (Saudis have limited success in keeping oil market share: Russell)

Demand: The effect on the transportation sector with the increase in oil prices. — Reuters “Continued strength of consumption depends on prices remaining cheap enough to encourage motorists to maximize discretionary use of their cars. Brent prices have already risen more than $21 per barrel, 45 percent, from their low shortly after the start of the year. Pump prices for gasoline across the United States have risen by more than 60 cents per gallon, almost 29 percent, over the same period, according to the EIA.” “Demand should increase further over the next four months as the United States enters the summer vacation season. U.S. gasoline demand typically rises by about 500,000 bpd between its mid-winter seasonal low and its mid-summer seasonal high. So far, demand has risen by around 250,000 bpd compared with mid-February, so demand should increase by a further 250,000 bpd over the next 2–3 months.” (Rising oil prices put U.S. driving recovery at risk: Kemp)

The fundamentals, physical markets, doesn’t support the run up in price — Reuters “Tens of millions of barrels are struggling to find buyers in Europe with traders of West African, Azeri and North Sea crude blaming poor demand. The deep disconnect between the oil futures and physical markets looks similar to the events of June 2014 when the physical market weakness became a precursor for a futures price crash. “Being large physical buyers of crude we have a direct pulse of the market and feel immediately when it is well supplied, as is happening now,” Dario Scaffardi, executive vice resident and general manager of independent Italian refiner Saras, told Reuters. “In the short-term, futures prices do not necessarily reflect accurately the physical market.” (Oil’s bull run hides a deep disconnect, crude traders warn)

11:01 am EDT. Retail investors keep pushing the market higher — Reuters “Oil prices rose to 2015 highs on Wednesday, as a month-long rally gained further impetus from the first fall in U.S. crude stocks since the beginning of January. Brent crude LCOc1 was up $1.60 to $69.12 a barrel by 1442 GMT (10.42 a.m. EDT), after hitting a 2015 peak of $69.63.U.S. crude CLc1 traded $1.54 higher at $61.89 a barrel, near an intraday high of $62.58. “Bulls are in control of the market,” said Tamas Varga and Stephen Brennock, analysts at London brokerage PVM Oil Associates, in a note on Wednesday.” (Oil bulls drive crude to 2015 high on fall in U.S. stocks)

3:26 pm EDT. Oil at its 2015 peak, on weaker dollar and inventorydrawdowns — Reuters “Oil prices hit 2015 peaks on Wednesday amid the first drawdown in U.S. crude inventories since January, before settling off their highs as investors and traders moved to take profits on a multi-week rally. The dollar’s .DXY tumble had also fed the run-up in oil and other commodities, as those raw materials became more affordable for holders of the euro and other currencies. [FRX/] U.S. crude futures CLc1 rallied more than $2 to the year’s high of $62.58 a barrel, before settling just 53 cents higher at $60.93. Futures of North Sea Brent LCOc1, the more widely-used benchmark, reached a 2015 peak of $69.63 before turning negative at one point. It settled up 25 cents at $67.77. (Oil hits 2015 peak after first U.S. crude drawdown since January)

5/7/2015

5:07 am EDT. Oil above $68 continuing its climb unsubstantiated by fundamentals even with stronger than expected demand and a slowdown in U.S. crude supply — Reuters “While the latest draw and the recent slowdown in weekly builds in crude stocks have been seen as positive for the oil price, crude stocks remain exceedingly high,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas. Brent crude was up 50 cents a barrel at $68.27 by 0845 GMT. It hit a 2015 high of $69.63 on Wednesday. U.S. crude was up 20 cents at $61.13 a barrel. The contract had rallied more than $2 to a high of $62.58 in the previous session.” (Oil heads toward 2015 highs despite ample supply)

OPEC policy is unlikely to change as members meet in June. — Reuters “Gulf OPEC members are not wavering in their strategy to focus on market share rather than cutting output alone. “The market is firming up and this will continue. Demand is much, much stronger than anticipated,” the delegate told Reuters. “There are clear signs and information about growth in demand and slower supply from the high cost and marginal producers.” (OPEC unlikely to cut in June without non-OPEC as oil rebounds: Gulf delegate)

Demand: Economist debate what drives demand — Is it economic activity and employment, or price, that hold the greatest sway over demand. — Reuters “However, some academics are now challenging that notion with more than just anecdotal evidence. A soon-to-be released study that relies on data culled from credit card purchases at the pump suggests consumers are significantly more responsive to prices than previously believed.” (Gas prices or economy, experts disagree on what drives U.S. demand)

11:44 am EDT. Oil declined 2% “profit taking?” — Reuters “There is some disappointment out there that the fundamentals for gasoline and oil products aren’t improving as quickly as some people would like, to provide support for the broader rally in crude that we’ve been seeing,” said Carl Larry, director of business Development for oila and gas at Frost & Sullivan. Brent futures were down $1.56 at $66.21 a barrel by 11:10 a.m. EDT (1510 GMT), losing all they gained on Tuesday and Wednesday. U.S. crude futures fell $1.40 to $59.53 a barrel.” (Oil rally snaps as ample supplies outweigh U.S. stock draw)

3:08 pm EDT. Reality check, oil falls 3% on stronger dollar and fundamentals — Reuters “Traders and investors also returned their focus to the oversupply in crude and gasoline after Wednesday’s euphoria over the first U.S. crude drawdown in months. The dollar, on a downtrend since the start of May, jumped on optimism that Friday’s U.S. employment report for April would show strength after upbeat weekly jobless claims. [USD/] A stronger greenback makes dollar-denominated commodities less affordable for holders of the euro and other currencies. “The dollar is definitely the driver in today’s tumble, though people are also taking stock of the market’s fundamentals and taking some profit after the incredible month of gains we’ve had,” said Phil Flynn, analyst at the Price Futures Group in Chicago. North Sea Brent crude settled down $2.23, or 3.3 percent, at $65.54 a barrel. For the week, Brent was headed 1.6 percent lower, its weekly loss since April 30. U.S. crude settled down $1.99, or 3.3 percent, at $58.94 a barrel. (Oil dives 3 percent on surging dollar, renewed supply worries)

5/8/2015

T. Boone Pickens betting oil will rebound by year-end hitting $75 per barrel, says worldwide demand as picked up. — Reuters “Talking about what he knows best, Pickens said the price of oil would climb because demand has picked up anew, with worldwide demand hovering around 1.5 million barrels a day, up from 660,000 barrels a day in 2014. At the same time, oil inventories have peaked as fewer rigs are pumping oil now in the United State” (Boone Pickens sees oil rising, bets on Bush for White House)

5:29 am EDT. Oil starts the day, continuing its downward move on oversupply concerns — Reuters “Analysts said Brent seemed capped around $70, and may already be overvalued as oversupply continued and U.S. producers, which have sharply reduced drilling in recent months of low prices, could increase production. “The small drop in U.S. production in recent weeks certainly does not justify the 30–40 percent price increase” since January, said Hans van Cleef, senior energy economist with ABN AMRO. “The oil market is still very much supply-driven, and in the end, we face a huge oversupply.” (Oil on verge of weekly decline despite strong China imports)

Oil and dry-bulk (coal & Iron Ore) markets no longer moving in tandem — Reuters “We think bulk producers can breathe a sigh of relief as the perfect storm in market conditions passes. The 30 percent relief rally in iron ore in the past four weeks appears to have snuffed out the 65 percent price plunge inflicted over the previous 14 months,” the bank said, although ANZ — along with other banks — warned that weak demand especially from China would also prevent strong price rallies. In oil markets, a strong rally occurred after prices more than halved between June last year and January this year, since then benchmark Brent has rallied 40 percent to almost $70 per barrel.” (After first quarter rally, outlook for oil and dry-bulk markets diverge

3:30 pm EDT. Brent Crude registered its first weekly loss in a month on profit taking and fundamentals — Reuters “In Friday’s session, Brent, the more globally-used benchmark for oil, settled down 15 cents, or 0.2 percent, at $65.39 a barrel. It was down 1.6 percent on the week. Brent had risen previously in four consecutive weeks, gaining nearly 20 percent. U.S. crude rose 45 cents, or 0.8 percent, for the session to settle at $59.39 a barrel. It climbed 0.4 percent on the week, extending gains for an eighth straight week that had put the market up 32 percent. Some analysts doubted the market could press on without correction. “We can see some downside acceleration next week and we are leaving a $40 price handle on the table,” said Jim Ritterbusch of Ritterbusch and Associates in Galena, Illinois.” (Brent posts weekly loss after month of gains; U.S. crude up)

5/11/2015

First rig increase at Permian Basin since December — Reuters “After weeks of idling rigs on slumping crude prices, U.S. oil drillers added rigs to the Permian Basin for the first time this year, industry data showed on Friday. Energy companies increased by one each the number of oil rigs in the Permian basin of West Texas and eastern New Mexico — the biggest and fastest growing U.S. shale oil field — and in the Barnett in Texas. That was the first increase in the Permian since December and the first in the Barnett since March, oil services company Baker Hughes Inc said on Friday. Overall, the number of active oil rigs declined for the 22nd week in a row, but the rate of that decline has slowed in recent weeks, suggesting the collapse in drilling may be coming to an end as prices recover after falling 60 percent from June to March.” (Permian basin sees first rig increase since oil rout: Baker Hughes)

Oil Drillers are beginning to sputter back to life. Bloomberg “For the first time in five months, a rig in the Williston Basin, where North Dakota’s Bakken shale formation lies, sputtered back to life and started drilling for crude once again. And then one returned to the Permian Basin, the nation’s biggest oil play, field services contractor Baker Hughes Inc. said Friday. Shale explorers including EOG Resources Inc. and Pioneer Natural Resources Co. say they’re preparing to bounce back from the deepest and most prolonged slowdown in U.S. oil drilling on record. The country has lost more than half its rigs since October, casualties of a 49 percent slide in crude prices during the last half of 2014. Futures rallied above $60 a barrel earlier this week, and a sudden return to oil fields would threaten to end this fragile recovery. (America’s Oil Drilling Boom Is Sputtering Back to Life)

Demand: China is expected to increase oil imports as storage comes online. — Reuters “China’s appetite for crude oil is expected to pick up later this year as storage comes online and new buyers emerge, even after its inbound shipments surpassed United States imports last month for the first time, traders and analysts say. China’s crude oil imports hit a record 7.37 million barrels per day (bpd) in April, making it the world’s biggest importer for the commodity last month. And despite slowing economic growth, China’s crude purchases are expected to keep climbing in second-half 2015, supporting oil prices that have rebounded about 40 percent since touching six-year lows earlier this year due to a supply glut. (China crude imports to pick up as storage, buyers emerge)

6:06 am EDT. Oversupply concerns driving prices lower as U.S. Sale production show signs of recovering. — Reuters “Oil slipped below $65 a barrel on Monday as signs that U.S. shale oil production was recovering after a recent price rally renewed concerns of a growing global supply glut. China’s latest move to bolster its economy offset some of the losses as it raised hopes that the world’s top energy consumer would help absorb supplies. Brent crude for June was down 44 cents at $64.95 a barrel by 0915 GMT (4.15 a.m. EDT) after dropping 1.6 percent last week. June U.S. light crude was down 35 cents to $59.04 a barrel after rising for eight straight weeks, the longest winning stretch since early 2013. Analysts talk of a growing disconnect between the futures market, which has gained more than 40 percent since its January low, and a growing physical supply glut.” (Oil falls below $65 on signs of U.S. shale oil revival)

M&A activity is expected to pick up as prices stabilize and market outlook improves — Reuters “Deal making in the oil and gas sector is set to accelerate as higher oil prices and an improved outlook for the sector boost investor appetite, Morgan Stanley said in a report on Monday Royal Dutch Shell’s $70 billion bid for smaller British rival BG Group last month highlighted the shift in sentiment in the sector after mergers and acquisitions (M&A)slumped in the first quarter of 2015 to a 20-year low, with only 30 deals completed at a value of $4 billion, most of them in North America. Since the start of the second quarter, 38 deals have completed with a total value of $93 billion, the bank said.( Oil and gas M&A set to rebound in second quarter: Morgan Stanley)

Retail investors are increasing their exit from ETFs at a high rate. — Reuters “Oil investors are hastening their exit from exchange-traded funds, a move that some analysts argue is a form of protection in light of weak market fundamentals ahead. Four of the largest oil-specific exchange traded funds, including the U.S. Oil Fund (USO), had outflows of $478 million in the three weeks to May 6, according to data from ThomsonReuters Lipper, marking the biggest withdrawal since the start of 2014.” (Exodus of oil ETF investors signals expected market weakness)

4:13 pm EDT. Oil ended the day lower on fundamentals, oversupply concerns — Reuters “Oil edged lower on Monday on signs that a multi-week rally was encouraging a rejuvenation in already bloated U.S. shale supplies, even as the government expected less output in June from the fastest-growing fields.” “We have growing concerns about crude fundamentals in the second half of 2015 and 2016,” the Wall Street bank said in a note to clients. Oil’s recent rally also appeared technically exhausted, chartists said on Friday, noting that Brent’s halted advance after it had hit 2015 highs last week.“ (Oil slips lower amid debate on U.S. shale oil recovery)

5/12/2015

Investors holding energy debt are beginning to reap the rewards. — Reuters “The rebound in oil prices since mid-March is paying off for holders of corporate bonds of energy companies, and investors are confident that they will outperform Treasuries this year, despite lingering risks. Michael Wildstein, senior portfolio manager at Delaware Investments, said energy bonds should outperform as long as oil prices remain stable. He owns investment-grade credits Continental Resources (CLR.N) and Energy Transfer Partners (ETP.N), and high-yield issuers Newfield Exploration (NFX.N) and Chesapeake Energy (CHK.N) in his $1.4 billion Delaware Corporate Bond Fund”.( Energy debt investors reap gains on oil rise, but risks loom)

U.S. shale oil M&A: Noble Energy Inc. set to acquire Rosetta Resources Inc for about $2 billion — Reuters “oble Energy Inc said on Monday it would acquire Rosetta Resources Inc for about $2 billion in stock, marking the first significant deal among U.S. shale oil producers following a steep fall in global crude prices. But until now buyers and sellers had been unable to agree on valuations and the outlook for future prices. With the Noble acquisition, a precedent has been set that will clear a path for other companies plotting shale deals, people familiar with the transaction said. Shares of Rosetta rose 25 percent to $24.23 and shares of Noble fell 7 percent to $45.39 on the New York Stock Exchange. (Noble Energy’s $2 billion Rosetta deal reopens U.S. shale oil M&A)

Production output from oil companies expected to rise. — Reuters “At least half a dozen U.S.-focused energy firms say they will pump more oil and gas this year than initially expected, adding to a sense that eager drillers are quickly pivoting from months of retrenchment toward renewed growth. A closer look at the figures, however, suggests upgrades to their full-year output forecasts reflect minor adjustments rather than an emerging trend. At most they add up to around 50,000 barrels per day (bpd), according to data compiled by Reuters. On the low end, they might be shy of 20,000 bpd. They came from companies as large as Occidental Petroleum, which pumped nearly 200,000 bpd or over 2 percent of U.S. crude in the first quarter, and as small as Carrizo Oil & Gas Inc., which produced about a tenth as much. (Some U.S. oil drillers see more output, but not by much)

3:31 am EDT. Oil continues its decline on oversupply concerns; Saudi Arabia reported strong crude production numbers and Goldman Sachs warned of further oil price declines. — Reuters “Tuesday’s falls continued price declines on Monday and the previous week, and they came after Brent climbed 40 percent from its January lows, with many analysts saying upward momentum looks to have come to an end as production around the world continues to outpace demand. Top oil exporter Saudi Arabia pumped 10.308 million barrels of oil per day in April, slightly less than in March but still close to record highs. Goldman Sachs said in a note that the recent price rally itself prevented a reduction of oversupply and would therefore lead to lower prices going forward.”

6:01 am EDT. Renewed unrest in Yemen and declining dollar provide a trading opportunity moving prices high — Reuters “Saudi-led air strikes pounded the Yemeni capital Sanaa on Tuesday, hours before a five-day truce was set to begin between the alliance of Gulf Arab nations and the Iran-allied Houthi militia that controls much of the country.” “Prices also drew support from a weaker dollar, which was down 0.47 percent against a basket of currencies. Dollar-traded commodities such as oil benefit from a weaker U.S. unit as it makes them cheaper for holders of other currencies.” (Oil rises as Middle East unrest offsets oversupply concern)

The latest rally in oil, mid-March, seen as driven by short covering as hedge funds rush to protect their exposure. — Reuters “Oil’s sharp rally since the middle of March has been driven by a race among bearish hedge funds to cover loss-making short positions rather than any great bullishness about the outlook. On the eve of the rally, hedge funds and other money managers had amassed record short positions in WTI-linked futures and options amounting to 209 million barrels of oil. But in the seven weeks between March 17 and May 5, hedge funds cut their shorts by almost 116 million barrels to 93 million, a decline of more than 55 percent. Over the same period, hedge funds added only 7 million barrels of net new longs, a 2 percent increase from 381 million to 388 million, according to the U.S. Commodity Futures Trading Commission (CFTC).” (Oil rallies as hedge funds are caught short: Kemp)

3:02 pm EDT. Simply put, the oil market presents an ideal environment to trade, queue off of bullish news, i.e. unrest in Yemen, weaker dollar, take 3–4% profit, wait for the dip, then play it again. — Reuters “Oil rose as much as 3 percent on Tuesday as a weak dollar lifted commodities denominated in the currency and OPEC raised slightly its forecast for world oil demand growth. Violence in Yemen also boosted crude prices, raising concerns over the security of Middle East supplies. The dollar fell on bond market gyrations, making oil and other commodities priced in the greenback more affordable to holders of the euro and other currencies. (Oil up about 3 percent; volatility threatens)

5/13/2015

Saudi Arabia raised its crude production in April — Reuters “The world’s top oil exporter pumped 10.308 million barrels of oil per day in April, a Gulf industry source told Reuters on Tuesday, compared to 10.29 million bpd in March. “This is an indication of strong demand, especially from Asia, as well as increasing domestic consumption during summer,” the source said. The increase underlined Saudi Arabia’s determination not to cede market share to higher-cost producers, such as U.S. shale drillers. The kingdom and others in the Organization of Petroleum Exporting Countries (OPEC) had resisted cutting production to shore up oil prices. (Saudi Arabia’s April crude output hits record high)

OPEC’s oil supplies stay ahead of demand. — Reuters “OPEC said its oil output rose further in April, keeping an excess supply in the market despite stronger demand and signs the producer group’s strategy of letting prices fall to hurt other producers is taking effect. In a monthly report on Tuesday, OPEC said demand for its oil this year would be 50,000 barrels per day (bpd) higher than previously thought, thanks to a slightly lower supply forecast for countries outside the group. Oil prices have almost halved from $115 a barrel in June 2014, in a decline OPEC officials have said is stimulating fuel use. The report made a small upward revision to forecast oil demand growth in 2015 and was upbeat about the outlook.” (OPEC oil output boost keeps supply surplus despite higher demand)

U.S. government on Tuesday lowered its 2015 and 2016 crude oil production growth forecast. — Reuters “In its short term energy outlook, the U.S. Energy Information Administration lowered its 2015 crude oil production growth forecast to 530,000 barrels per day (bpd) from 550,000 bpd, while 2016 growth was seen at 20,000 bpd, down from 80,000 bpd previously. Meanwhile, it raised its 2015 U.S. oil demand growth forecast to 340,000 bpd vs 330,000 bpd seen last month and cut its 2016 demand growth forecast to 70,000 bpd from 90,000 bpd previously. (EIA cuts 2015, 2016 U.S. crude oil production growth forecast)

5:36 am EDT. Keying off bullish news that U.S. stockpiles declined, prices move higher, though Global oil production exceeds demand by more than 2 percent — Reuters “Brent crude oil rose above $67 a barrel towards five-month highs on Wednesday after U.S. crude stockpiles fell for a second straight week, suggesting that the world’s biggest oil market is rebalancing. U.S. crude, gasoline and distillate stockpiles all fell last week, the American Petroleum Institute said on Tuesday, ending months of builds that have lifted stocks to record highs. Oil shrugged off a bearish report from the International Energy Agency (IEA), which said that market fundamentals looked loose as global supplies increased, outpacing small rises in oil demand. (Oil extends gains after U.S. stockpiles drop for second week)

A new Exchange Traded Fund for Canadian heavy crude oil launches — Reuters “The first exchange-traded fund tracking the price of Canadian heavy crude launched on Tuesday, enabling investors to gain exposure to the country’s physical crude market and potentially boosting liquidity. The Canadian Crude Oil Index ETF, issued by Calgary-based hedge fund manager Auspice Capital Advisors Ltd, will be based on the price of Western Canada Select heavy blend crude. Auspice President and Chief Investment Officer Tim Pickering said the new ETF could increase participation in the relatively illiquid Canadian crude market. “In Alberta, we have got a market that is participated in almost exclusively by wholesale participants. What’s missing is speculators and retail players, people that have different motivations,” Pickering said.”( Hedge fund launches first ETF for Canadian heavy crude oil)

3:52 pm EDT. Oil ended lower as traders take profits. — Reuters “Oil prices fell after initially rallying on Wednesday as worries about huge supplies weighed on the market despite a second straight week of draws in U.S. crude. Government data showed U.S. oil inventories fell 2.2 million barrels in the week to May 8, to below 485 million barrels, compared with analysts’ expectations for a rise of 386,000 barrels. Gasoline and distillate stockpiles also declined.” “It looks like a buy the rumor, sell the news event,” said John Kilduff, partner at New York energy hedge fund Again Capital. “(Oil ends down despite U.S. crude draw; stockpiles still hefty)

5/14/2015

OPEC expected to intensify push for market share, further increasing production, which caused prices to fall in 2014. — Bloomberg “OPEC’s push to defend its share of the global oil market has just begun and the International Energy Agency said the group may further increase production, a strategy that caused prices to crash last year. Gulf-based members of the Organization of Petroleum Exporting Countries are boosting supplies as they escalate a battle to preserve sales volumes, the IEA said in its monthly market report. While the U.S. shale oil industry appears to have “blinked” in the face of OPEC’s move, countries including Russia are coping better than expected with low prices and the agency increased its overall 2015 estimate for non-OPEC production.” (IEA Says OPEC Battle for Oil Market Share Only Just Started)

Approximately 50% U.S. oil and gas executives see oil prices below $60 and high volatility through the end of the year. — Reuters “The survey, which canvassed nearly 200 senior U.S. energy executives, comes amid an oil industry slowdown caused by oversupply and spiraling prices, and as the oil market mulls whether prices and activity will rebound in the coming months. The survey showed that 45 percent of respondents expect an average Brent price of between $50 and $59 a barrel this year. Brent has averaged $57.59 a barrel so far this year and traded at around $67 on Wednesday, according to Reuters data. (U.S. oil execs see little hope for crude price bounce this year: survey)

5:38 am EDT. Oil lower on global demand concerns — Reuters “Oil prices eased slightly on Thursday as weak data from the world’s top economies raised concern about the outlook for global fuel demand. Uncertainty over the strength of any decline in U.S. oil output also weighed.The larger economic picture offset data that showed a large drawdown in U.S. crude stockpiles last week. June Brent crude was trading 10 cents down at $66.71 a barrel as of 0917 GMT. U.S. crude for June delivery, at $60.20, was 30 cents lower.” (Oil eases on economic worries, U.S. output uncertainty)

3:29 pm EDT. Fundamentals prevail as prices remain lower — Reuters “Oil futures pulled back on Thursday as an ample global supply picture weighed on prices while Brent’s front-month June contract headed to expiration. Trading was choppy as market participants tried to square bullish factors including U.S. inventory data, spot demand for crude in Asia and Middle East unrest with basic supply fundamentals. “The market is really in a pause,” said Harry Tchillgurian, analyst at BNP Paribas. “The longer the price stays up, the more you invite supply to come back to the market.” (Oil down with eyes on ample supply, dollar’s bounce)

5/15/2015

5:16 am EDT. Bulls seem to be pulling back as price remains just below $67 leaving no room to trade. — Reuters “Brent crude oil steadied below $67 a barrel on Friday, consolidating after several weeks of gains after reports of a growing supply glut that is building inventories worldwide. Oil futures have rallied strongly since January after collapsing last year but analysts say the rebound may have over-shot, and could be about to correct. Although the U.S. oil market is becoming more balanced, production elsewhere is still running well ahead of consumption. “A mood change is in the air,” Eugen Weinberg, global head of oil and commodities research at Commerzbank in Frankfurt, told Reuters Global Oil Forum. “The oil price rally looks like it may be slowly running of steam.” Brent for July was at $66.70 a barrel by 0900 GMT, unchanged from Thursday close after trading in a narrow 55-cent range. U.S. crude for June was down 25 cents at $59.63 a barrel.” (Oil steadies below $67 as global glut builds)

Hedge fund manager Pierre Andurand expects benchmark Brent crude to drop to about $50 by end of year. — Reuters “Oil-focused hedge fund manager Pierre Andurand said on Thursday that he expected benchmark Brent crude to drop to about $50 a barrel by year-end due to higher production and market volatility. “I don’t think the market is ready to see $80 to $90 oil in the short term,” the manager of the $450 million London-based Andurand Capital told Reuters ahead of his speech at an industry conference in New York on the direction of oil. Andurand said oil’s rebound from a seven-month rout has been overdone as investors have bet on U.S. production cuts, which he sees as temporary.” (Hedge fund manager Andurand sees drop in Brent crude by year-end)

Tensions rise in Gulf shipping lanes — Reuters “Iranian naval vessels fired shots at a Singapore-flagged tanker in the Gulf on Thursday, in what appeared to be Iran’s latest attempt to settle a legal dispute by force with passing commercial vessels, U.S. officials said.” “Two weeks ago, Iranian patrol ships diverted a Marshall Islands-flagged container vessel from the Strait of Hormuz to settle a years-old debt case.” “Shipping industry officials said they were bracing for the likelihood of even more tensions at sea, which could lead to a spike in shipping costs. “The pattern looks like the Revolutionary Guards are using a commercial pretext to intervene in the incidents to date,” said one shipping underwriter. “This could start to impact upon (insurance) rates.” (Iran navy fires shots at tanker as tensions rise in Gulf)

11:27 am EDT. Fundamentals remain the market driver, as bulls relinquish rein. — Reuters “Oil fell on Friday as renewed worries of a supply glut weighed on a market feared to be overpriced from a recent rally. Gasoline RBc1 and heating oil HOc1 joined the slide, pulling the petroleum complex lower, as analysts and traders said the higher demand for such oil products and drop in crude stockpiles lately weren’t enough to justify total inventory numbers. Futures of North Sea Brent oil are up nearly 20 percent since the end of March, while U.S. crude has risen almost 30 percent, a rebound that appears to have overshot and could be about to correct. “A mood change is in the air,” Eugen Weinberg, global head of oil and commodities research at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. “The oil price rally looks like it may be slowly running of steam.” (Oil falls on glut worries as rally comes into question)

3:24 pm EDT. Market ends the day mixed, Brent rebounds off of the day’s lows while U.S. Crude retained its loses — Reuters “Brent rebounded from Friday’s early weakness while U.S. crude held to losses as traders and investors debated whether oil’s rally over the past month and a half should continue amid stubbornly high supplies. Futures of North Sea Brent have rallied nearly 20 percent since the end of March, while U.S. crude futures have risen almost 30 percent. Crude inventories in the United States, meanwhile, remain near 80-year highs. To some, that suggests a market that has overshot and likely to correct.(Brent up, U.S. crude down as oil rally comes into question)

5/18/2015

Recent increases in gas prices can be attributed to dollar weakness as oppose to the rally in oil prices. — Reuters “Rises in crude oil prices over the three-week period were not driven by changes in oil supplies, said Trilby Lundberg, publisher of the survey, but rather were caused by a recent weakening of the dollar against key foreign currencies. Prices should remain relatively low for the coming summer driving season. “The chances are high that there will be small or negligible price rises from here in the national average, assuming no crude oil price spike in the near future,” Lundberg said. The price increase for the nation would have been substantially smaller if not for significant hikes in California, the state with the highest gasoline consumption, and the rest of the West Coast, Lundberg said. In California, the average price rose 53 cents over the past three weeks to $3.76 per gallon.” (U.S. gas prices up 22 cents over past three weeks: survey)

OPEC not expected to cut output at June meeting. Reuetrs “Asked if OPEC would cut output at the upcoming June 5 meeting, Iran’s Deputy Oil Minister Rokneddin Javadi told Reuters: “I don’t think so.”Iran, along with Venezuela, has repeatedly called for OPEC to cut output to shore up low prices that have eaten into producers’ oil revenues. Javadi’s comments signal an admission that the group was unlikely to agree to a reduction, especially after its current strategy has succeeded in curbing non-OPEC output and allowed OPEC to regain market share.” (Iran deputy oil min says OPEC unlikely to cut output)

5:27 am EDT. Oil rises as traders seize bullish opportunity, escalating unrest in the Middle East. — Reuters “Oil prices rose on Monday after Islamic State militants said they had seized control of the key city of Ramadi in western Iraq, raising fears of deeper turmoil in the oil-producing country. Tensions in the Middle East were further heightened after a Saudi-led coalition resumed air strikes against Houthi militia in Aden, a port city on the shores of key Middle East oil routes. Analysts nevertheless said oil markets remained oversupplied, and that the glut could worsen if U.S. production picked up and output by producer group OPEC stayed strong.” (Oil prices rise after Islamic State advances in Iraq)

Goldman cuts oil price forecasts for 2016 to 2020 — Reuters “citing improved U.S. shale efficiency meeting global oil demand, coupled with unimpeded OPEC productivity. However, the U.S. investment bank, in a note published on Saturday, raised its view of the average 2015 Brent price to $58 per barrel from its earlier forecast of $52 and lifted its outlook for the average WTI price to $52 per barrel from $48” (Goldman Sachs cuts crude price forecasts for the next five years)

Hedge Funds losing faith in the rally, given fundamentals, supplies — Bloomberg “Speculators are losing faith in the oil rally, judging that OPEC will keep increasing supply from the highest level since 2012. Their net-long position in West Texas Intermediate crude dropped 2.1 percent, as long wagers fell the most in two months and short bets declined to the lowest since August, U.S. Commodity Futures Trading Commission data show. Funds also reduced their bullish bets on Brent, the European benchmark, for the first time in eight weeks. OPEC’s push to defend its share of the global oil market has just begun and its members may further increase production, the International Energy Agency said May 13. Saudi Arabia said it boosted output to the highest level in at least three decades. Oil explorers in the U.S. reduced the rig count last week by the least since December, diminishing the probability that supply will contract. “Until we see some real tightening of supply the market is going to be vulnerable to a pullback,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone May 15. Only “once we get evidence that the fundamentals are changing will prices be able to move higher,” he said.” (Hedge Funds Lose Faith in Oil Rally as OPEC Seen Boosting Supply)

3:42 pm EDT. Oil down on stronger dollar and oversupply concerns — Reuters “Oil slipped on Monday as a rallying dollar and concerns of growing oversupply weighed on the market after Saudi Arabia reported its highest crude exports in nearly a decade. Crude oil futures erased early gains of more than $1 a barrel on worries of turmoil in the Middle East after a major advance by Islamic State militants in Iraq and renewed air strikes by a Saudi-led coalition against Houthi militia in Yemen. The dollar rose more than 1 percent against a basket of major currencies .DXY, its most in three weeks. The 19-commodity, crude oil-dominated Thomson Reuters/Core Commodity CRB Index .TRJCRBTR fell 0.3 percent as the stronger dollar made raw materials denominated in the currency less affordable to holders of the euro and other denomination. Oil was also weighed down by data showing that Saudi Arabia’s crude oil exports rose in March to the highest levels since November 2005, analysts said.” (Oil down as firmer dollar, ample supplies offset Mideast turmoil)

5/19/2015

Strong Global demand as seen by record Saudis oil exports, in March. — Reuters “Saudi Arabia’s crude exports rose in March to their highest in almost a decade, official data showed on Monday, a sign of unexpectedly strong global demand as the top oil exporter revved up its output to the loftiest rate on record. The OPEC heavyweight shipped 7.898 million barrels per day (bpd) of crude in March, up from 7.350 million bpd in February and 7.474 million bpd in January, figures supplied by Riyadh to the Joint Organisations Data Initiative (JODI) showed. That was the highest level since November 2005, when the kingdom shipped 7.962 million bpd, according to JODI, an international body set up to promote transparency in oil markets. Oil Minister Ali al-Naimi has said Saudi Arabia produced some 10.3 million bpd of crude in March, highlighting the strength of global demand, which has helped lift refinery profit margins to their highest in years.” (Saudi Arabia’s March oil exports highest in over nine years — data)

Realized volatility down to 24% from 60% as Hedge Funds squared their short positions, thus reducing trading opportunities. — Reuters “Oil prices have become much less volatile in recent weeks as the record short position previously established by hedge funds has been squared up and prices return to a level at which many U.S. shale wells are profitable. Realized volatility, a technical measure of the day to day variability in prices, has fallen to an annualized rate of just 24 percent, down by more than half from its peak of 60 percent in late February. Volatility in front-month Brent futures has dropped to its lowest level for almost five months and is now roughly in line with the very long-run average of about 27 percent. After displaying its wild side, the oil market has reverted to a milder state, to use terms employed by Benoit Mandelbrot to describe erratic volatility in commodity markets (“The (mis)behavior of markets” 2004). The reduction in volatility reflects a number of factors of which the most important is the squaring up of the record short positions which hedge funds and other money managers between November and March.” (Oil volatility fades as risks become more balanced: KEMP)

Refineries in the U.S. are on their way to becoming the major refining hub for the western hemisphere. — Reuters “U.S. refiners now supply almost a quarter of the rest of the hemisphere’s daily fuel demand, up from less than 10 percent a decade ago. U.S. refiners are exporting more than 4 million barrels of gasoline, diesel and other fuels every day around the world, up from 1 million barrels per day in 2005. Two-thirds of the exports, almost 2.8 million barrels per day (bpd), go to markets in the western hemisphere, according to U.S. Customs. Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Panama, Peru and Venezuela all received record or near-record shipments last year. Other countries as far away as France, Nigeria, China, South Korea, Australia and Lebanon have also seen increased imports from the United States. But the western hemisphere has been the biggest and fastest growing market for U.S. refineries, accounting for an extra 2 million barrels per day since 2005. (U.S. refiners dominate western hemisphere markets: Kemp)

4:19 am EDT. Oil prices down on fundamentals, oversupply outpacing demand. — Reuters “Crude oil prices fell on Tuesday as slow economic growth and high supplies meant that markets remain oversupplied, although U.S. prices received some support from rising demand ahead of the summer driving season. Brent futures LCOc1 were down 60 cents at $65.67 a barrel by 2.12 a.m. ET, after an almost 1 percent fall on Monday on near-record Saudi exports. Goldman Sachs said Brent crude prices were due for a downward correction after a recent rally that saw prices of the North Sea benchmark jump 50 percent since its mid-January lows. “We find that the global market imbalances are in fact not solved and believe that the rally will prove self-defeating as it undermines the nascent rebalancing,” the bank said in an overnight report that reiterated its downward revision of long-term oil prices on Monday. It said the ongoing oversupply, upside to U.S. production at current prices and excess capital access would be the main drivers pulling down prices.” (Oil prices drop as weak fundamentals weigh on market)

5:28 pm EDT. Oil prices down 3% on stronger dollar and oversupply concerns. — Reuters “Oil prices fell more than 3 percent on Tuesday, with U.S. crude extending losses for a fifth straight day as the dollar rallied and on evidence that the United States and top oil exporter Saudi Arabia were pumping more than the world needed. North Sea Brent and U.S. crude settled down more than $2 a barrel each as the dollar hit two-week highs against a basket of currencies .DXY, making crude and other dollar-denominated commodities less affordable for holders of currencies such as the euro. The sell-off in oil came ahead of Tuesday’s end-of-business expiry in U.S. crude’s front-month contract, which often results in unusually heavier market activity. Volume in U.S. crude’s July contract CLN5, the new front-month from Wednesday, was markedly higher than the expiring June contract CLM5, Reuters data showed. “There is certainly a degree of profit-taking going on today before the expiry of the June contract, but it’s primarily driven by the dollar’s strength,” said Sal Umek of the Energy Management Institute in New York. (Oil slides more than 3 percent on dollar rally, glut worry)

5/20/2015

5:04 am EDT. Oil prices move higher as fundamentals play out. The risk of trading has increased substantially with lower realized volatility. — Reuters “Crude oil prices bounced back on Wednesday from steep falls in the previous session as industry data showed that U.S. crude stocks fell more than expected last week and strong Japanese economic growth surprised markets, stoking producer hopes of increased demand” “Prices also drew support from strong economic data from Asia. Japan’s economy, the world’s third largest, expanded at an annualized rate of 2.4 percent in the first three months of this year, above a median market forecast for a 1.5 percent rise and following a revised 1.1 percent expansion in October-December, official data showed. “Japan is one of the major importers of crude oil and growth in this region would definitely be favorable for crude demand,” Singapore-based brokerage Phillip Futures said. Japan’s weekly crude runs were at 3.02 million barrels per day for the week to May 16, official data showed Wednesday, up 0.12 percent from this time last year, although 0.17 percentage points below the previous week.” (Oil prices rise on U.S. stock draw, strong Japan data)

Saudis and other OPEC members are limiting exports to top customer as an incentive to boost prices? — Reuters — “While the Saudi and other refusals for additional crude supplies may not be part of a new pricing strategy, the rejections to their biggest client help explain a 40 percent rise in oil prices this year as Chinese importers have had to seek more oil from other suppliers in what analysts say is still an oversupplied market. Senior Chinese oil traders told Reuters the Saudis have turned down requests from Chinaoil and Unipec — the respective trading arms of PetroChina and Sinopec — for extra cargoes of crude for May and June loadings, forcing them to seek supplies from producers in West Africa, Oman and Russia.” (Saudi Arabia, partners turn down Chinese requests for extra oil )

Asian refiners are facing increasing competition from new refineries in the Middle East. — Reuters “Faced with competition from mammoth new refineries in the Middle East and soft fuel demand in key markets, Asian refiners are trying a variety of tactics to cope from investing in refineries in emerging markets to using cheaper energy sources. Less complex and older refineries in Asia, however, might be forced to cut run rates or shut, industry executives said at an energy conference. “We have to explore ways and means to survive the decline in demand and try to maintain refining capacity,” vice-president Michio Ikeda of JX Nippon Oil & Energy Corp said on the sidelines of the Asia Oil and Gas Conference in Kuala Lumpur. Japan’s largest refiner is considering investments in markets such as Vietnam and Indonesia and also increasing petrochemical production.” (Asian refiners forced to get creative to stay competitive)

Oil companies receiving inflows of funds from hedge funds and private equity firms. — Reuters “By pouring billions of dollars into energy shares and bonds in the past few months these newcomers, dubbed “energy tourists” by Houston’s seasoned dealmakers, have thrown a lifeline to scores of companies that a few months ago looked like potential targets for bigger rivals or distressed debt and restructuring specialists. “You’ve got generalist funds that have never invested in energy coming out of the woodwork,” Michael Ames, an energy investment banker at Raymond James, told a meeting of oil and gas executives this month. So far this year, 40 oil and gas companies raised $18.7 billion in new share sales, while 35 firms issued $26.4 billion in debt in the first four months, Thomson Reuters data show. The share sales are the highest in at least 15 years while bond issuance is on track to be the heaviest in three years.” (Flood of new cash sustains U.S. oil firms; energy dealmakers gripe)

3:31 pm EDT. Oil rebounds on Energy Information Administration report. — Reuters “U.S. crude stocks fell nearly 2.7 million barrels last week, down for a third consecutive week, as refineries hiked output, the government-run Energy Information Administration (EIA) said. Gasoline and distillate inventories also declined. While the crude draw was nearly triple that estimated by analysts in a Reuters survey, it was only about half of the 5.2 million-barrel drop reported by industry group American Petroleum Institute, disappointing some market bulls. “It’s a fairly neutral report at the best as the weekly change is mildly bullish within a bearish overall stock situation,” said James L. Williams, energy economist at WTRG Economics in London, Arkansas. He noted that stockpiles were in “excellent shape” with crude inventories about 90 million barrels above year-ago levels, while refinery utilization rates were only a little higher at above 92 percent” (Oil rises on U.S. crude drawdown but oversupply still weighs)

5/21/2015

Oil continues to move higher on U.S. inventory report and unrest in the Middle East. — Reuters “Oil rose towards $66 a barrel on Thursday, gaining for a second day, supported by expectations that a global supply glut is starting to ease and by fighting in Iraq.” “Brent is getting a bit of impetus from the threat Islamic State is posing in Iraq,” said Christopher Bellew, senior broker at Jefferies Bache. “I can see prices moving up further from here on geopolitics towards $70.” (Oil rises towards $66 on U.S. inventory drop, Iraq)

How accurate are the Oil stockpile reports? — Reuters “Oil-market watchers are struggling to reconcile the large estimated oversupply in the market with the much smaller buildup of reported inventories and narrowing contango in futures prices. Some blame the barrel counters who compile official statistics on supply, demand and stocks. But the truth is that information on the world oil market is incomplete and it is easy for hundreds of millions of barrels of oil to disappear from the supply chain without being counted.” (How do you lose 100 million barrels of oil?)

3:08 pm EDT. Oil ended the day up 2%, its biggest move in more than a week. — Reuters “Fighting in Iraq that raised worries about the security of Middle East oil shipments also boosted the market. The dollar’s .DXY retreat took some pressure off crude prices as well. The greenback snapped a broad three-day run-up and fell against the euro for the first time in a week, making dollar-denominated commodities more affordable to holders of other currencies. Inventories of U.S. crude in Cushing, Oklahoma fell by almost 740,000 barrels between Friday and Tuesday, trade sources said, citing a report by market intelligence firm Genscape. The report added to the fervor of oil bulls, already inspired by Wednesday’s U.S. government data showing the third straight weekly decline in crude stockpiles across the United States.” (Oil gains over 2 percent on inventory draws, Iraq fighting)

5/22/2015

Oil prices steady at $66 per barrel, with unrest in the Middle East on the fore front. Expect profit taking before the long weekend. — Reuters “Oil prices steadied on Friday as worries over the impact on crude supplies of war in the Middle East were balanced by reports of profit-taking ahead of a long weekend. Monday, May 25 is Memorial Day in the United States and a public holiday in much of Europe, closing many markets. “No one wants to hold open positions ahead of a long weekend so books are being squared, bringing some consolidation,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.” (Brent crude oil steadies near $66 before long weekend)

Saudis usage of oil eclipsed U.S. during the summer months, June through August — Reuters “As the United States raced over the past five years toward becoming a global petroleum powerhouse, the world’s biggest oil exporter Saudi Arabia quietly seized a market milestone from America: the largest source of peak summer demand. From June through August, when temperatures in Riyadh routinely rise above 100 degrees Fahrenheit (38 degrees Celsius), Saudi Arabia diverts as much as a tenth of its crude output to fuel power plants that run full tilt to meet surging demand from air conditioners. The result is that Saudi Arabia’s winter-to-summer “swing” in oil consumption has eclipsed that of the United States, where gasoline consumption jumps by as much as 10 percent every summer as millions of families take advantage of school holidays and warm weather to embark on the classic American road trip.” (U.S. drivers yield ‘swing’ oil demand crown to Saudis)

China’s demand for gas accelerates as consumers shift to bigger cars — Reuters “Retail sales of SUVs soared more than a third last year to 3.82 million, and have more than doubled since 2012, according to the China Passenger Car Association (CPCA). China’s gasoline demand is expected to grow by 8 percent in 2015, compared with growth of less than 1 percent for diesel, Wood Mackenzie’s Feng said. For 2016 to 2020, annual demand growth for gasoline is seen at 5.5 percent, versus 1.7 percent for diesel, he said. (China’s shift to consumer-led growth drives jump in gasoline demand)

Oil companies proved reserves for wells will change with lower prices. — Bloomberg “Six years ago, the industry pushed the Securities and Exchange Commission to make it easier for companies to claim proved reserves for wells that wouldn’t be drilled for years. Some prospects considered sure-things when crude was $95 a barrel are money losers at today’s $60. When crude crashed in 2008, 44 U.S. companies wiped 630 million barrels from their books. Now the stakes are higher. Of all the proved reserves of oil and natural gas liquids found by the 44 companies since 2008, more than half — 5.4 billion barrels out of the 9.7 billion — is attributed to wells that don’t exist yet, according to data compiled by Bloomberg. (Oil’s Whodunit Moment Coming With Millions of Barrels to Vanish)

11:56 am EDT. Oil down 1% on strong dollar and profit taking — Reuters “A stronger greenback makes dollar-denominated commodities less affordable to holders of the euro and other currencies. Traders said oil was particularly vulnerable to profit-taking after the gains of the past two days where Brent had risen 4 percent and U.S. crude 6 percent. [FRX/] “No one wants to hold open positions ahead of a long weekend so books are being squared, bringing some consolidation,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.” (Oil down more than 1 percent ahead of long U.S. Memorial Day weekend)

3:05 pm EDT Oil down 2% — Reuters “Oil fell about 2 percent on Friday as a rallying dollar and profit-taking ahead of a long U.S. holiday weekend cut short a two-day run-up in crude prices. Heating oil HOc1, a proxy play for diesel, also fell almost lost 2 percent while gasoline RBc1 lost more than 1 percent on concerns of outsized U.S. supply despite forecasts for a spike in driving this weekend and through Monday’s Memorial Day holiday. Worries that fewer U.S. oil rigs were being idled after a broad rebound in crude prices since early April further weighed on sentiment. Drillers cut the number of U.S. oil rigs in operation by just one this week, the strongest sign yet that a nearly six-month slump in activity was ending, data from oil services firm Baker Hughes showed. U.S. crude CLc1 settled down $1, or 1.7 percent, at $59.72. It rose 3 cents for the week though, extending weekly gains for a 10th straight week. North Sea Brent oil LCOc1, a more widely referenced benchmark, settled down $1.17, or 1.8 percent, at $65.37 a barrel. Brent fell 2.1 percent on the week. (Oil down 2 percent ahead of long U.S. Memorial Day weekend)

5/25/2015

Oxford University’s campaign to disinvest its 3.8 billion pounds ($6 billion) endowment from funds that invests in companies producing Coal and tar sands. — Reuters “For Rivka Micklewaite and fellow students, securing a pledge this week from Oxford University to avoid direct investments in companies producing coal or tar sands is just the beginning. Getting that commitment involved a two-year campaign during which they staged a “marriage” between the 900-year-old university and “Big Oil” before breaking it up, to symbolize the need to end investment in fossil fuels, Micklewaite said. “The campaign is definitely going to continue,” she told Reuters, adding that full divestment is her aim for the 3.8 billion pounds ($6 billion) in university endowment funds. The second-year engineering student from Balliol College is not alone. She is part of a global campaign urging investors to ditch assets in ‘dirty’ energy firms in favor of ‘greener’ rivals, and which so far has pledges to sell out totaling $50 billion. Norway’s $900 billion sovereign wealth fund and the Church of England are among recent high-profile sellers. But some of the money managers running the more than $27 trillion in assets held globally in mutual funds say divestment as a tool to address climate change is too simplistic in most cases. Most argue it can leave fewer investors at a company who are committed to steering management in the desired direction. (Funds feel heat of coal and tar divestment drive

Price of storing oil is falling. Is this an indication demand is picking up? — Reuters “The price for storing a barrel of Brent for six months has fallen from more than $1.23 per month at the start of 2015 to just 37 cents per month on May 21. According to most estimates, the global market has been oversupplied by between 1.5 million and 2.5 million barrels per day since the start of the year. Yet the price for storing crude has fallen by two-thirds in the space of just four months, which indicates there is no shortage of space in tank farms and the supply-demand surplus may be being overestimated. Strong growth in demand is helping the market absorb record crude supplies from Saudi Arabia and the U.S. shale fields. “Markets around the world have surprised on the upside. Demand has definitely surprised on the upside in refined products,” an executive for Vitol, the world’s largest oil trader, told a conference (“Oil market buoyed by product demand” May 20).” (Traders watch the falling price of oil storage: Kemp)

7:05 am EDT. Oil prices trading lower on stronger dollar. — Reuters “The dollar pared early gains but remained near to two month-highs against the euro and yen as well as a one-month high against a basket of currencies. A strong dollar makes crude oil less attractive for holders of other currencies. “The overall fundamentals still point to a well-supplied market, a fact that should continue to put a ceiling on prices,” Barclays said. However, the market drew support from strong demand figures across Asia and the United States.”Global oil demand continues to surprise to the upside, with April data showing no signs of slowdown despite a pick-up in prices,” Energy Aspects said in a note. (Oil prices edge down as dollar strengthens)

2:34 pm EDT. Oil higher, as global demand ticks up, over shadowing stronger dollar. — Reuters “Global oil demand continues to surprise to the upside, with April data showing no signs of slowdown despite a pick-up in prices,” Energy Aspects said in a note. Japan’s customs-cleared crude oil imports rose 9.1 percent year-on-year to 3.62 million barrels per day (bpd) in April, the Finance Ministry said. In China, crude imports hit a record 7.4 million bpd last month, with healthy car sales countering a slowing economy. In the United States, the peak summer driving season started with Memorial Day on Monday, and the American Automobile Association said road travel was expected to reach a 10-year high over the long weekend.” (Oil prices gain as firm demand outweighs dollar strength)

5/26/2015

Iraq maintains record oil output. — Reuters “Iraq’s oil exports have held above 3 million barrels per day (bpd) so far in May, according to loading data and an industry source, keeping shipments from OPEC’s second-largest producer close to a record high. Another strong month from Iraq adds to signs of high output from major members of the Organization of the Petroleum Exporting Countries focused on keeping market share, weighing on global oil prices. “There is little doubt that record crude exports out of Iraq are adding further length to an already extremely well-supplied market, thereby adding downside pressure,” said Eugene Lindell, oil analyst at JBC Energy in Vienna.” (Iraq exports hold close to record high in May)

OPEC members seen to maintain its oil production levels at their scheduled June 5, meeting. — Reuters “Lowering OPEC’s production ceiling requires consensus between all members … under current conditions it seems unlikely that the OPEC production ceiling will change,” Zanganeh was quoted as saying. Last month, Zanganeh said the producing group should cut its target daily crude production by at least 5 percent, or approximately 1.5 million barrels per day. The Organization of the Petroleum Exporting Countries will meet on June 5. At its last meeting in November, OPEC, led by oil kingpin Saudi Arabia, decided against cutting output to defend its market share, resisting calls by some members such as Iran and Venezuela to reduce production to shore up prices.” (Iran says OPEC unlikely to change output ceiling: Mehr news agency)

China’s Crude 0il output rose 1.6% for the year. — Peoples Daily “Crude oil output in China reached 69.58 million tonnes in the first four months of 2015, a year on year increase of 1.6 percent, according to data from the top economic planner. China refined 155.57 million tonnes of crude oil during the period, up 3.6 percent year on year, while refined oil production rose 5.2 percent to 98.32 million tonnes, the National Development and Reform Commission said in an online statement. Apparent consumption of refined oil, calculated as production plus imports minus exports, increased 4.8 percent from a year earlier to 89.18 million tonnes. In a separate statement, the planner said natural gas output totaled 45 million cubic meters during the January-April period, up 4.7 percent year on year. Imports of natural gas saw an increase of 7 percent to 19.8 billion cubic meters, while apparent consumption came in at 62.9 billion cubic meters, the commission said.”(China crude oil output rises 1.6 pct)

Bears missed capitalizing on market run. — Bloomberg “Hedge funds and other money managers reduced their net-long position in West Texas Intermediate crude by 7.1 percent in the seven days ended May 19, the most in two months, U.S. Commodity Futures Trading Commission data show. Short positions anticipating lower prices expanded by 30 percent. Oil speculators missed out as record demand from U.S. refineries helped trim supplies from their highest level in more than eight decades and drive prices higher.” (Oil Bears Miss Out as Record U.S. Refinery Demand Drives Rally)

Will long dollar index/short Crude continue to be profitable? With the prospect of an interest rate increase, it’s very likely the inverse correlation will hold. — Reuters “A once-popular pair trade pitting the U.S. dollar against oil prices has re-emerged in recent weeks, injecting a new wildcard into the market just as the Organization of the Petroleum Exporting Countries prepares to meet. Through the second half of 2014, oil slid while the dollar rose, though market watchers viewed this inverse correlation as a coincidence. Oil’s rout was fueled by a swelling global glut, the dollar’s rise driven by European monetary easing and expectations of higher U.S. interest rates. In recent weeks, however, oil market analysts and traders said it looked as though foreign exchange markets were jerking oil prices around. Oil market players are now paying closer attention to currency markets than they have since the European financial crisis. (Return of crude/dollar trade fuels oil market dilemma ahead of OPEC)

6:05 am EDT. Oil prices lower on stronger dollar and bullish U.S. Shale output.. — Reuters “Oil fell to around $65 a barrel on Tuesday, pressured by the possibility that U.S. shale oil producers could increase drilling activity and by a stronger dollar. U.S. drillers cut the number of rigs by just one last week, data showed on Friday, and Goldman Sachs said prices were at a level that would spur activity. The dollar could rally further, Morgan Stanley said, adding to a growing list of headwinds crude faces that include rising OPEC supply. Brent crude was down 45 cents at $65.07 a barrel at 0948 GMT, while U.S. crude, also known as WTI, was 43 cents lower at $59.29. “The main factor weighing on prices is the significantly appreciating U.S. dollar,” said Carsten Fritsch, analyst at Commerzbank. “What is more, the decline in drilling activity in the U.S. that has been ongoing for 23 weeks appears to have stopped.” (Oil drops to $65 on U.S. shale outlook, dollar)

2:51 pm EDT, Oil tumbled as crude’s correlation with the dollar became the dominant factor. — Bloomberg “The stronger dollar will add to pressure on crude, according to Morgan Stanley. A rising greenback curbs the appeal of raw materials priced in the U.S. currency. Oil’s recovery from a six-year low has stalled amid speculation rising prices will encourage output from shale formations, while U.S. supply remains near a record. The Organization of Petroleum Exporting Countries is seen sticking with its strategy offavoring market share over supporting prices when it meets June 5. “We’re looking at real dollar strength with it rising to the highest since 2007 against the yen,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The inverse correlation between oil and the dollar is kicking in.” (Oil Drops to One-Month Low as Dollar Link Strengthens)

3:29 pm EDT. Oil ended the day 3% lower on dollar strength and strong supply outlook; time to take profits. — Reuters “Oil prices fell nearly 3 percent on Tuesday as the dollar’s rally weighed on dollar-denominated crude oil futures along with concerns that a recent rally might keep U.S. producers active. The U.S. dollar index rallied as Greece’s financial crisis and signs of increasing opposition to austerity in Spain pressured the euro. “Pressuring oil is the dollar’s strength on the concerns about Greece being able to make its debt payments and the U.S. Federal Reserve seeming to be closer to raising rates,” said Phil Flynn, analyst at Price Futures Group in Chicago. (Oil falls as dollar strengthens, ample supply weighs)

5/27/2015

Goldman Sachs, expect WTI drilling production to increase at current price levels $60. — Reuters “Shale oil producers, benefiting from lower costs, are expected to ramp up drilling activity if the price of U.S. oil stays near $60 a barrel, Goldman Sachs said.”We believe that should West Texas Intermediate prices remain near $60 a barrel, U.S. producers will ramp up activity, given improved returns, with costs down by at least 20 percent,” analysts at Goldman Sachs said in a report. (U.S. shale oil producers to ramp up drilling at current price: Goldman Sachs)

Iran expected to ramp up production in 2016. — Reuters “Iran plans to raise its oil output by 170,000 barrels per day by end of the current Iranian year, which ends on March 20, 2016, the official IRNA news agency cited an Iranian oil official as saying on Monday. Soltan Kamali, managing director of Arvandan Oil and Gas Company, a subsidiary of the state’s National Iranian Oil Company (NIOC), said the “additional output will be available once the initial phases of North Azadegan and Yadavaran oilfields come into operations,” IRNA reported.” (Iran to raise oil output by 170,000 bpd from new fields by March 2016: IRNA)

Iraq looking to gain market share will ramp-up exports — Bloomberg“The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.” (Iraq About to Flood Oil Market in New Front of OPEC Price War)

5:08 am EDT. As expected, traders take profits, crude moves to the upside as dollar retreats from its highs yesterday. — Reuters “The dollar was trading down 0.33 percent against a basket of currencies .DXY, following a surge on Tuesday. A weaker U.S. dollar makes dollar-backed commodities such as crude oil more attractive for holders of other currencies. “We are hostages a little bit to the swings in the currency markets,” said Ole Hansen, head of commodity strategy at Saxo Bank. U.S. commercial crude inventories are expected to have fallen by 2 million barrels last week, a preliminary Reuters survey showed. Declining U.S. stockpiles of crude and oil products in past weeks indicate robust demand in the world’s largest oil consumer, supporting prices. [EIA/S] (Oil rebounds on expected U.S. stock draw, weaker dollar)

Demand: Transportation sector gas consumption increasing as driving surges. — Reuters “California motorists consumed an extra 34,500 barrels of gasoline every day in February compared with the same month last year, state tax records show. The state is just part of a nationwide surge in driving that has pushed U.S. gasoline consumption up by more than 300,000 barrels per day compared with last year. California drivers filled their cars with 1.148 billion gallons of gasoline in February, about 40.5 million gallons more than in February 2014, an increase of almost 3.7 percent. The Golden State has the most expensive gasoline in the country owing to its relative isolation, special fuel formulations and high level of tax. (Driving is making a comeback in the U.S.: Kemp)

Oil companies lock-in prices as a pre-cursor to a pick-up in spending and/or production. — Reuters “California Resources Corporation, Cenovus Energy, EP Energy, EQT Corporation, Marathon Oil, Hess Corporation, Gulfport Energy, and Whiting Petroleum all initiated new hedges or added to existing hedges in the first quarter on the back of a US$10 rally from early January. Several — most notably higher-rated firms such as Marathon and Hess — do not traditionally hedge at all, according to market participants. Most have locked in prices for future delivery at just above US$60 through to 2016 in an attempt to assure funding lines ahead of any potential summer slowdown. “Increased hedging activity is a sign these firms view the outlook for the market as constructive enough to put down some protection — in a way it is almost a necessary pre-cursor to a pick-up in spending and/or production,” said Ryan Todd, E&P equities analyst at Deutsche Bank. “Once the value of futures contracts used for hedging moves back into a range that’s reasonable, it presents an opportunity to lock in cashflow ahead of when lenders revisit the revolvers the E&P firms have in place. Having a strong outlook for the business, even if it does cap the upside, goes a long way in shoring up the risk of a lack of funding.” (Oil rally drives producer hedging)

9:55 am EDT. Dollar recovers sending oil lower.– Reuters “The dollar was up 0.34 percent against a basket of currencies .DXY, recovering from a fall of 0.33 percent. “We are hostages a little bit to the swings in the currency markets,” said Ole Hansen, head of commodity strategy at Saxo Bank.” (Oil falls below $63 as dollar strengthens)

3:34 pm EDT. Dollar strength pushes oil lower. Take daily profits; Dollar getting ahead of itself. — Reuters “Oil prices fell by up to 3 percent for a second straight day on Wednesday as a resurgent dollar weighed on the market ahead of U.S. inventory data. Gasoline RBc1 and heating oil HOc1 fell more than 2 percent each, extending the slide across the fuels complex, on bets that U.S. refineries will be operating at full swing with the end of maintenance season. The dollar soared against major currencies on speculation about the first U.S. interest rate hike in years. A stronger greenback makes dollar-denominated commodities, including oil, less affordable in other currencies. (Oil down about 3 percent again on dollar, awaits supply data)

5/28/2015

Saudi Arabia’s demand for oil products expected to pick up during summer months — Reuters “Saudi Arabia’s demand for oil products could increase by up to 20 percent this summer from last year as soaring temperatures stoke demand for power generation, but new refineries will limit the need for imports, traders and analysts said. Requirements for fuel oil, the cheapest form of oil to burn to generate electricity, could climb by up to 20 percent this year, although demand for pricier gasoil is likely to be unchanged from last year. Imports of the middle distillate into the country are expected to hit a record low this year due to new refineries’ ability to meet demand, potentially curbing Asian gasoil margins as this removes a major outlet for barrels, traders said. (Saudi Arabia’s summer oil demand for power generation to climb)

5:31 am EDT. Dollar takes a pause as oil moves higher; the economy’s strength doesn’t justify dollar’s continued rapid escalation. — Reuters “Oil prices recovered on Thursday after a two-day slide as the dollar weakened, making fuel less expensive for holders of other currencies. The dollar has risen more than 4 percent against a basket of currencies .DXY over the last 10 days, helping accelerate a fall in oil prices from a five-month high early in May. But the surge in the U.S. currency paused on Thursday, encouraging some oil buying, traders and analysts said. “Much depends on the U.S. dollar,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. “If the dollar resumes its rise, oil will probably test new lows again,” Fritsch added. Front-month Brent LCOc1 was up 65 cents at $62.71 a barrel by 0815 GMT. U.S. crude futures CLc1 were up 30 cents from their last settlement at $57.81 per barrel. Investors awaited oil inventory data from the U.S. Energy Information Administration (EIA) to see how U.S. production was responding to a recent surge in prices. (Oil rises as dollar dips, eyes on U.S. stocks data)

OPEC is not expected to cut oil production at its meeting in June. — Reuters “Saudi Arabia will continue producing oil to meet customer demand, and its output is now at about 10.3 million barrels per day in light of growth in demand from China and India, the source added. He said Saudi Arabia would not sacrifice its market share for other people’s interests, especially if there was no cooperation on oil policy from outside OPEC — a line which has been stated repeatedly by Saudi officials in recent months.” (June OPEC meeting won’t cut output: Saudi paper quotes source)

OPEC expect rivals to increase production despite weak prices — Reuters “The North American oil boom is proving resilient despite low oil prices, producer group OPEC said in its biggest and most detailed report this year, suggesting the global oil glut could persist for another two years. A draft report of OPEC’s long-term strategy, seen by Reuters ahead of the cartel’s policy meeting in Vienna next week, forecast crude supply from rival non-OPEC producers would grow at least until 2017. Sluggish global demand for oil means the call on OPEC’s crude will fall from 30 million barrels per day (bpd) in 2014 to 28.2 million in 2017, effectively leaving the group with two options — cut output from current levels of 31 million bpd or be prepared to tolerate depressed oil prices for much longer.” (OPEC sees rivals boosting oil output despite weak prices)

Oil drillers predicted years of pain for the global rig market if demand remains weak. — Reuters “Seadrill, the world’s second biggest offshore oil driller, predicted years of pain for the global rig market on Thursday as energy companies continue to pare spending despite a recent lift in oil prices. The company, part of shipping tycoon John Fredriksen’s business empire, said charter rates are down, most contract talks are about renegotiating existing deals and the market’s depression will likely last through 2016, leading to lower utilisation and scrapping. It reported first-quarter core earnings, or EBITDA, of $711 million, beating expectations for $638 million. But its stock fell nearly 5 percent, reversing a positive trend that made it one of the best performing offshore rig stocks in the past three months. “Drillers are in a something like three-years recession and they are not at the bottom of their earnings trend yet,” Nicholas Green, a senior analyst at Bernstein Research said. “What we need to see is demand improve and we’re not seeing that,” he said. “The fundamental story here is that we need to see demand come further up, but it’s not going to come up for probably another 18 months and therefore the outlook for the drillers continues to be very tough.” (No 2 offshore oil driller Seadrill sees industry pain through 2016)

4:59 pm EDT. Oil moved higher as U.S. inventories declined. — Reuters “Oil prices rose in choppy trade on Thursday, snapping two days of sharp losses, after data showed a fourth weekly drawdown in U.S. crude stocks. The U.S. Energy Information Administration (EIA) said crude oil inventories USOILC=ECI fell by 2.8 million barrels last week, ahead of Monday’s Memorial Day holiday, which unofficially kicked off the peak summer driving season in the United States. It was a fourth straight week of declines in domestic crude stocks, contrary to the draw of 857,000 barrels forecast in a Reuters survey and the build of 1.3 million barrels estimated by the American Petroleum Institute. Despite that, oil bulls could barely push the market higher right after the EIA data. U.S. crude was down most of the day and Brent was only up slightly, both rallying just before the close. (Oil ends higher as U.S. inventories drop for fourth week)

5/29/2015

Oil production remains high irrespective of low price levels; in essence the supply build-up remains an issue. — Bloomberg “our months into oil’s rebound from a six-year low, the tanker market is sending a clear signal that the rally is under threat. A sudden surge in demand for supertankers drove benchmark charter rates 57 percent higher in the two weeks through May 20. OPEC will have almost half a billion barrels of oil in transit to buyers at the start of June, the most this year, while analysts say about 20 million barrels is being stored on ships in another indication the glut has yet to dissipate. The Organization of Petroleum Exporting Countries is pumping the most oil in more than two years, determined to defend market share rather than prices. A record cut to the number of active U.S. drilling rigs and billions of dollars of spending reductions by companies since last year’s price plunge has yet to translate into a slump in barrels produced. The world is pumping about 1.9 million barrels a day more crude than it needs, according to Goldman Sachs Group Inc. “Supply of oil continues to build,” said Paddy Rodgers, the chief executive officer of Antwerp, Belgium-based Euronav NV, whose supertanker fleet can haul 56 million barrels of crude. “All of this oil needs to go somewhere,” he wrote in an e-mail May 19.(The Tanker Market Is Sending a Big Warning to Oil Bulls)

Investors are pulling money out of energy producers for the first time in eight months. — Bloomberg “More than $1.55 billion has been withdrawn this month from exchange-traded funds concentrated on energy stocks such as Exxon Mobil Corp. and Chevron Corp. It’s on pace for the first monthly setback for the group since investors began pouring into the sector in October with an eye toward profiting from an eventual recovery in prices. “The thesis that oil is too cheap and it has to go higher maybe is not as compelling a case with oil at $60 as it was when it was at $42,”said Ryan Issakainen, a strategist at First Trust Advisors LP in Wheaton, Illinois. Still, $5.4 billion remains of the new money invested in energy ETFs since the year began, suggesting that traders are trimming positions, not starting a rout. On May 1, energy ETF’s lost $475.8 million, days before U.S. crude closed at this year’s high of $60.93 a barrel on May 6, ending a 49-day rally from a six-year low of $43.46 on March 17. (Investors Pulling Energy Sector Bets for First Time in 8 Months)

Retail investors fleeing oil funds — Bloomberg “The biggest U.S. exchange-traded fund that tracks oil is heading for the largest two-month outflow in six years, raising concern that crude’s 30 percent rally may stall. Holders of the United States Oil Fund, known as USO, have withdrawn almost $1 billion so far in April and May, according to data compiled by Bloomberg. Crude dropped about $12 a barrel after a $1.4 billion exodus from the fund in the two months ended June 2009.” “The oil rebound has run out of gas and now you are seeing nervous investors with itchy trigger fingers bailing out of USO,” Eric Balchunas, a Bloomberg Intelligence analyst, said May 27. “They don’t want to get burned by another drop in oil.” (Everyone Is Fleeing Oil’s Biggest Fund)

4:55 am EDT. Oil up 1% on U.S. Inventory data and oil sands outage. — Reuters “Crude oil prices rose around 1 percent on Friday after U.S. inventories fell for a fourth straight week, although prices were set for a weekly drop on a stronger dollar. Oil saw steep falls earlier this week as a resurgent dollar weighed on the market amid concerns U.S. crude supplies may have started rising again after three weeks of draws. North Sea Brent crude has shed more than 3 percent this week, its second straight weekly loss, while U.S. crude is set to end a record weekly winning streak with a loss of more than 2 percent.July Brent LCOc1 was up 60 cents at $63.18 a barrel by 0820 GMT. U.S. crude CLc1, also known as West Texas Intermediate or WTI, was up 70 cents at $58.38.”( Oil gains 1 percent on U.S. inventory drop)

4:08 am EDT. Dollar index resumes its upward move; let’s see if the inverse correlation or oil fundamentals holds. — Reuters “ The dollar index rose on Friday, resuming its recent streak of monthly gains after a break in April, with investors likely to look past soft first-quarter U.S. growth numbers after recent activity data pointed to a more sustained recovery. That along with higher core inflation have kept alive expectations that the Federal Reserve would lift interest rates later this year. Later in the day, revised gross domestic product data is expected to underscore the U.S. economy stalled in the first quarter of the year. But data on Thursday, particularly upbeat home sales, reinforced the view the economy was recovering from weather-related problems in the first quarter and the Fed was still in track to raise rates, boosting the dollar.” (Dollar index on track for monthly gains, bolstered by Fed expectations)

12:43 pm EDT. Dollar rally ahead of itself, weak GDP and consumer sentiment data brings it back to reality. Oil moves higher on weaker dollar. — Reuters “Oil rose more than 3 percent on Friday as a rally in the dollar faded and as data from Thursday that showed a fourth straight weekly drop in U.S. crude stockpiles helped drive the market. Crude prices, however, were still on track to finish the week and the month lower on concerns that the world remains awash in oil. The dollar was flat against a basket of major currencies .DXY on Friday, after having risen 2.5 percent this month. [USD/] “The dollar is not standing in front of crude today and that’s helping,” said Bob Yawger, director of energy futures at Mizuho Securities in New York. (Oil up 3 percent as dollar rally stalls, U.S. inventories ease)

3:43 pm EDT. Oil jumps 5%, setting its self for another downward inverse correlation run. — Reuters “Crude oil prices jumped almost 5 percent on Friday, their biggest rally in 1–1/2 months, as a steady U.S. dollar and a bigger than expected drop in U.S. oil rigs in operation set off a renewed rush of bullish bets. U.S. crude has risen by as much as $4 a barrel after hitting a one-month low just a day ago, locking in a record 11th weekly gain that was propelled both by declining domestic oil inventories and rapidly shifting sentiment ahead of next week’s OPEC meeting, at which the group is expected to keep production at high levels. Oil bulls were also enthused by Friday’s rig count data from Baker Hughes, which showed U.S. drillers again reducing the number of rigs in operation this week despite speculation that they would add more. A lower rig count signals potentially lower production.” (Oil leaps 5 percent as dollar rally stalls, U.S. rigs fall (Oil leaps 5 percent as dollar rally stalls, U.S. rigs fall)

6/1/2015

Russia experiencing economic strain from low oil prices and sanction is asking global Oil Producers not to increase output. — Reuters “Russia is calling on oil producers around the world to refrain from increasing output, Energy Minister Alexander Novak said on Friday, according to Russian news agencies, just days before he is due to meet officials from OPEC. The Russian economy has been hit hard by lower oil prices, which have almost halved from a peak in June last year of $115 per barrel. Oil and gas sales account for around half or Russia’s state budget revenues. “We call for all countries to keep their output unchanged,” Novak was quoted as saying by TASS news agency. Several other local media outlets also reported his call to global oil producers.” (Russia calls on oil producers not to boost output — local media)

Brent Crude’s price expected to average $61:60 through the end of the year. “Oil prices are likely to stay relatively weak for the rest of this year due ample supply from traditional Middle East producers and a resurgence of U.S. shale production, a Reuters survey forecast on Friday. Reuters monthly survey of 28 analysts predicted the global oil benchmark North Sea Brent crude LCOc1 would average $61.60 a barrel in 2015, close to current levels. So far this year Brent has averaged close to $58 a barrel, down from almost $100 in 2014. (OPEC supply, resurgent shale seen keeping oil prices weak: Reuters poll)

WTI contango weakening as supply glut declines; however Brent supply glut remains an issue with increasing production levels. — Reuters “The U.S. oil market is on the brink of returning to a more bullish footing known as backwardation for the first time in six months, with the discount for prompt supplies vanishing as a domestic supply glut eases. The discount for prompt U.S. oil futures versus the second-month contract — a structure known as “contango” that signals a weak market — narrowed to its smallest in five months on Friday as strong demand and flattening production added to expectations that domestic stockpiles will continue to fall over the summer. If that spread flips to a premium, known as “backwardation,” it would come in sharp contrast to the global Brent futures, which is showing no signs of emerging from its 50-cent contango. On Thursday a prompt cargo of Forties crude, part of the European benchmark, traded at its lowest in 6–1/2 years. (U.S. oil contango vanishing as supply glut shifts abroad)

OPEC output in May hits highest level since 2012. — Reuters “OPEC oil supply in May climbed further to its highest in more than two years as increasing Angolan exports and record or near-record output from Saudi Arabia and Iraq outweighed outages in smaller producers, a Reuters survey showed. The boost from the Organization of the Petroleum Exporting Countries puts output further above its target of 30 million barrels per day (bpd), underlining the focus of top exporter Saudi Arabia and other key members on market share. OPEC supply rose in May to 31.22 million bpd from a revised 31.16 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.” (OPEC oil output in May reaches highest since 2012: survey)

1:46 am EDT. Oil prices fell as global production climbs and dollar rises. — Reuters “Oil output by the Organization of the Petroleum Exporting Countries (OPEC) likely hit a two-and-a-half year high of 31.22 million barrels per day (bpd) in May and production is not expected to be cut during a meeting of the group this Friday. U.S. bank Morgan Stanley said that prices could fall in the second half of the year, although it said it was unlikely they would drop back to their six-year lows from January. “We have growing concerns about crude fundamentals and prices in 2H15 and 2016 after the quick recovery (since January) … The market appears complacent about rising OPEC production and upcoming Iran discussions, both of which could more than offset U.S. declines,” Morgan Stanley said on Monday. “That said, retesting YTD (year-to-date) lows is very unlikely. Healthy transport demand, reflected in strong refining margins, capex cuts and low spare capacity should limit downside.” (Oil prices fall as OPEC output seen staying high)

6:42: am EDT, Oil continues to fall on global supplies and rising dollar. — Reuters “OPEC continues to produce well above target, and also well above demand for its oil,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. The dollar .DXY gained 0.3 percent against a basket of currencies on Monday, making oil more expensive to holders of other currencies.”(Oil falls as OPEC output stays high, dollar rises)

11:45 am EDT. Oil prices fell 1% on global supply fundamentals and stronger dollar. — Reuters “il prices fell more than 1 percent on Monday, retreating from the sharp rally of the previous session, on the impact of a strong dollar and worries of stubbornly high supplies as OPEC prepared to meet this week to stick to production targets. The Organization of the Petroleum Exporting Countries pumped at a two-and-a-half year high of 31.22 million barrels of oil per day (bpd) in May, a Reuters monthly survey showed. [OPEC/O] The boost from OPEC puts output further above its target of 30 million bpd, underlining the focus of top exporter Saudi Arabia and other key members on market share. (Oil falls more than 1 percent on high OPEC output, firmer dollar)

3:52 pm EDT. Oil fell as OPEC oil output hits 2.5-year high in May and firmer dollar — Reuters “Oil settled down as much as 1 percent on Monday, retreating from Friday’s sharp rally on a strong dollar and concern over stubbornly high supplies as OPEC was expected to stick with robust production at its meeting this week. The Organization of the Petroleum Exporting Countries pumped a 2–1/2 year high of 31.22 million barrels of oil per day (bpd) in May, a Reuters monthly survey showed.” (UPDATE 8-Oil drops on high OPEC output, firmer dollar)

6/2/2015

With prices beginning to stabilize will U.S. shale oil producers, rev-up production? — Reuters “U.S. shale oil producers, having weathered the worst price plunge in their industry’s brief history, now face a dilemma: whether to stay in a defensive crouch after slashing their rig fleets, or start drilling more wells to capture a partial recovery in prices. In a way, the conundrum is as old as the first oil well. If producers start pumping more crude, as some executives have said they might do if prices edge a bit higher, they risk contributing to another slump in a fragile global market; if they hold back, they forego regaining revenue lost during a price slide of 60 percent that started in June.” (The U.S. oil fracker’s dilemma: crouch or pounce?)

Europe’s top energy companies advocating pricing system for carbon emissions. — Reuters “Europe’s top oil and gas companies urged governments around the world to introduce a pricing system for carbon emissions, as governments meet in Bonn, Germany, on Monday to work on a U.N. deal to fight climate change. Criticised for not doing enough to tackle climate change, the chief executives of BG Group (BG.L), BP (BP.L), Eni (ENI.MI), Royal Dutch Shell (RDSa.L), Statoil (STL.OL) and France’s Total (TOTF.PA) said carbon pricing “would reduce uncertainty and encourage the most cost-effective ways of reducing carbon emissions widely.” In a joint statement, the companies acknowledged “the current trend” in greenhouse gas emissions is too high to meet the United Nation’s target for limiting global warming by no more than 2 degrees. “Our industry faces a challenge: we need to meet greater energy demand with less CO2. We are ready to meet that challenge and we are prepared to play our part,” the leaders of the six companies said” (Europe’s top oil firms jointly call for carbon pricing)

Are current price levels, ~ $65 per barrel a ceiling or floor? — Reuters “Big Oil is too confident about crude prices. After a 40 percent rally from January’s six-year low, the momentum has been on the upside. But the current prices — $65 a barrel for Brent and $60 for WTI — look more like a ceiling than a floor. That is not what many insiders seem to think. Some oil service companies expect mid-$70s Brent by the end of this year. Anglo-Dutch Shell assumed oil will rebound to $90 by 2018 in its $70 billion takeover of the UK’s BG Group. Some believe that the steep cut in capex costs will affect supply, including shale, and boost prices again. But such predictions may underestimate shale’s potential. Lower drilling and pumping costs, among other efficiencies, have pushed the breakeven cost of shale down to about $60, Goldman Sachs estimates. Lower oil prices have also helped cut costs, since shale drilling is energy-intensive. The broker sees room for further cost declines in the three main shale basins in the United States: Eagle Ford, Bakken and Permian. If these materialise, shale could reach a $50 per barrel breakeven by 2020. Costs could keep falling as drillers gain more experience with shale, which is more akin to a manufacturing process than traditional oil drilling. (Why $65 per barrel oil looks like a ceiling, not a floor)

5:15 am EDT. Oil prices rebound on weaker dollar — Reuters “Oil prices rose on Tuesday as the dollar weakened and on expectations that OPEC producers would maintain their group production target at its current level and resist pressure for an increase.The dollar fell against the euro and a basket of currencies, making oil cheaper consumers in Europe and also for holders of other currencies. [FRX/] Brent crude oil for July was up 70 cents at $65.58 a barrel by 0900 GMT. U.S. crude was up 70 cents at $60.90 a barrel.” (Oil up ahead of OPEC meeting as dollar slips)

5:34 pm EDT. Oil up on weak dollar, an expectation U.S. supplies fell. However report after te market closed indicated a build-up — Reuters “Oil prices rose on Tuesday, driven by a weak dollar and expectations that U.S. crude supplies could have fallen last week for a fifth straight week. But the American Petroleum Institute (API) estimated an inventory build instead, in a report released after the market’s settlement, causing oil to pare some of its earlier gains. API said U.S. crude inventories rose by 1.8 million barrels in the week to May 29. Analysts polled by Reuters had forecast stocks would drop by 1.7 million barrels, for a fifth straight week of declines. (Oil up on dollar drop; poll calls for U.S. stocks decline)

6/3/2014

Saudis say strategy to defend market share is working; they expect demand to pick up in the second half of 2015 — Reuters “Saudi Arabia’s oil minister Ali al-Naimi said on Monday he expects oil demand to pick up in the second half of 2015 while supply decreases, in a sign that the kingdom’s strategy of defending market share was working. The comment indicates Saudi Arabia will likely propose not to change output policy at producer group OPEC’s meeting on Friday, although Naimi declined to speak directly on the issue. “The answer is yes,” Naimi said in his first public comment upon arrival in Vienna, where the meeting will take place, when asked whether the strategy of defending market share through higher supplies and lower oil prices was working. “Demand is picking up. Good! Supply is slowing, right? That is a fact,” he told reporters. “You can see that I’m not stressed, I’m happy,” he said. (Naimi says Saudi oil strategy working, sees stronger demand)

Russian oil output remained unchanged in May at a post-Soviet high. — Reuters “In tonnes, oil output rose to 45.288 million from 43.830 million in April while gas production fell to 48.28 billion cubic meters (bcm) last month, or 1.56 bcm a day, from 52.64 bcm in April. The Organization of the Petroleum Exporting Countries (OPEC), which controls more than 40 percent of the world’s crude oil production, meets this Friday in Vienna. Analysts expect the bloc to maintain current output levels.” (Russia keeps oil output at post-Soviet high before OPEC meet)

Iraq’s new Basra Heavy crude oil grade poorly received in Asia — Reuters “Sellers of the new grade have struggled to find buyers, with at least one Malaysian-based trader taking a deep discount to offload 2 million barrels, while others have complained about a lack of pre-marketing and slow delivery of technical details to refineries. The problems, which have increased shipping and marketing costs for term buyers and Iraq’s equity partners in its southern oilfields, may hamper the country’s efforts to ramp up exports and could lead Asian buyers to look closely at Iranian oil if sanctions are lifted. “Asian refiners are conservative. You cannot bring new crude overnight and expect it to be taken up quickly,” a trader with a western firm said. Iraq — which sells more than half of its oil to Asia — proposed last year to split its supply into two grades, adding Basra Heavy to its traditional Basra Light (New Iraqi crude meets cool reception in Asia)

Is the euro-dollar rate and oil price correlation indicative of where the oil market and inflation is heading? — Bloomberg “If you want to know which way the euro’s headed, ask an oil trader. The euro-dollar rate is tracking crude prices more closely than at any time in the past two years. The European Central Bank gives more weight to the impact of energy prices on inflation than the Federal Reserve, so when oil started falling in the middle of last year it was one more reason for Europe to step up monetary stimulus to boost price growth.” (Euro’s Growing Ties to Oil Only Encourage Bears Seeing Parity)

OPEC countries agree not to change production levels. — Reuters “There is consensus among Gulf OPEC countries, and others, to keep the ceiling unchanged,” a senior Gulf OPEC delegate told Reuters late on Tuesday after an informal meeting of the four core Gulf Arab OPEC members earlier in the day”. (OPEC finds oil output consensus: ‘Don’t rock the boat’)

5:21 am EDT. Oil falls on dollar strength and oversupply — Reuters “Oil prices fell on Wednesday as the dollar strengthened and as oversupply weighed on markets ahead of a key meeting of OPEC oil producers. Core Gulf members of the Organization of the Petroleum Exporting Countries, which controls over a third of the world’s oil, have a consensus to maintain the group’s oil output at its meeting on Friday, a senior Gulf OPEC source has told Reuters. “There is consensus among Gulf OPEC countries, and others, to keep the (production) ceiling unchanged,” the OPEC delegate told Reuters in Vienna. “Nobody wants to rock the boat. The meeting is expected to be smooth sailing.” (Oil prices drop on dollar, oversupply)

3:12 pm EDT. Oil fell 3%. — Reuters “Oil fell nearly 3 percent on Wednesday as traders and investors ignored a fifth straight weekly decline in U.S. crude stockpiles to focus instead on a big build in distillates, including diesel, as the peak season for U.S. road travel gets under way. Glum sentiment ahead of Friday’s meeting of the Organization of the Petroleum Exporting Countries also weighed on the market. OPEC, which pumps more than a third of the world’s oil, is expected to reject any calls for output cuts, continuing to produce about 2 million barrels per day above demand. U.S. crude inventories fell 1.95 million barrels last week, more than the 1.7 million forecast by analysts in a Reuters poll, a report from the government-run Energy Information Administration (EIA) showed.( Oil down 3 percent despite U.S. stockpile drop; pre-OPEC mood glum)

6/4/2015

Iran’s exported more oil to India since March 2014. — Reuters “India’s imports of Iranian crude oil rose last month to their highest level since March 2014 as refiners boosted purchases ahead of a final push by international negotiators to reach a deal on Tehran’s disputed nuclear program by end-June. The jump to a 14-month high comes just two months after India dropped its crude imports from Iran to zero under U.S. pressure to limit its purchases of the Islamic republic’s oil. In March this year India did not take any Iranian oil for the first time in at least a decade. Many analysts say Tehran, the United States, Britain, France, Germany, Russia and China will reach an agreement by or shortly after a June 30 deadline for a deal, although the sanctions that have cut Iran’s oil exports to less than half of pre-2012 levels aren’t likely to be lifted until next year (India’s May Iran oil imports hit highest since March 2014 )

OPEC to accelerator on production — Reuters “OPEC is set to carry on pumping oil nearly flat-out for months more, content that last year’s shock market therapy has revived demand and knocked back growing competition. With oil prices having stabilized, at around $65 a barrel, some $20 above their January lows, there’s little appetite within the Organization of the Petroleum Exporting Countries to modify production limits.(OPEC to pump flat-out for months more)

Is OPEC’s all bars production strategy self-defeating? Is it increasing competition amongst members causing them to driving up production levels as they compete for market share, thus adding to oversupply and price pressure? — Bloomberg “There’s a lot of jockeying for position going on in OPEC right now,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said by phone. “The Saudis are increasing production and anyone else in OPEC who can is also doing the same. If OPEC’s not willing to cut output to make room for Iran, they have to look for reductions from producers outside the group.” OPEC will maintain its output target of 30 million barrels a day when it meets in Vienna, according to all but one of 34 analysts and traders surveyed by Bloomberg last month. In reality, the group has been pumping more than that for a year, a sign of its determination not to cede a single barrel of market share to rival producers.”(What’s OPEC Going to Do With Iran’s Million Barrels a Day?)

Shell’s CFO expects prices to rebound as shale production falls and global demand increases. Bloomberg “Royal Dutch Shell Plc sees oil prices rising because supply from shale drilling in the U.S. won’t be enough to satisfy growing global demand. The industry needs to find an extra 4 million barrels to 5 million barrels a day every year to meet demand and replace depleted fields, Shell Chief Financial Officer Simon Henry said in an interview on Tuesday. “Lower oil prices increase demand and reduce investment, and it already has,” Henry said after a conference organized by Chatham House in London. Global consumption of about 93 million barrels a day is increasing by 1 million every year, he said. (Shell Expects Oil Rebound as Shale Fails to Fill Supply Gap)

4:30 am EDT. Oil lower focus remains on fundamentals, global oversupply and slightly increasing demand — Reuters “The Organization of the Petroleum Exporting Countries is expected on Friday to keep a group output target of 30 million barrels per day (bpd), a ceiling it has been exceeding for most of the last two years, weakening prices. The cartel is now pumping about 2 million bpd more than needed, analyst say, feeding a glut that has left millions of barrels stored on tankers without a buyer and kept prices at close to half their peak levels last year.” (Oil prices slip ahead of OPEC meeting)

4:27 pm EDT. Market drops 3% on second day as trades sell and sit on side lines awaiting decisions and reports. — Reuters “Crude prices tumbled almost 3 percent for a second day on Thursday ahead of an OPEC decision likely to keep the market oversupplied and on worry rising European bond yields could tighten the speculative money swirling in oil. The Organization of the Petroleum Exporting Countries, meeting in Vienna, is expected to affirm on Friday an output target of 30 million barrels per day, ignoring calls from some producers to cut supply and support prices. OPEC actually produces about 2 million bpd above that. Traders will also be looking out for Friday’s U.S. jobs data for May and the latest weekly reading on oil rigs in the United States. (Oil tumbles again before OPEC; worry over spiking European yields)

6/5/2015

Asian demand supports OPEC’s expectations quotas. — Reuters “Asian consumption of gasoline and other fuels has beaten expectations due to demand stemming from structural changes in the economies of Asia’s biggest oil users, vindicating for now OPEC’s decision six months ago to keep its taps open. Saudi Arabia’s oil minister in November persuaded fellow OPEC members to refrain from cutting their crude production quotas, arguing that demand would ultimately pick up and prices recover. The strength of recent demand for oil has surprised everyone, including OPEC, researchers at independent research consultant Energy Aspects said this week.”( Asia’s resilient fuel demand vindicates OPEC policy…for now)

Technology expected to keep driving production efficiency and cost reduction for U.S. shale drillers. — Reuters “The U.S. tight-oil boom is here to stay despite low crude prices as technological breakthroughs will allow steep reductions in costs, the head of U.S. firm ConocoPhillips told a seminar organized by oil-producing group OPEC. “Innovations have already led to a U.S. energy renaissance. Tight oil reservoirs can remain viable today, breakeven costs are already down by 15 to 30 percent,” said Ryan Lance, chairman and CEO of Conoco. Oil prices crashed over the past year after OPEC decided against cutting production to tackle a global glut that arose from a U.S. shale oil boom. OPEC chose instead to fight for market share, betting that a price drop would depress output in higher-cost producers such as the United States. Lance said cost reductions had been partly achieved due to cuts in service costs.” (Tight oil is here to stay, Conoco CEO tells)

OPEC members are publicly talking about a new “fair” price of $80 for their crude — Reuters “Oil ministers from Iraq, Venezuela and Angola said in Vienna this week that a price of $75 or $80 a barrel — barely $10 above the going rate — could be just fine. Iraq’s Adel Abdel Mahdi said it would be “equitable”. Privately, one Gulf OPEC delegate also told Reuters he reckons crude may be trading around this level next year, once markets rebalance. It remains to be seen whether this new range becomes a common refrain for the group, which has effectively given up efforts to maintain prices in order to defend its share of the world market.” (OPEC moots $80 as new ‘fair’ oil price — but will it stick? )

5:27 am EDT. Oil fall on OPEC’s production policy — Reuters “Speaking on his way into Friday’s ministerial meeting, Saudi Arabia’s oil minister Ali al-Naimi said oil production was “a sovereign right” and oil producers were “free to do what they want”. “It is a free market, everyone is free to produce as much as he wants,” Naimi said. Naimi was earlier quoted by the Saudi-owned al-Hayat newspaper as saying oil demand was increasing and supply from outside OPEC had declined:“I am 100 percent comfortable with the oil market situation,” Naimi told al-Hayat. (Oil prices fall as OPEC seen keeping production high)

1:44 pm EDT. Oil rose on stronger dollar, reversing course as OPEC maintain production levels, amid glut concerns. Expect the market to revert to inverse correlation trade — Reuters “Oil seesawed in volatile trade on Friday, with Brent hitting seven-week lows before recovering, as a surging dollar and an OPEC decision not to cut output in an oversupplied market led to a swing in crude prices. Crude’s biggest producers and shippers in the Organization of the Petroleum Exporting Countries agreed at a meeting in Vienna to stick to a policy of unconstrained output for another six months. The decision came despite warnings of a second lurch lower in prices, with members such as Iran looking to ramp up exports. Oil prices rose after the widely-expected OPEC decision, as market bulls embarked on a relief rally following the losses of the past two days, when both Brent and U.S. crude fell nearly 3 percent a day. The dollar’s surge on a stronger-than-expected U.S. jobs report for May doused the enthusiasm, however. A stronger greenback typically makes dollar-denominated commodities such as oil less affordable to holders of the euro and other currencies (Oil seesaws on strong dollar, OPEC decision)

6/8/2015

100 percent comfortable” with the oil market, in terms of supply and demand — Reuters “Naimi’s remarks come ahead of an OPEC meeting on Friday in which the organization is widely expected to stick by its policy of unconstrained oil output for another six months. He told the newspaper the market was witnessing an increase in demand for oil and a slight improvement in global growth and that supply from outside of OPEC member countries had declined. “I am 100 percent comfortable with the market situation, but prices are a different issue,” he said. (Saudi oil minister ‘100 percent comfortable’ with market: al-Hayat newspaper)

OPEC agreed to stick by its policy of unconstrained output for another six months. — Reuters “Concluding a meeting with no apparent dissent, Saudi Arabian oil minister Ali al-Naimi said OPEC had rolled over its current output ceiling, renewing support for the shock market treatment it doled out late last year when the world’s top supplier said it would no longer cut output to keep prices high. The Organization of the Petroleum Exporting Countries will meet again on Dec. 4, Naimi said. (OPEC agrees to keep pumping as oil glut fears persist)

Despite OPEC’s output policy U.S. Oil executives to maintain policy to push out inefficient producers for the market. — Reuters “Oil executives in North Dakota, a center of the U.S. shale revolution, say OPEC made a questionable bet when it decided on Friday to stick with a policy that aims to push higher cost American producers out of the market by keeping output high. Here, in the top U.S. oil state after Texas, oil companies have slashed costs over the last seven months to reach fighting weight — one that will allow them to profit despite the more-than 40 percent drop in prices over the past year and solidify the new American role as the world’s swing supplier. The policy OPEC first adopted in November has brought stress, but not catastrophe. Oil companies say they have recalibrated their operations to survive even if prices stay lower for a long while. “High commodity prices hide a lot of inefficiencies in the system,” said Tommy Nusz, chief executive of Oasis Petroleum Inc, which pumps about 58,000 barrels per day in North Dakota. “Most companies will come out of this cycle stronger.” (North Dakota refuses to flinch as OPEC keeps output high)

What are the risks with oil trading in the $60 — $70 range? — Reuters “If anything, the list of uncertainties that could pull oil prices both ways from OPEC’s current favorite price range of $60-$70 per barrel has grown longer. It includes the performance of the U.S. oil industry, the return of Iran to oil markets, demand growth in China, very tight spare oil capacity in Saudi Arabia and finally a possible return of a political oil risk premium — as illustrated this weekend by a rocket attack on Saudi Arabia. “If prices go back to $70 per barrel, U.S. production goes back. Meanwhile if China’s stockpiling slows, we will all of a sudden have a very oversupplied market,” said Jamie Webster, a senior director at IHS Energy and a long-time OPEC observer. (OPEC oil price anchor could be easy to unmoor)

4:50 am EDT. Oil lower as oversupply remains the watch word after OPEC’s meeting — Reuters “Oil prices slipped on Monday after China’s fuel imports dropped sharply and as markets digested an OPEC decision to keep its production target unchanged, a move analysts said would keep the market oversupplied for the rest of the year. China, the world’s biggest net oil importer, bought nearly a quarter less crude in May than it did in the previous month, official data showed. China’s imports of oil products also fell by more than 6 percent while oil product exports fell 10 percent. [TRADE/CN] The Chinese data came after the Organization of the Petroleum Exporting Countries (OPEC) agreed on Friday to maintain oil output at levels well above current demand, exacerbating a glut where millions of barrels of crude are stored without a buyer. “The OPEC decision is bearish for oil,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. “It means we will have an oversupplied market for the rest of the year.” (Oil slips after OPEC keeps output high, China slowdown)

3:09 pm EDT. Oil remained lower on oversupplies concerns — Reuters “Oil fell by 1 percent or more on Monday on a slump in Chinese demand and worries that OPEC’s decision to pump crude without restraint could prolong the current supply glut, although a weaker dollar limited losses. China, the top net oil importer in the world, bought about a quarter less crude oil in May than it did in April, official data showed on Monday. In the oil products category, imports fell by more than 6 percent, against a 10 percent drop in exports. [TRADE/CN] Refineries in China used more crude from stockpiles last month, leading to lower imports, the data suggested. A higher number of processing plants for crude that were offline for maintenance was also cited for the lower demand.” (Oil falls as China cuts crude imports; OPEC decision weighs)

6/9/2015

EU pursues a single energy strategy motivated by the Russian discord — Reuters “European Union energy chiefs on Monday sought to galvanize efforts to create a single European energy market with a set of accords on closer power and gas ties while disunity simmers over the finer detail of implementing goals for a new decade of greener fuel. The European Commission, the EU executive, has used the political crisis with the bloc’s biggest energy supplier, Russia, to focus on completing an energy union based on rationalized connections across the 28-member bloc to share fuel and curb the need for imports. The grand plan is also meant to harness efforts to lower carbon emissions as France readies to host United Nations climate talks late this year.” (Disunity simmers as EU nations pursue single energy market)

China’s lower oil imports add to oversupply concerns. — Reuters “China’s oil imports fell about 11 percent in May from a year ago in the steepest drop since November 2013, likely knocking the country off its perch as the world’s top crude buyer — a spot it claimed for the first time in April. Lower imports by China, at a time when markets are expected to be oversupplied following OPEC’s decision to keep its output targets unchanged, dragged down global crude prices on Monday. [O/R] China imported 23.24 million tonnes of crude in May, data from the General Administration of Customs showed. This puts China behind the United States, which imported just under 30 million tonnes last month, according to calculations based on data from the U.S. Energy Information Administration (China’s May crude oil imports drop, knocked off top buyer spot)

U.S. Shale output seen slowing considerably — Bloomberg “The shale oil boom that turned the U.S. into the world’s largest fuel exporter and brought $3 gasoline back to America’s pumps is grinding to a halt. Crude output from the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based on Energy Information Administration estimates. It’ll drop further in July to 5.49 million, the agency said Monday. With the Organization of Petroleum Exporting Countries refusing to curb its own oil production, U.S. shale is coming under pressure to re-balance a global supply glut. Everyone from EOG Resources Inc., the country’s biggest shale-oil producer, to hedge fund manager Andrew J. Hall to banks including Standard Chartered Plc have forecast declines in U.S. output following last year’s plunge in crude prices. The nation was still pumping the most in four decades in March. “Production has to come down because rigs drilling for oil are down 57 percent this year,” James Williams, president of energy consultancy WTRG Economics, said by phone Monday from London, Arkansas. “Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline, and it’s making us nervous about when exactly it’s going to happen.” (America’s Shale Oil Boom Grinding to Halt as U.S. Forecasts Drop)

4:55 pm EDT. Oil up as dollar struggles to maintain upward momentum and demand from transportation sector. — Reuters “Oil prices gained on Tuesday, recouping some of the previous session’s losses, as higher seasonal demand in developed economies offset the impact of a large global supply overhang. Demand for oil tends to increase in the summer months as drivers take to the roads for holidays in Europe and the United States. This has helped counter the impact of a growing glut in supply that has led to tankers storing oil at sea. “There is currently seasonal demand for oil, so there is less of a build in crude oil stocks,” said Olivier Jakob at Petromatrix in Zug, Switzerland. “But there is still too much oil for the rally to take hold.” Hopes of more economic stimulus in China after disappointing data from the world’s No.2 economy also gave some support to the oil price. (Oil gains on driving season demand, China rate cut hopes)

1:00 pm EDT. Oil back up 3% maintaining its trading range probably has another 2 to 3% upside move before profit taking ensues; unless dollar makes a significant upside move. — Reuters “Crude oil prices jumped 3 percent or more on Tuesday, and gasoline and diesel rose as much, as bulls ramped up bets across the oil complex for another weekly drop in U.S. stockpiles. U.S. crude inventories likely fell for a sixth straight week in the week ended June 5, data from industry group American Petroleum Institute (API) is expected to show later on Tuesday before official numbers on Wednesday from the government’s Energy Information Administration (EIA). A Reuters poll of five analysts forecast on average that crude stocks fell 1.7 million barrels last week. [EIA/S] Brent futures LCOc1 were up $1.88, or 3 percent, at $64.57 a barrel by 12:29 p.m. EDT (1629 GMT). That was the largest advance on the day for Brent since May 29. U.S. crude futures CLc1 rose by $1.70 to $59.84. (Oil rises 3 percent in broad rally ahead of expected stockpile drop)

6/10/2015

Private investors exploring Mexico’s energy prospects but showing caution. — Reuters “Almost a year after Mexico opened its energy market to private investors, North American firms are rushing south to decide which pipeline or power plant to invest in. Enthusiasm is so high that some executives from big asset managers, pension funds and private equity firms complain of overbooked hotels in certain parts of Mexico City and business-class airplane cabins crowded with pitchbook-reading competitors. So far, the potential investors are mainly looking, not buying, with actual investments in Mexican energy projects coming in more slowly than some expected. The Mexican Energy Ministry has predicted $62.5 billion in both public and private investments over three years from the new program, which was signed into law last August. Since then, only five private equity deals worth a total of $2 billion have been announced, according to Pitchbook, a Seattle-based research firm. (Private investors look but do not leap at Mexican energy projects)

With the prospects of Iran’s sanctions being lifted Western companies’ eye investment opportunities. — Reuters “Eight western European companies are keen to invest in Iran’s $2.8 billion (2 billion pound) Siraf oil refinery project, an Iranian official said on Monday, as the country ramps up capacity to reduce is dependence on imports. Iran — OPEC’s fifth-largest crude producer — has huge oil and gas reserves but lacks refining capacity, leaving it heavily reliant on imports. Western sanctions imposed on the Islamic Republic over its disputed nuclear program have also deprived the country of industry technology. “This project has been designed for the current situation,” Alireza Sadeghabadi, managing-director of Siraf Refineries Infrastructure Co., said, referring to Iran’s self-sufficiency drive. “Of course after the removal of sanctions more foreign companies will be interested in investing in Iran,” he said in an interview with Reuters. (

Oil rout takes a toll on oil transport trains — Bloomberg “Investors are rediscovering a stock-market lesson in Canada: Shares of the country’s two biggest railroads don’t always go up. Canadian National Railway Co. and Canadian Pacific Railway Ltd. are falling this year, raising the prospect of their first annual decline since 2008. Known for prominent shareholders including Bill Gates and Bill Ackman, the companies are among the country’s worst-performing industrial stocks of 2015. The carriers, like their U.S. counterparts, are grappling with widening fallout from the global rout in crude prices, which is eroding oil-train shipments faster than either had forecast. They’re also facing coal mine closings and a decline in grain shipments as the remnants of a bumper harvest fade. “We’ve had a bit of a reality check this year,” said Andrew Pyle, a fund manager at ScotiaMcLeod Inc. in Peterborough, Ontario, who oversees about C$300 million ($241 million) and owns Canadian National stock. “There were probably some investors who felt that these things never did go down. The fundamentals that have been supporting the valuations in the rails haven’t necessarily disappeared, but they are changing.” (Canada’s Railroads Confront Market Gravity: Stocks Go Down, Too)

OPEC states increase in output was driven by global demand. — Reuters “Saudi Arabia’s oil ministry said on Tuesday the rise in its oil production over the past three months was a result of increased global demand and the needs of its customers and was not designed to compensate for lower oil prices. An official source at the ministry also said its petroleum policy did not reflect personal views and were formulated by an integrated team of experts and specialists in oil market economics, based at the ministry’s offices in Riyadh.” (Saudi ministry says higher oil output driven by demand)

Oil prices up on U.S. inventory report and slowing production. — Reuters “Oil prices rose on Wednesday after a report of falling U.S. inventories and signs that U.S. oil production growth was leveling off after several years of very sharp increases. A report by industry body the American Petroleum Institute (API) on Tuesday showed a much sharper weekly fall in U.S. crude stocks than expected. The API report followed a separate prediction by the U.S. government that domestic oil production would fall more strongly and for longer than expected. “It would be madness to try and talk bearish,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. “Those who are long should try and run their positions up to the next resistance areas where profit-taking on part of the length is recommended,” he added. (Oil prices jump on U.S. stock draw, easing production)

12:15 pm EDT AS expected oil rose just above the 2% mark before profit taking ensued. Reuters “The U.S. Energy Information Administration (EIA) said crude oil inventories fell by 6.8 million barrels last week, four times more than the 1.7 million barrels forecast by analysts in a Reuters poll. Industry group American Petroleum Institute had raised market expectations late on Tuesday when it estimated a draw of 6.7 million barrels. Oil futures, which rose 3 percent on Tuesday in anticipation of the draws, extended their run by another 2 percent or more on Wednesday before paring gains. By 11:50 a.m. EST, global crude benchmark Brent LCOc1 was up 20 cents, or 0.3 percent, at $65.08 a barrel, from the session high of $66.36 after the EIA data. U.S. crude CLc1 was 40 cents higher at $60.55, versus the intraday peak of $61.82. “Obviously, a 6.8 million draw should get the market’s reaction,” said Jim Williams, energy economist at WTRG Economics in London, Arkansas. (Oil up after U.S. stockpile draw, profit-taking pares gains)

4:15 pm EDT. Oil ended the day up but off of the day’s high on some profit taking. — Reuters “Oil futures, which rose 3 percent on Tuesday in anticipation of the draws, extended gains on the data. Later, profit-taking pulled prices off session highs. U.S. crude CLc1 settled up $1.29, or 2.1 percent, at $61.43 barrel, after hitting a May 13 high of $61.82. Global crude benchmark Brent LCOc1 settled at $65.70, up 82 cents, or 1.3 percent. Its session peak was $66.36. Gasoline futures for July RBc1 settled up 3.3 percent at $2.1464 per gallon. The session high of $2.1506 was the highest since last Nov. 10. On Tuesday, the EIA said it expected U.S. oil output to decline in the second half of this year. For 2016, it projected a drop of 160,000 barrels per day in U.S. production, revising its previous forecast for a rise. On Wednesday, producer group OPEC also said it expected non-OPEC supply to decline in the second half. (Oil jumps after U.S. stockpile draw; gasoline at seven-month high)

6/11/2015

Refinery runs and an unprecedented slump in Canadian imports push North Dakota’s Bakken to a near premium for the first time in two years — Reuters “Yet some traders say the surprising strength emerging from opaque physical crude markets in the heartland of the fracking boom also points to a more important, lasting factor: declining production of Bakken crude, a long-anticipated but as yet unproven twist in the shale revolution. The buying frenzy pushed Bakken delivered at Clearbrook, Minnesota WTC-BAK, to trade just 35 cents a barrel below the West Texas Intermediate benchmark last week, dealers say, the narrowest discount since July 2013. On Tuesday, it widened slightly to a 75-cent discount. Four months ago, it traded at a $7.50 discount. “The rapid spread contraction may be indicative of a faster-than-anticipated production decline, presenting upside risk to our price forecast” in the second half, Barclays analysts wrote in a report. There are other compelling reasons for Bakken crude’s relative strength, to be sure. (Disappearing Bakken oil discount adds to output slowdown signs)

Cost-cutting and production efficiency expected to be the focus for the oil industry for at least the next two years. Reuters — “If the boom was characterized by an emphasis on ambitious and complex engineering and technology projects, the downturn has brought a renewed focus on simplification and efficiency. It marks a return to what was called “operational excellence” during the long years of low oil prices in the 1990s. Operational excellence is about more than just short-term expenditure reduction. (Operational excellence becomes oil industry watchword (again): Kemp)

U.S. the world’s top producer of oil and gas. — Bloomberg “The U.S. has taken Russia’s crown as the biggest oil and natural-gas producer in a demonstration of the seismic shifts in the world energy landscape emanating from America’s shale fields. U.S. oil production rose to a record last year, gaining 1.6 million barrels a day, according to BP Plc’s Statistical Review of World Energy released on Wednesday. Gas output also climbed, putting America ahead of Russia as a producer of the hydrocarbons combined. The data showing the U.S.’s emergence as the top driller confirms a trend that’s helped the world’s largest economy reduce imports, caused a slump in global energy prices and shifted the country’s foreign policy priorities. (U.S. Ousts Russia as Top World Oil, Gas Producer in BP Data)

5:08 am EDT. Oil prices steady on reports from International Energy Agency (IEA) see increase global demand for oil while World Bank cut its global economic growth forecast. — Reuters “IEA, which coordinates energy policy for industrial nations, raised its projection for global oil demand growth in 2015 by 280,000 barrels per day (bpd) to 1.40 million bpd, bringing demand this year to almost 94 million bpd. The agency said “unexpectedly strong global oil demand growth” had been supporting oil prices and raised its estimate for world demand for crude from OPEC this year. But the market response was cautious after a downbeat assessment by the World Bank, which predicted the global economy would expand 2.8 percent this year, below its 3 percent outlook in January. Brent crude oil for July LCOc1 was unchanged at $65.70 a barrel by 0445 ET. U.S. crude CLc1 was down 20 cents at $61.23 a barrel. Traders said Thursday’s reports offered few surprises. “This is in line with the view that the global economy is improving and by year-end these forecasts are likely to be even stronger as positive price effects from lower oil prices feed into a better economic outlook and higher oil demand,” said Harry Tchilinguirian, head of commodity markets strategy and oil strategy at BNP Paribas. (Oil steady as bullish IEA balances bearish World Bank)

4:15 pm EDT. Oil ended the day up but off of the day’s high on some profit taking. — Reuters “Oil futures, which rose 3 percent on Tuesday in anticipation of the draws, extended gains on the data. Later, profit-taking pulled prices off session highs. U.S. crude CLc1 settled up $1.29, or 2.1 percent, at $61.43 barrel, after hitting a May 13 high of $61.82. Global crude benchmark Brent LCOc1 settled at $65.70, up 82 cents, or 1.3 percent. Its session peak was $66.36. Gasoline futures for July RBc1 settled up 3.3 percent at $2.1464 per gallon. The session high of $2.1506 was the highest since last Nov. 10. On Tuesday, the EIA said it expected U.S. oil output to decline in the second half of this year. For 2016, it projected a drop of 160,000 barrels per day in U.S. production, revising its previous forecast for a rise. On Wednesday, producer group OPEC also said it expected non-OPEC supply to decline in the second half. (Oil jumps after U.S. stockpile draw; gasoline at seven-month high)

3:06 pm EDT. Oil down on stronger dollar. –Reuters “Crude oil prices fell on Thursday as players took profits from the past two days of gains, turning bearish after the dollar’s rise against the euro on Greek debt worries weighed on demand for commodities. A positive outlook for oil from the International Energy Agency (IEA) was offset by the dollar’s first rally in five days against a basket of currencies .DXY. A stronger dollar makes commodities denominated in the greenback, including oil, costlier for other currency users. The euro EUR= extended losses after International Monetary Fund spokesman Gerry Rice said “major differences” remained with Greece over an agreement to save the country from bankruptcy. IMF’s technical team has returned from Brussels, where it had been in talks with Greek officials, although the IMF was still “fully engaged” with Athens, Rice said. (Oil slips, rally cut short by dollar and Greek worry)

6/12/2015

International Energy Agency (IEA) expects oil demand to rise much more this year — Reuters “The agency, in a monthly report, raised its forecast for global oil demand growth in 2015 by 280,000 barrels per day (bpd) to 1.40 million bpd, bringing demand this year to almost 94 million bpd. “Recent oil market strength of course partly stems from unexpectedly strong global oil demand growth,” said the Paris-based IEA, which advises industrialized nations on energy policy. (World oil demand jumps after price slump: IEA)

China’s oil demand eased May from April numbers. — Reuters “China’s implied oil demand grew 9.6 percent in May from a weak base a year earlier but eased slightly from April, pausing after a rebound in fuel consumption as refineries stepped up production to take advantage of better margins this year. The country consumed roughly 10.31 million barrels per day (bpd) of oil in May, up from 9.41 million bpd a year before but down slightly from 10.44 million bpd in April, according to Reuters calculations based on preliminary government data. Implied oil demand is the sum of refinery throughput and net fuel imports, excluding changes to commercial fuel inventories. (China’s May oil demand eases from April, after price-driven rebound)

U.S. Shale producer Apache Corp. running positive operating cash flow .– Bloomberg “Apache Corp. CEO John Christmann didn’t just get a new job when he took charge of one of the world’s biggest shale producers in the dark days of the oil market crash in January, he signed on to a corporate makeover. In the past six months Christmann has focused on transforming Apache from a high-flying global explorer into a ruthlessly efficient production machine rooted deeply in West Texas shale fields. Under his watch, Apache has set the pace for an industry intent on moving beyond basic cost-cutting to reset priorities on regions and projects that can thrive with $50-a-barrel oil. Christmann has now accomplished what none of his other major peers have yet managed: he’s making more cash from operations than he’s spending. That compares to the two years preceding the 2014 oil market crash, when Apache was among a group of 18 producers on the Standard & Poors 500 Index spending a total of $36 billion more than the cash they generated. (Why This Shale CEO Isn’t Afraid of OPEC or Low Oil Prices)

5:26 am EDT. Oil lower on dollar strength and Saudis decision to increase production — Reuters “Oil prices slipped on Friday after the world’s top crude exporter Saudi Arabia said it was ready to raise output to new record highs, potentially adding to a global supply glut. The U.S. currency strengthened against the euro, also weighing on dollar-denominated oil, after the International Monetary Fund pulled out of stalled debt talks with Greece. Saudi Arabia said it was in talks with Indian buyers to supply additional crude, meaning the Middle Eastern exporter could top its record of 10.3 million barrels per day produced in May. Brent crude LCOc1 was trading 63 cents lower at $64.48 a barrel at 0450 ET, while U.S. light crude CLc1 was down 77 cents at $60. “The dollar is gaining some ground against the euro. If anything, that’s bearish for oil,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. (Oil slips as Saudis stand by to increase production)

Global demand to be stronger than expected however supply exceptionally high. — “Reuters: World oil demand will rise much more than expected this year, the International Energy Agency (IEA) said on Thursday, in the latest sign that the collapse in oil prices is helping to boost fuel use. The Paris-based agency also pointed to “exceptionally high” growth in global supplies, forecasting OPEC crude production would remain near May’s multi-year high and boosting its projection of supplies this year from other producers. In a monthly report, the IEA raised its forecast for global oil demand growth in 2015 by 280,000 barrels per day (bpd) to 1.40 million bpd, bringing demand this year to almost 94 million bpd. “Recent oil market strength of course partly stems from unexpectedly strong global oil demand growth,” said the IEA, which advises industrialized nations on energy policy. (Oil demand rises after price drop, but supply strong: IEA)

4:37 pm EDT. Oil continued lower on supply and dollar strength, setting itself up for another 3–5% upside run — Reuters “The number of oil rigs in the United States notched another weekly decline, but crude prices did not move much on the data from oil services firm Baker Hughes. Gasoline prices RBc1 retreated from Thursday’s seven-month highs. Traders said the fuel remains fundamentally strong due to summer driving demand and relatively low pump prices. Crude rebounded early in the week, but the rally stalled on Thursday as the dollar strengthened against the euro due to developments in Greece’s debt crisis, which still dominated sentiment on global markets on Friday. Strength in the greenback makes oil, sold in dollars, less affordable to euro holders. [MKTS/GLOB] “The Greece debt debate is clobbering the euro, kiboshing a rally in crude,” said Matt Smith, director of commodity research at energy intelligence firm ClipperDatadata. “Rumblings of an impending rise in Saudi production is also providing a downbeat end to the week.” (Oil down second day, weekly gain cut on Saudi output worry)

6/15/2015

Retail investors continue their outflow from energy exchange-traded bullish products in May — Reuters “Some $540 million exited energy ETPs globally last month, following net withdrawals of $1.2 billion in April, data from asset manager BlackRock showed. Investors piled into oil ETPs in the first quarter chasing an oil price rebound. But Brent crude futures prices slipped just over 2 percent in May, and some investors decided to take profits ahead of a potentially much bigger downward correction. “The gains were getting a bit ahead of themselves given the elevated inventory levels,” said Martin Arnold, global commodity and FX strategist at ETF Securities, an issuer of ETPs. (Outflows from energy ETPs continue in May: BlackRock)

Drillers pull more rigs from production, the most since late May. — Reuters “Energy firms pulled another seven rigs from U.S. oil fields this week, the most since late May, oil services company Baker Hughes Inc said on Friday in its closely followed report. That was the 27th straight weekly decline, bringing the total rig count down to 635, the lowest since August 2010. Drillers this week added a rig in just one basin, the Granite Wash located in the Texas Panhandle and Oklahoma. (U.S. oil drillers pull seven rigs, biggest drop since late May — Baker Hughes)

4:41 am EDT. Oil stabilizes on possible storm disrupting production in the Gulf of Mexico and Yemen peace talks. — Reuters “A large tropical disturbance in the southern Gulf of Mexico has a 70 percent risk of developing into a cyclone in the next 48 hours, the U.S. National Hurricane Center said, potentially threatening oil output in the region. U.S. light crude oil CLc1, also known as West Texas Intermediate (WTI), bounced from a session low of $59.62 per barrel to trade around $59.80, down 16 cents, by 0800 GMT (0400 ET). Brent crude LCOc1 was unchanged at $63.87 a barrel. Brent has fallen from a high above $66 last week and appears to be settling into a range between $60 and $65, said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. “There’s a good possibility that we will test the lower end of this range this week,” Fritsch said. “The market is oversupplied and output continues to rise slowly, so oil prices should stay under pressure.” Warplanes from a Saudi-led coalition bombarded Yemen’s capital Sanaa overnight, a Reuters witness said, as the country’s warring factions prepared for talks due to start in Geneva on Monday. (Oil steadies on U.S. storm, Yemen peace talks)

11:59 am EDT. Oil falls on stronger dollar, Greek debt crisis, Yemen talks and Libya’s output boost. — Reuters “Crude oil fell on Monday as the Greek debt crisis boosted the dollar and raised concerns about demand for petroleum in Europe, and as the U.N. started talks to try to bring peace to Yemen, where OPEC heavyweight Saudi Arabia is involved in a civil war. Expiring front-month July Brent was down $1.17 at $62.70 a barrel at 11:42 a.m. EDT. August Brent was off 57 cents at $64.07, with losses more in line with the rest of the complex. U.S. July crude was down 36 cents at $59.60, having swung from $58.73 to $59.98. The spread between Brent and U.S. crude was as little as $2.96 a barrel intraday on Monday, the narrowest since January and having narrowed from more than $7 a month ago and more than $8 in April. Brent has fallen from a high above $66 last week and appeared to be settling in a range between $60 and $65, said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. (Oil falls on stronger dollar, Yemen talks, Libyan output boost)

3:55 pm EDT. Oil ended lower. — Reuters “Oil prices fell in volatile trading on Monday as the Greek debt crisis raised concerns about demand for petroleum in Europe and as the U.N. started talks to try to bring peace to Yemen, where OPEC heavyweight Saudi Arabia is involved in a civil war. Expiring front-month July Brent fell $1.26 to settle and go off the board at $62.61 a barrel. August Brent fell 69 cents to settle at $63.95. The weak July Brent expiration also signalled “a much over-supplied North Sea trade that is seeing the impact of near record OPEC production both directly and indirectly,” Jim Ritterbusch, analyst at Ritterbusch & Associates in Galena, Illinois, said in a research note. U.S. July crude fell 44 cents to settle at $59.52, after trading from $58.73 to $59.98. The spread between Brent and U.S. crude shrank to $2.65 a barrel intraday, the narrowest since January. A month ago it was more than $7 a barrel. (Oil slips on Greece concerns as July Brent expires)

6/16/2015

Saudi Arabia expected to cut gasoline imports as they increase refinery capacity. — Reuters “Middle Eastern oil producers Saudi Arabia and the United Arab Emirates will sharply cut or even halt costly gasoline imports next year after ramping up new refining capacities that put them a step closer to becoming exporters of the motor fuel. The estimated loss of at least 60,000 barrels per day (bpd) in shipments to Saudi Arabia and the UAE is expected to be mitigated by strong global demand that will help replace revenue lost by sellers such as trader Gunvor [GGL.UL], French major Total and India’s Reliance Industries. And while the dwindling imports may point to a coming change in trade flows as other Middle East refining projects come online, the market currently looks strong enough to withstand the relatively small loss in daily seaborne purchases. (Mideast oil powers Saudi Arabia, UAE to cut gasoline imports)

India seen as a major emerging player in Asia’s oil market. — Reuters The South Asian nation has doubled imports to almost 4 million barrels per day (bpd) in the past decade, in the process overtaking Japan, Germany and South Korea to become the world’s third-biggest importer behind China and the United States. Its importance to the outlook for crude oil over the next decade becomes even more apparent in the light of slowing demand growth in China, the likelihood of at best steady consumption in much of the developed world and declining demand in Japan. Two recent events underscored the importance that India is assuming in Asian crude oil markets: the visit by a senior official of Saudi Arabia’s state oil giant and talks between Indian refiners and Iraq over filling strategic storage. (Softly, softly, India’s influence rises in crude oil: Russell)

Oil reserves accounting to be revised in December, can impact prices. — Reuters “Steep downward revisions to oil and gas reserves at the end of this year are likely to increase scrutiny of how energy companies tally future barrels — a process that has become more opaque with the rise of shale drilling. The revisions due in December will reflect a deep plunge in crude prices and should not come as a surprise for investors who have been pouring billions of dollars into U.S. oil companies betting that crude prices will recover. But investors may not fully appreciate other risks stemming from the wide variety of methods companies use to estimate and vet their reserves, or economically-recoverable oil and gas. (Guesswork, inconsistency nag U.S. shale oil accounting)

5:04 am EDT. Oil trading high, on warnings that a tropical storm was heading towards Texas. — Reuters “U.S. crude, also known as West Texas Intermediate (WTI), was up 51 cents at $60.03 a barrel at 0803 GMT, staying within a range of $57-$62 per barrel that has been in place since the beginning of May. Brent was up 13 cents at $64.08 per barrel. The U.S. National Hurricane Center (NHC) issued a tropical storm warning on Tuesday for the Texas coast from Baffin Bay to High Island. Chevron Corp and Royal Dutch Shell have evacuated non-essential workers from oil platforms but have not yet shut production in a basin responsible for nearly a fifth of U.S. crude oil output. (Oil prices rise as Texas braces for tropical storm)

5:07 pm EDT. Oil ended higher as storm moves ashore — Reuters “U.S. crude prices rose on Tuesday as a tropical storm moved ashore in the oil-producing state of Texas, but global oversupply limited gains and pressured Brent futures. Expectations that U.S. crude inventories fell again last week and strong RBOB gasoline futures also lent support. U.S. July crude rose 45 cents to settle at $59.97 a barrel, having swung from $59.42 to $60.37. Brent front-month August crude fell 25 cents to settle at $63.70, off its $64.41 intraday peak and below Brent’s 50-day moving average of $64.01. U.S. RBOB gasoline rose 2.54 cents to settle at $2.1245 a gallon, still bolstered by last week’s government inventory data showing the bulk of the 2.9 million-barrel drop in the week to June 5 occurred on the East Coast. (U.S. crude oil up as tropical storm goes ashore in Texas)

6/17/2015

The largest global oil glut in decades with no signs of a slowdown in production — Bloomberg” Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. If the Organization of Petroleum Exporting Countries were to keep pumping at current rates it would become the longest surplus since at least 1985 by the third quarter, the data show. There are few signs the 12-nation group will cut back. Saudi Arabia, OPEC’s biggest member, will probably increase production to intensify pressure on U.S. shale drillers, Goldman Sachs Group Inc. predicts. OPEC’s supplies may be swollen further this year if Iran reaches a deal with world powers to ease sanctions on its exports, Commerzbank AG says. “It seems to be taking longer for the oil surplus to clear, and, even without the return of Iran, IEA data indicates it could last for the rest of the year,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “Any expectations the oversupply will be gone by 2016 don’t look justified at this stage.” (The World Is Facing Its Longest Oil Glut in at Least Three Decades)

Sinopec Chinese state energy firm looking for investments opportunities in U.S. shale oil and gas projects — Reuters “The Chinese state energy firm is keen to take a 10–15 percent stake in projects to export liquefied natural gas (LNG), said Jack Yu, managing director of Sinopec D.C., which handles government relations in the U.S. Previous talks over investing in Freeport LNG’s project in Texas fell through, he said. New deals, if they materialize, would come more than two years after Sinopec made waves with two big U.S. investments, spending more than $3 billion buying various shale stakes from Devon Energy and Chesapeake Energy. Yu says that although oil prices have fallen to half of what they were a year ago, valuations on U.S. assets remain elevated, limiting opportunities for bargain hunting. (China’s Sinopec hunting U.S. shale deals, but prices high)

Oil Producers not expecting to see a bounce in price any time soon are delaying and cutting back projects. — Reuters “Deepwater oil projects and complex gas facilities worth around $200 billion have been canceled or put on hold worldwide in recent months due to the sharp drop in oil prices over the past year, consultancy Ernst and Young said on Tuesday. Further project cuts and delays are likely as the industry braces for an extended period of lower oil prices as a result of a supply glut. “The mind set in the industry at the moment is that prices are unlikely to be bouncing up materially in the near term,” the consultancy’s Andy Brogan said in a presentation. “There is an expectation that volatility is with us for a reasonable period of time to come and companies need to cope with that.” The delays in multi-billion dollar projects that can take up to 10 years to develop, and needed to support rising global demand for energy, could create a shortage in the future. (Low oil price hits $200 billion in mega-projects)

North Dakota’s crude oil output has peaked? — Reuters “North Dakota’s crude oil output has peaked, according to the latest production data published by the state government, as the slump in prices takes its toll. The state produced 1.17 million barrels per day (bpd) in April, down from a peak of 1.23 million in December, the Department of Mineral Resources (DMR) reported on Friday. The former rapid growth in production has stalled and current output is no higher than it was in September 2014(link.reuters.com/zeb94w). In the seven months between February and September 2014, output increased by 233,000 bpd, while in the seven months from September 2014 to April 2015, output actually edged down 18,000 bpd. Prices are by far the most important cause of the downturn, according to state regulators, followed by tax changes, tougher flaring rules and new regulations on oil conditioning to remove the most volatile components from the crude and make it safer to transport (“Director’s Cut” June 2015).” (North Dakota’s oil production has peaked: Kemp)

5:20 am EDT. Decreasing U.S. stockpiles and increasing demand push prices higher. — Reuters “Brent crude oil rose on Wednesday as strong demand and falling stockpiles in the United States pushed prices higher. Brent futures were up 99 cents at $64.69 a barrel at 0514 ET. Front month U.S. crude futures were up 83 cents at $60.80 per barrel. U.S. crude stocks fell last week even as refineries cut output, while gasoline inventories dropped and distillate stocks built, data from industry group the American Petroleum Institute showed on Tuesday. [API/S] U.S. crude stocks are forecast to have fallen 1.7 million barrels last week, according to a Reuters poll of analysts. Gasoline stocks are expected to be down 300,000 barrels. [EIA/S] “The API (data) was bullish and (U.S. gasoline) is tight,” a broker in London said. J.P. Morgan said in its weekly oil research note that U.S. production had reached a new high this week, but that it would start to drop. An expected fall in U.S. crude production due to the relatively high cost of producing shale has also been supportive of prices. (Oil prices rise on strong U.S. demand)

3:47 pm EDT Markets ended mixed with U.S. Crude lower and Brent up. — Reuters “Brent crude edged up and U.S. crude eased on Wednesday in volatile trading as both contracts trimmed losses after the Federal Reserve left the outlook for interest rate increases uncertain, brokers and analysts said. The Fed said the economy was likely strong enough to support an interest rate increase by the end of the year, although it lowered expectations for 2015 economic growth because of a weak start to the year. [MKTS/GLOB] “The Fed again cited international concerns and the lower growth, opening the door for delaying the expected rate hike and keeping liquidity boosted,” said Phil Flynn, an analyst at Price Futures Group in Chicago. The dollar index weakened, helping dollar-denominated crude recover.” (Brent edges up, U.S. crude off low as Fed weakens dollar)

6/18/2015

Though prices have settled into a trading range, the risk still remains global over production and demand (sluggish economic growth) concerns. — Reuters “A year on from the start of one of the biggest oil price crashes in history, the driving force behind the slide remains intact: there is still too much crude. While output continues to grow, the economic outlook has darkened in top energy consumer China, where oil demand has been one of the few bright spots in the market. Add to the mix record output by the Organization of the Petroleum Exporting Countries (OPEC) and the possibility of a return of Iranian crude exports, and further price turbulence looks almost certain. (A year after the crash, oil markets risk more trouble ahead)

Canadian oil producers’ targeted hedging price is $65 per barrel. — Reuters “Canadian energy producers are giving up hoping for a big rebound in oil prices, preparing instead to embark on a course of belated hedging if crude prices edge just a few dollars higher. That may be about to change. A rally in U.S. crude CLc1 from $60 a barrel today to about $65 could trigger a wave of selling from Canadian companies eager to build up protection against a second price slump, according to market sources in Calgary. Many allowed their hedging activity to lapse since last year, when oil tumbled to a six-year low near $42 a barrel. Canadian producers are between 10 percent and 20 percent underhedged compared with the same time last year, banking sources in Canada’s oil capital estimated. For example, Canadian Natural Resources Ltd (CNQ.TO) had hedged around 10 percent of its production by early May; a year earlier it had already hedged more than half its output. It was not immediately clear which Canadian companies were gearing up for more hedging. Dozens of them routinely use derivatives contracts such as swaps or options to provide a guaranteed price on future oil production, often to appease lenders who want secure cash flow. (Canadian oil producers eye hedging catch-up at $65/barrel)

Libya to re-open El Feel, El Sharara oilfields — Reuters “Libyan authorities will try during the month of Ramadan to reopen pipelines for El Feel and El Sharara oilfields and Zueitina port that have been blocked for weeks by protests and disputes, the state oil company said on Tuesday. The two major oilfields and oil terminal have been shuttered by protesters demanding jobs, disputes among security guards and the country’s conflict between two rival governments battling for control of the north African OPEC state. “The efforts are being carried out by elders, local municipalities, and mediators,” National Oil Corporation spokesman Mohamed Harari said, adding talks would take place during Ramadan. “If the three pipelines are reopened, the oil production might reach 800,000 barrels per day.” Ramadan is due to start this week. (Libya in talks to reopen El Feel, El Sharara oilfields)

5:33 am EDT. Oil trading off of a weaker dollar rises. — Reuters “Oil prices rose on Thursday as a weaker dollar made fuel cheaper for holders of other currencies, and on hopes of a last-minute breakthrough that could keep Greece in the euro zone and help avoid a shock to European economic growth. The dollar fell 0.5 percent to a one-month low against a basket of currencies .DXY after the Federal Reserve disappointed investors who had hoped for a clearer signal on when the U.S. central bank will lift interest rates. [FRX/] European finance ministers meet in Luxembourg on Thursday for what could be the last best chance of a political rescue for Greece after other negotiations collapsed. “Oil prices were revived by a weakening dollar,” Phillip Futures analyst Daniel Ang said (Oil prices up on weak dollar, hopes of Greek deal)

3:42 pm EDT. Oil trading off of a weaker dollar remains up. — Reuters “The dollar fell to a one-month low against a basket of currencies .DXY after the Federal Reserve disappointed investors anxious for a clearer signal on a U.S. rate hike. The euro also got a boost from hopes for a positive end to the Greek fiscal crisis. [FRX/] Market intelligence firm Genscape reported a draw of about 870,000 barrels of crude at Cushing in the week to Tuesday, according to market sources who saw the data. Between Friday and Tuesday alone, some 1.2 million barrels were drawn. On Wednesday, the U.S. Energy Information Administration (EIA) also cited the first weekly build in Cushing inventories since mid-April. Oil still ended off the day’s highs, pressured by lingering doubts about demand a day after U.S. government data suggested the recent strength in crude consumption may not hold. “The highs for the day had a lot to do with the weaker dollar but we have pared since,” Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, said, citing profit-taking. (Oil up third day on dollar slump, U.S. crude draw data)

6/19/2015

Oil prices remain under pressure, supported by the same bearish fundamentals, global oversupply and sluggish demand. — Reuters “While output continues to grow, the economic outlook has darkened in top energy consumer China, where oil demand has been one of the few bright spots in the market. Add to the mix record output by the Organization of the Petroleum Exporting Countries (OPEC) and the possibility of a return of Iranian crude exports, and further price turbulence looks almost certain. Oil prices began a seven-month rout this time last year that took Brent crude futures LCOc1 from $116 per barrel to around $45 by January. While prices have crawled up since, there are few signs yet that OPEC’s strategy of keeping output high in a bid to drive out competitors, such as U.S. shale oil, is doing enough yet to change market fundamentals.. (A year after the crash, oil markets risk more trouble ahead)

Energy Information Administration reported U.S. crude stocks fell last week, while gasoline stocks and distillate inventories rose. — Reuters “Crude inventories fell by 2.7 million barrels to 467.93 million last week, compared with analysts’ expectations for a decrease of 1.7 million barrels. But the drop recorded by the EIA was less than the 2.9 million-barrel slide reported on Tuesday by industry group American Petroleum Institute (API). Crude stocks at the Cushing, Oklahoma, delivery hub rose by 112,000 barrels, the first increase since mid-April, EIA said. U.S. crude futures erased gains and briefly turned lower after the EIA data. U.S. July crude was up 8 cents at $60.05 a barrel, having swung from $59.81 to $61.38. Brent August crude was up 40 cents at $64.10, well off its $65.47 intraday peak. “The drawdown in crude oil inventories was expected so its effect is muted, and the rise in Cushing, Oklahoma, inventories diminishes the headline number quite a bit,” said John Kilduff, partner at Again Capital LLC. “The report is mixed given the reported rise in gasoline inventories,” Kilduff said. (U.S. crude oil stockpile falls, gasoline builds unexpectedly: EIA)

5:28 pm EDT. Oil trades below $64 on stronger dollar, Greece and U.S. Shale production concerns. — Reuters “Oil eased below $64 a barrel on Friday as concern over Greece and a forecast that U.S. shale oil output would keep growing this year countered signs of a pickup in demand. Greece has been less of a driver for oil than other markets such as equities, but analysts said the situation represented a bearish risk heading into the weekend. Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default. Brent crude LCOc1 for August had slipped 42 cents to $63.84 as of 0856 GMT, while U.S. crude for July CLc1 was down 44 cents at $60.01. Both contracts made gains on Thursday. “Oil markets are not pricing much in terms of Greek risk but most of the European oil demand growth this year is coming from the southern countries,” said Olivier Jakob of Petromatrix in Zug, Switzerland. “Therefore, if there was a Greek default and a contagion of a risk premium to other southern European countries it could have a negative impact on European oil demand.” (Oil eases below $64, ample supplies and Greece weigh)

3:10 pm EDT. Trading off of a lower dollar oil prices fell 2%. — Reuters “Crude oil fell about 2 percent on Friday, the first decline after three days of gains, as worries over the Greek fiscal crisis, weaker oil products prices and pre-weekend profit taking undercut the market. Gasoline RBc1 and diesel’s proxy, heating oil HOc1, led the oil complex lower, sliding more than 2 percent as concerns about their high refining margins over crude prompted those who had been bullish on such products to close out some positions. A slowdown in the decline of U.S. oil rigs did not help. Oil services firm Baker Hughes reported an overall drop of four U.S. rigs this week, compared to 7 last week. It also cited new drilling activity in the Permian and Bakken shale basins, a sign that higher crude prices were coaxing producers back to the well pad after a six-month price rout. [RIG/U] Brent crude LCOc1 fell $1.24, or 1.9 percent, to settle down for the first time since Monday at $63.02 a barrel. U.S. crude CLc1 slipped 84 cents, or 1.4 percent, to $59.61. For the week, Brent fell 1.3 percent, and U.S. crude half a percent. (Oil down 2 percent on Greek worries, weaker products markets)

6/22/2015

Gazprom is building a global strategic alliance with Royal Dutch Shell — Reuters “Gazprom, the world’s top gas producer, said on Thursday that Shell and its long-time gas buyers in Europe — Germany’s E.ON and Austria’s OMV — had agreed to build two new Nord Stream gas pipelines under the Baltic sea to Germany. In a rare interview, chief executive Alexei Miller said the agreement with Shell also foresaw an expansion of the firms’ joint $20 billion liquefied natural gas plant on the eastern island of Sakhalin as well as global upstream asset swaps. “Documents of such significance are signed only once every five years or maybe even 10,” Miller said on the sidelines of Russia’s top forum for investors in Saint Petersburg. The deal with Shell is a coup for Gazprom at a time when many Western companies are reducing their exposure to Russia because of Western sanctions over Moscow’s actions in Ukraine. (Exclusive: Gazprom building global alliance with expanded Shell )

The U.S. Shale industry facing liquidity issues as prices remain low. — Bloomberg “The debt that fueled the U.S. shale boom now threatens to be its undoing. Drillers are devoting more revenue than ever to interest payments. In one example, Continental Resources Inc., the company credited with making North Dakota’s Bakken Shale one of the biggest oil-producing regions in the world, spent almost as much as Exxon Mobil Corp., a company 20 times its size. The burden is becoming heavier after oil prices fell 43 percent in the past year. Interest payments are eating up more than 10 percent of revenue for 27 of the 62 drillers in the Bloomberg Intelligence North America Independent Exploration and Production Index, up from a dozen a year ago. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank. (The Shale Industry Could Be Swallowed By Its Own Debt)

Russia’s Rosneft to purchase 30% of China National Chemical Corp’s — Reuters “Russia’s top oil producer Rosneft has signed a memorandum that paves the way for purchasing 30 percent of China National Chemical Corp’s [CNNCC.UL], a subsidiary of ChemChina Petrochemical (CCPC), the oil major said on Saturday. Rosneft will also supply 200,000 tonnes of crude oil a month (48,000 barrels per day) to the company within a year, in a deal that would strengthen Rosneft’s position in the world’s top energy consumer. It’s not clear, when Rosneft will start supplying oil to CCPC. “Together with the project of construction of a refinery in China the cooperation with ChemChina will allow Rosneft to obtain a new potential for the production and marketing of products along the whole value-chain to the end-customer,” Rosneft said in a statement. It also said that the signed memorandum envisages Rosneft’s analysis of CCPC assets. Rosneft will pay for the share from finances, raised by the sales of oil to CCPC. The memorandum foresees cooperation in the area of oil, oil products and petrochemical trading, Rosneft said. (Russia’s Rosneft says may buy 30 percent of ChemChina subsidiary)

Drillers’ net reduction of rigs was 4 for the week ending 6/19. — Reuters “ U.S. oil drillers this week added one rig each in the Permian and Bakken shale basins, data showed on Friday, another sign that higher crude prices are coaxing producers back to the well pad after a six-month slump in activity. Overall, drillers reduced the number of rigs by four this week, oil services company Baker Hughes Inc said in its closely followed report. It was the 28th straight weekly decline and brought the total rig count down to 631, the lowest since August 2010. The number of oil rigs in the Permian, the nation’s biggest shale oil field located in West Texas and eastern New Mexico, climbed to 232 this week, up one from the lowest level in at least four years last week, according to Baker Hughes data going back to 2011. Drillers also added one rig in the Williston section of the Bakken formation centered in North Dakota. (U.S. oil rigs decline, but up in Permian, Bakken: Baker Hughes)

2:05 am EDT. In early trading oil slightly higher; the key is the dollar Euro trade, in essences the prospects of a Greek deal. — Reuter “Oil prices nudged higher in Asian trade on Monday, after initially falling on concerns about the outcome of a eurozone meeting on the Greek debt crisis later in the day and continuing worries about global oversupply. Prices rebounded from early lows after a European Commission official tweeted the latest proposal from Greece was a “good basis for progress” in Monday’s talks. “We’re seeing … a snap back from Friday’s losses, which were too aggressive,” said Ben Le Brun, market analyst with Sydney’s OptionsXpress.” (Oil prices nudge higher as worries ease over Greek debt)

3:48 pm EDT. Oil reversed losses to end slightly higher on Monday on short-covering; though the euro was down 0.4 percent to $1.1333 @ 3:23 pm. — Reuters “Oil reversed losses to end slightly higher on Monday as short-covering ahead of the expiry of the front-month contract in U.S. crude lifted a market burdened by concerns about creeping gasoline inventories.Worries about the potential fallout from the Greek debt crisis also weighed on oil prices initially, offsetting positive impact from a stockpile draw at the Cushing, Oklahoma delivery point for U.S. crude futures reported by oil services firm Genscape. Brent crude settled up 32 cents, or 0.5 percent, at $63.34 a barrel, after falling almost $1 earlier (Oil up as U.S. crude contract expires; eyes on gasoline, Greece)

6/23/2015

Saudi Aramco is considering its crude oil refinery in Jeddah because of age and environmental concerns. — Reuters “The refinery, which started operating in 1967, serves much of the country’s western region and its closure would increase demand at other Saudi facilities. It produces liquefied petroleum gas, gasoline, diesel, asphalt and jet fuel, and exports naphtha. Aramco was originally considering whether to close it in 2018 but now looks likely to postpone the closure to as late as 2022 because of growing domestic demand for oil products and since construction of a new refinery at Jizan, also on the Red Sea coast, has been delayed, said one source. Another said Jeddah’s growth had left the refinery in the middle of the city, which created environmental issues that contributed to a likely decision to close it. (Saudi Aramco may shut Jeddah refinery in several years: sources)

Kuwait’s al-Zour oil refinery to be delayed beyond 2019 — Reuters “The 615,000 barrel per day oil refinery, originally planned more than a decade ago, would be the biggest in the Middle East, but the project has been repeatedly delayed by bureaucratic and political issues, including tensions between Kuwait’s parliament and the cabinet. Officials had previously said start-up would occur by late 2018 or early 2019.” (Kuwait’s al-Zour oil refinery to be delayed beyond 2019)

Hedge Funds pulling out of market awaiting clearer market conviction. — Bloomberg “Hedge funds reduced both bullish and bearish bets on oil for a fourth week as rising OPEC output was met with forecasts for a contraction in U.S. supply. Money managers trimmed their short wagers in West Texas Intermediate oil by 4.3 percent and long bets by 0.2 percent, leading to a 0.8 percent gain in the net-long position, U.S. Commodity Futures Trading Commission data for the seven days ended June 16 show.” (Speculators Retreat From Oil as OPEC Oversupply Crowds Out Shale)

4:41 am EDT. Oil continues it’s slight up move on fundamentals, global oversupply, eclipsing the strong dollar. — Reuters “Oil prices held steady on Tuesday, as a glut in supply offset an improvement in sentiment due to better European economic data and optimism a deal will be done between Greece and its creditors. Oil prices recovered some of their earlier losses, briefly moving into positive territory as European shares climbed to a three-week high on expectations of a Greek deal. Brent crude was down 9 cents at $63.25 a barrel at 0814 GMT (0414 EDT), after closing the previous session up 32 cents. U.S. crude for August delivery fell 35 cents to $60.03 a barrel. The July contract, which expired on Monday, closed up 7 cents at $59.68 a barrel. Strong European economic data helped put a floor under prices despite a heavy global surplus of oil. (Oil steady as supply glut offsets European optimism)

3:35 pm EDT. The market in trade mode rallies 2% on the expectation that U.S. inventory report will show strong demand for gasoline. In essence by on rumor sell on the news. The inverse correlation dollar trade took a back seat to the anticipated increase in demand. — Reuters “Crude futures rallied around 2 percent on Tuesday, latching onto a rebound in oil products ahead of U.S. inventory data expected to show strong demand for gasoline. Also supporting prices were signs of trouble with an impending Iranian nuclear deal that could delay Tehran’s hopes of lifting Western sanctions on its oil exports. A strong dollar, which usually pressures commodity prices, did little to temper the rally. (Crude up about 2 percent as U.S. oil products jump; eyes on Iran)

6/24/2015

Europe’s Oil & Gas companies coming to grips with carbon pricing — Oil & Gas Climate Initiative — Bloomberg “The chiefs of some of Europe’s biggest energy companies decided to pull an historic about-face. It was time to heed the protesters marching in the February snow outside their industry conference demanding action to counter global warming. By the time the convention chat turned into action, Royal Dutch Shell Plc, BP Plc, Total SA, Eni SpA, Statoil ASA and BG Group Plc published an unprecedented open letter on climate change. Breaking with their biggest U.S. competitors, they announced their support for efforts to put a cost on polluting, acknowledging they were on the wrong side of history. “They have massively changed the rhetorical position,” says Charlie Kronick, senior climate adviser at Greenpeace in London. “They know that if you are not at the table, you could end up being lunch.” (How the European Oil Industry Decided to Save the Climate)

Iran’s exports to China fell 31.6% in May — Reuters “China’s crude oil imports from Iran fell in May to their lowest levels in four months, official customs data showed on Tuesday, as overall crude imports dropped during the traditional maintenance season. China’s imports from Iran were 2.20 million tonnes last month, or 518,400 barrels per day (bpd), down 26.7 percent from April’s 707,400 bpd and down 31.6 percent on the year. An explosion in early April at Dragon Aromatics, an independent petrochemical producer in eastern China that handles condensate like that exported by Iran, could have contributed to the May drop. Thomson Reuters Oil Research & Forecasts had put its latest estimate of China’s imports from Iran in May at 593,400 bpd. The group expects volume from Iran to fall in June to 506,100 bpd.(China’s May Iran oil imports down 31.6 percent on year: customs)

5:00 am EDT. Oil continues to trade higher in anticipation that the U.S. government report will show a decrease in crude inventories, expect some profit taking just before and after the report. -Reuters “Oil rose towards $65 a barrel on Wednesday before a U.S. government report expected to show domestic crude inventories fell for an eighth week, a sign that a supply glut is easing. The industry group American Petroleum Institute (API) on Tuesday reported a drop in U.S. crude stocks, ahead of Wednesday’s official data. Doubts over the likelihood of a deal next week on Iran’s nuclear work also supported prices. Brent crude LCOc1 rose 30 cents to $64.75 a barrel by 0836 GMT. U.S. crude CLc1 gained 39 cents to $61.40. Both contracts made gains on Tuesday. “There could be some support from the APIs,” said Tony Machacek, an oil broker at Jefferies Bache in London. “We’re probably going to be testing $66 to the upside,” he added, referring to Brent.” (Oil rises towards $65 on signs glut easing, Iran doubts)

11:38 am EDT. U.S. crude oil inventories fell last week, gasoline stocks rose. — Reuters “The increase in gasoline inventories was the second consecutive build. U.S. crude briefly turned negative on the news, but then recovered to trade fairly flat at $61.10 a barrel. Crude inventories fell 4.9 million barrels to 462.99 million in the week ending June 19, the EIA said, compared with analysts’ expectations for a decrease of 2.1 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell 1.87 million barrels, while crude imports dropped 432,000 barrels per day (bpd) to 6.19 million bpd. “Initially there was some sell-the-fact reaction to the drop in crude inventories and also some expectation that the inventory drop was related to a temporary drop in crude oil imports associated with Tropical Storm Bill,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. (U.S. crude stockpile falls, gasoline builds unexpectedly: EIA)

4:21 pm EDT. Oil traded down, 1.5%, on profit taking. — Reuters “Crude oil futures settled down more than 1 percent on Wednesday after a government report showing an eighth straight weekly drop in U.S. crude stockpiles was offset by a large build in refined products. Uncertainties about progress in the Greek debt crisis added to the energy market’s skittishness, even as support emerged from roadblocks to an Iranian nuclear deal aimed at allowing Tehran to resume oil exports without restrictions.Brent futures LCOc1 settled down 96 cents, or 1.5 percent, at $63.49 a barrel. U.S. crude CLc1 ended down 74 cents, or 1.2 percent, at $60.27.”(Oil slides after big U.S. gasoline build offsets crude draw)

6/25/2015

Kuwait expect oil prices to continue rising, see gains in the final quarter of 2015. — Reuters “All indicators point to an improvement in prices … today we have reached the stage where a fall is difficult, a fall has now become unlikely,” Ali Saleh al-Omair told reporters. Omair also said costs for the country’s al-Zour refinery were expected to increase by around 1 billion Kuwaiti dinars ($3.31 billion) pushing up total cost to more than 5 billion dinars. A Kuwait National Petroleum Company spokesman had said on Monday the start-up of the refinery would be delayed as the company was seeking more financing on the back of rising construction costs.” (Kuwait oil minister says oil price drop unlikely)

U.S. West coast refiners snapping up Russian crude, taking advantage of price spread. — Reuters “Refiners on the U.S. West Coast and Hawaii have stepped up purchases of Russian crude, taking advantage of a narrow gap between U.S. and global prices as they look to guard against a seasonal shortage of Alaskan supply, trade and industry sources said. Up to four tankers were expected to carry nearly 3 million barrels of Russia’s ESPO crude from Kozmino near the city of Vladivostok to refineries in the United States this month and next, the sources said. (U.S. West Coast refiners snap up Russian crude cargoes)

3:07 am EDT. Oil steady as the spread (Brent, WTI) narrows, indicating the markets are diverging. — Reuters “Brent crude for August delivery LCOc1 was up 2 cents at $63.51 a barrel by 0648 GMT (0248 EDT), after ending the previous day down 96 cents, or 1.5 percent. The benchmark rose 22 cents earlier in the session. U.S. crude for delivery in August CLc1 was down 14 cents at $60.13 a barrel, after finishing Wednesday down 74 cents, or 1.2 percent. “The market is disappointed with last night’s numbers,” said Mike McCarthy, chief market strategist at Sydney’s CMC Markets. (Crude prices steady, U.S. gasoline stocks data disappoints)

3:01 pm EDT. Oil vacillating within its trading range ended lower, setting up for another 2 t0 3% up trade. — Reuters “Crude oil fell for a second straight day on Thursday, weighed by weaker U.S. refined fuels markets and potential negative impact from Greece’s debt crisis on European energy demand. Worries of a possible glut emerging in U.S. gasoline and diesel supply after large builds in both last week added to concerns that millions of barrels of Nigerian crude were floating around the Atlantic Basin looking for buyers. [EIA/S] Brent crude settled down 29 cents, or 0.5 percent, at $63.20 a barrel. U.S. crude, also known as West Texas Intermediate or WTI, fell 57 cents, or almost 1 percent, to end at $59.70. “It feels like the bulls have thrown in the towel in their pursuit of pushing WTI up to $65,” said Scott Shelton, broker with ICAP in Durham, North Carolina. (Crude down again on oil products weakness; Greece, Iran eyed)

6/26/2015

Lower oil prices impact OPEC’s bottom line –Bloomberg “OPEC nations’ oil revenues dropped last year below the psychological $1 trillion mark for the first time since 2010, in the clearest sign yet of the economic impact of lower prices for oil-rich nations. The Organisation of the Petroleum Exporting Countries said on Wednesday in its annual statistical report that its 12-members earned $964.6 billion selling their petroleum, down 12.7 per cent from $1.1 trillion in 2013 and the lowest amount since 2010. Oil export revenues hit a nominal record of $1.2 trillion in 2012, according to OPEC data.” (OPEC’s Oil Revenues Have Dropped Below $1 Trillion — Here’s What That Looks Like)

Oil producers hedging against a possible price drop in the fall. — Reuters “Two big trades in oil options worth nearly $60 million last week boosted volatility in that market and revived speculation among traders that U.S. producers are placing hedges to guard against another price rout this fall. Hedging for future production now is prudent, some said, as trading ahead looks to remain rangebound. However, dealers said bearish fears have been revived because supply is due to swell when refineries start fall maintenance just as a slug of imports is due to hit the U.S. Gulf Coast. The two sizeable puts, equivalent to almost 1 million barrels of crude, expire in November next year and give the holder the right to sell at $53 per barrel if prices drop lower than that, according to data from the Depository Trust & Clearing Corp (DTCC). The identity of the buyers was not known. Traders and bankers said the deals bore the hallmarks of Mexico’s finance ministry and its national oil company Pemex. The Mexico hedging program is the most widely-watched operation by a nation in commodities markets. (Big oil options trades revive speculation about producer hedging)

North Dakota drillers adding rigs; is this a sign production is revving up? — Reuters “Drilling rigs are coming back to North Dakota. WPX Energy Inc, a small oil producer in the No. 2 U.S. crude state, said on Thursday it will add two rigs this year, becoming the first since the crude price downturn to announce concrete steps to boost output. Though only the 11th-largest North Dakota oil producer, trailing Whiting Petroleum Corp and others, WPX has effectively staked out a leadership position in the state’s Bakken shale formation by saying it will add rigs, slash well completion costs and target a 20 percent boost in output by 2016. Half a dozen other companies in the crowded U.S. shale industry have talked about adding rigs but have so far balked at making definite moves. (In bet on oil prices, WPX plans to add Bakken rigs)

Oil moving to the lower end of the trading range is down in early trading — Reuters “Oil prices slipped on Friday but remained stuck in tight trading ranges as investors awaited the outcome of Iranian nuclear talks which could lead to a big increase in Iranian crude exports. The market also monitored last-minute negotiations to try to avert a Greek debt default and avoid Greece’s exit from the euro. A Greek default would probably strengthen the dollar against the euro, providing headwinds for oil and other commodities priced in dollars, economists say. Brent crude for August was down 20 cents at $63.00 a barrel by 0905 GMT (0505 EDT) after ending the previous session down 29 cents. U.S. crude was down 25 cents at $59.45 a barrel after finishing Thursday down 57 cents. “We are well and truly stuck,” said Ole Hansen, senior commodity strategist at Saxo Bank. (Oil slips as market awaits Iran, Greece talks)

8:21 am EDT. Oil down 2.1% in two day, low volatility. — Bloomber “West Texas Intermediate futures fell 1 percent in New York, deepening a decline of 2.1 percent over the previous two days. U.S. crude stockpiles remained 84 million barrels above the five-year average for this time of the year while the nation pumped near the fastest pace in more than three decades of weekly government data. A measure of price fluctuations dropped to the lowest level since Oct. 29. Oil’s rebound from a six-year low has faltered on signs a global glut will persist as rising prices spur output. The Organization of Petroleum Exporting Countries has pumped more than its quota of 30 million barrels a day for the past 12 months as the group seeks to defend market share against higher-cost producers. “The market appears to have been set on cruise control,” Miswin Mahesh, an analyst at Barclays Plc in London, said in a report. “Yet the glut has not gone away.” (Oil Extends Losses Below $60 Amid Oversupply as Volatility Sinks)

3:44 pm EDT. Brent ended slightly higher; WTI traded lower. — Reuters “Crude futures ended little changed on Friday after signs Greece might have a deal by the weekend to avoid a debt default, while Iran faced continued difficulty in securing an nuclear agreement to end sanctions on its oil exports. Brent rose modestly after falling for two straight days. But U.S. crude extended its downside after indications that the country’s oil rig count, a measure for future production, may start rising soon. (Oil near flat, Brent up modestly after two-day drop)

6/29/2015

Modifications to how Platts (Oil pricing agency) measures oil product values in Asian trade begins July 1. This is expected to boost volumes and encourage the use of regional oil storage facilities. — Reuters “The change in how fuel oil, diesel, jet fuel and gasoline are assessed for loadings out of Singapore and Malaysia takes a borderless approach similar to that in the world’s largest oil storage hub Amsterdam-Rotterdam-Antwerp (ARA). The main change is that from July in Platts’ free-on-board (FOB) Singapore price assessments — the basis for most contract and spot deals done in Asia — traders at the time of making a bid or offer for a cargo will no longer specify a loading point in Singapore or southern Malaysia “This is a good thing for the market, as it will attract more investments into the region, which will expand storage space and make tanks cheaper for traders,” a Singapore-based storage operator said. (Asia oil pricing change to raise trade volumes)

4:55 am EDT. Oil falls below $62 on safe haven play as Greek crisis intensifies, — Reuters “Oil fell more than $1 to below $62 per barrel on Monday, its lowest in three weeks, as Greece shut its banks and imposed capital controls, causing investors to flee from riskier assets and darkening the demand outlook. The European Central Bank froze funding support to Greece’s banks after bailout talks between the government and foreign creditors broke down at the weekend, leaving Athens with little choice but to shut the system to keep lenders from collapsing. Brent crude LCOc1 was down $1.36 at $61.90 a barrel by 0828 GMT. It fell to its lowest since June 5. U.S. crude CLc1 was down $1.25 at $58.38 a barrel, its lowest since June 9. Further weakness is likely as the situation in Greece will not be resolved until a referendum at the weekend on whether to accept conditions for a bailout, analysts said. “This may be the time when we break lower and into the $50s for Brent as we have a full week of uncertainty,” said Bjarne Schieldrop, head of commodity analysis at SEB in Oslo. (Greek worries push oil below $62 to three-week low)

US rig decline slows; producers pulled 3 rigs this week. — Reuters — “Energy firms pulled three rigs from U.S. oil fields this week, the smallest drop in five weeks, data showed on Friday, a sign the collapse in drilling is coming to an end as crude prices recovered after falling 60 percent from last June to March. It was the 29th straight weekly decline, bringing the total down to 628, the lowest since August 2010, oil services company Baker Hughes Inc said in its closely followed report.In the latest week, drillers removed two rigs in the Permian, the biggest U.S. shale oil play in West Texas and eastern New Mexico, and three in the Bakken centered in North Dakota. Experts expect the rig count to bottom out soon. “We expect the rig count decline to remain lumpy in the coming weeks and expect to see a few weeks with some rig additions, offset by larger declines in subsequent weeks, before we reach an absolute bottom,” analysts at Evercore ISI, a banking advisory firm, said in a report this week. (U.S. weekly oil rig count decline slows: Baker Hughes)

3:28 pm EDT. As expected, investors gravitate to less risky assets pushing Crude to a 3-week low. — Reuters “Crude futures hit 3-week lows on Monday as Greece shut its banks and imposed capital controls, causing widespread risk aversion, while Iran looked likely to extend nuclear negotiations with the West to export more of its oil into an oversupplied market. The dollar initially surged against the euro on the Greek jitters, but it later retreated, limiting the downside for oil. A softer dollar makes commodities priced in the greenback more affordable for holders of other currencies. Brent crude futures settled down $1.25, or almost 2 percent, at $62.01 a barrel, its weakest finish since June 5. U.S. crude closed down $1.30, or 2.2 percent, at $58.33 a barrel, its lowest settlement since June 8. “It’s all about Greece today,” said oil bear Tariq Zahir of Tyche Capital Advisors in Laurel Hollow, New York. “Also, the Iran deadline for a nuclear pact could be pushed out by a week or so from tomorrow, so it’s a risk-off day.” (Oil hits three-week lows as Greek crisis worsens; eyes on Iran)

6/30/2015

US Oil companies defeat investors pus to included nominate climate experts for board seats. — Reuters “Petty legal filings. Diversionary ballot measures. Counting abstentions as no votes. These are just some of the tactics U.S. oil companies used this spring to quash efforts by investors to win the right to nominate climate experts for board seats. Led by New York City Comptroller Scott Stringer and proposed at 75 U.S. companies in various industries this year, the so-called proxy access measure would give investor groups who own 3 percent of a company for more than three years the right to nominate directors. At the 19 oil and gas companies targeted, the aim was to demand more accountability on global warming. While the non-binding measure passed at two-thirds of all the companies targeted, and at 15 of the 19 energy companies, some took unusual steps to block it. Oilfield services provider Nabors Industries Ltd, for example, counted non-votes from brokers as votes against the proposal. Still, the measure passed at Nabors, which didn’t respond to requests for comment. (Oil companies played hardball in bid to defeat climate outsiders)

US exports to Europe double in May. — Reuters “The United States exported between 120,000 and 140,000 barrels per day (bpd) of condensate last month, according to traders and ClipperData, which tracks ships and terminal loadings, up from about 60,000 bpd at the start of the year. The condensate is lightly processed through stabilizers due to rules banning crude exports in the United States, now the world’s third-largest oil producer. The rise comes as more companies look to take advantage of the ability to ship the oil overseas, including to places like the Netherlands, France, South Korea and Brazil. “One of the main surprises is that the majority of the exports have been to Europe rather than anywhere else, when we thought the concentration would be to Asian markets,” said Abudi Zein, chief operating officer at ClipperData, adding this was probably to do with the size of the cargoes and freight costs. Traders have also said that the oil’s quality deterred some Asian refiners. (U.S. light oil exports double in May, mostly to Europe)

Fuel demand stabilizes in US, — Reuters “The initial consumption stimulus from lower oil prices may be fading, at least in the United States, according to the latest round of official data on traffic volumes and fuel sales. Traffic on California’s highway network was 2.6 percent higher in May than a year earlier, the state transportation department said. Growth was the same as April’s but lower than in March and February, and not much different from the long-term average of 2.5 percent. In Texas, sales of gasoline and diesel were up 2 percent in April and March compared with the same months the prior year, a far smaller increase than at the end of 2014 and start of 2015, according to the state comptroller.” (Fuel demand stabilises in the United States: Kemp)

5:44 am EDT. Oil fluctuates bouncing off its lows; as Greece’s debt crisis remain in focus. — Reuters “Oil prices bounced from three-week lows in choppy trade on Tuesday as investors awaited a Greek debt default, shying away from riskier assets and putting benchmark North Sea Brent crude on course for a second month of losses. Brent for August was up 60 cents at $62.61 a barrel by 0925 GMT, after falling to $61.35 on Monday, its weakest since June 5. It closed at $62.01 on Monday, its lowest finish since April 15. The contract was heading for a decline of more than 5 percent for June. U.S. crude was up 30 cents at $58.63, having closed down $1.30 at $58.33 a barrel. It was set for its first monthly decline in three and was down about 3.5 percent this month.”Markets are worried that a Greek debt default could hit European economic growth and thus fuel demand,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. (Oil bounces off three-week lows as Greek debt default looms)

4:58 pm EDT. Oil traded off its lows on perceived stronger demand while disregarding stronger dollar and Greece debt issues. — Reuters “Oil prices ended higher as it rebounded from three-week lows on Tuesday with U.S. refined fuel trading leading the rally on bets for strong summer demand, even as Greece’s move toward a debt default threatened to jolt global markets. The run-up in oil also jarred with the stronger dollar, w hich normally tends to weigh on commodities. The extension of a deadline for a nuclear deal that will let Iran export more crude into an oversupplied market was another bearish factor the market overlooked. Brent crude settled up $1.58, or 2.6 percent, at $63.59 a barrel. (Oil bounces off three-week lows as Greek debt default looms)

7/3/2015

Asian oil refining margins at years low — Reuters “Rallying oil refining margins have ground to a halt in Asia. Currently at a 2015 low, they could drop another 20–30 percent this quarter, led by declining profits in diesel as supply from the Middle East adds to a global glut. While softer Asian demand for diesel will be a drag, margins will likely draw some support and stay above last year’s low as the region’s gasoline uptake remains healthy. Asian refining margins enjoyed a stellar run in the first half of this year on weak oil prices and hit a two-year top above $10 per barrel in June. But they have almost halved this week to $5.60 with supply of refined products from traditional importers in the Middle East building up. “We see refining margins weakening on worsening diesel fundamentals, particularly east of Suez, though gasoline should be supportive,” said Robert Campbell, head of oil products research at Energy Aspects. (Asia oil refining margins hit 2015 low, Mideast supply to drag)

4:25 am EDT. US rig count increases adding to oversupply concerns pushing prices lower. — Reuters “Oil prices fell on Friday as a rising U.S. rig count stoked fears of global oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation. U.S. oil drilling increased this week for the first time after 29 weeks of declines, a sign U.S. oil production may start to increase more strongly again after a slowdown due to a period of low oil prices. Oil rigs increased by 12 to 640 following a slump that cut the number of active U.S. rigs from a peak of 1,609 in October to a nearly five-year low last week, energy services firm Baker Hughes Inc (BHI.N) said. “This is the first weekly increase in 30 weeks and is an indication that the slump in drilling activity has ended,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. “Oil prices have retreated on that news,” Fritsch told Reuters Global Oil Forum. (Oil drops on rising U.S. rig count)

3:04 pm EDT. Reuters — “Oil prices dropped on Friday as a rising U.S. rig count stoked more concerns about global oversupply while an investigation by Chinese regulators into suspected stock market manipulation further unsettled the market.A sharp move lower in late-morning U.S. trade was exacerbated by thin liquidity, with many U.S. market participants off for the U.S. July Fourth holiday. U.S. oil drilling increased this week after 29 consecutive weeks of declines, the strongest sign yet that higher prices are coaxing producers back after an extended period of low prices. Oil rigs increased by 12 to 640 following a slump that cut the number of active U.S. rigs from a peak of 1,609 in October to a nearly five-year low last week, energy services firm Baker Hughes Inc ( BHI.N) said. “This is the first weekly increase in 30 weeks and is an indication that the slump in drilling activity has ended,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt” (Oil slides in thin trade on rising U.S. rig count)

7/6/2015

Will oil continue to trade within the $5 range through the end of the year? — Bloomberg “The sleepiest oil market since 2013 will probably limp through the second half of the year as well. Crude traded in a $5 range in June, the narrowest in 19 months. Volume was the lowest since December and open interest — — the number of futures contracts outstanding — was the least since January. New York-traded futures, which have swirled around $60 a barrel for the past two months, will average about $59 in third quarter and $63 in the fourth, according to forecasts of 22 analysts compiled by Bloomberg. (Oil Oversupply Meets Rising Demand in Quietest Market Since 2013)

Is the current price range the break-even mark for US crude production? — Bloomberg “For the first time in almost seven months, America’s shale drillers put rigs in oil fields back to work, and they’re doing it at a lower price. The last time they added rigs, crude futures were trading near $70 a barrel. Now, even after a rebound, they’re under $60. And yet drilling rigs rose in almost every major U.S. oil basin in the country this week, raising the total by 12, according to field-services company Baker Hughes Inc. The sudden rebound is a testament to how resilient U.S. shale has become in the battle for global market share. Spurred by last year’s collapse in prices, shale explorers have brought down their break-even costs by $15 to $20 a barrel, a Bloomberg New Energy Finance analysis shows. (Shale Boom Shows Strength as Rigs Gain With Oil Under $60)

U.S. crude stocks unexpectedly rose by almost 2.4 million barrels last week, leading to an increase in volatility, sending prices lower. Was this an overreaction? — Reuters “But did the market overreact when the stock numbers were released on Wednesday — misinterpreting normal week-to-week variability in the data as a fundamental shift in the balance between supply and demand? Tanker arrivals create quite a bit of “noise” in the weekly inventory data which can easily be confused with shifts in the supply-demand balance over short periods. Reported crude stockpiles are driven by three factors: domestic crude production, crude imports, and refinery runs. Domestic output is fairly constant week to week, but imports and runs are highly variable. In 2014, U.S. refineries processed an average of 15.8 million barrels per day (bpd). Domestic crude production was around 8.7 million bpd in 2014 and the country imported around 7.3 million bpd of crude, according to the Energy Information Administration. (Tanker arrivals create volatility in U.S. oil stocks: Kemp)

3:53 am EDT. Oil prices fell on Greece rejection of debt terms, stronger dollar China’s market issues and lower demand concerns. — Reuters “Oil prices fell sharply on Monday after Greece rejected debt bailout terms and as China rolled out emergency measures to prevent a full-blown stock market crash, adding to worries about poor demand growth at a time of global oversupply. The result of Greece’s referendum has put in doubt its membership in the euro, pulling down the single currency EUR= against the dollar. A strong dollar tends to pressure commodities as it makes fuel more expensive for holders of other currencies. Commodities were also sucked into market turmoil that has seen Chinese shares .CSI300fall as much as 30 percent since June due in part to an economy that is growing at its slowest pace in a generation. (Oil falls on Greece vote, China stock market turmoil)

4:10 pm EDT. Greece gives Oil market a reality check, as fundamentals, average demand vs. phenomenal supply leading to an 8% drop. — Reuters “Oil prices suffered their biggest selloff in five months on Monday, falling as much as 8 percent as Greece’s rejection of debt bailout terms and China’s stock market woes set off a deepening spiral of losses. Adding to the pressure on oil, Iran and global powers were trying to meet a July 7 deadline on a nuclear deal, which could bring more supply to the market if sanctions on Tehran are eased. The self-imposed deadline could be extended again, officials at the negotiations said. A slump that began last week gathered pace through the session, taking four-day losses to more than 10 percent, the largest rout since early January, as weeks of range-bound trading abruptly ended. Global Brent prices collapsed below the $60 a barrel mark for the first time since mid-April.” (Oil crashes 8 percent as Greek vote, Iran talks set off exodus)

7/7/2015

Russia seen losing market share upon Iran’s return. — Bloomberg “Russia, which vies with Saudi Arabia and the U.S. to be the world’s largest oil producer, has the most to lose when Iran returns to the global energy market, according to a dozen analysts and executives at oil companies, banks and trading houses interviewed by Bloomberg. “Iran is going to be competing in Europe head-on with Russia,” said Ed Morse, head of commodities research at Citigroup Inc. (Russia Seen as Biggest Oil-Market Loser When Iran Comes Back)

Oil supplies set to increase as CNOOC’s production rises above 2014’s highs — Reuters “China’s crude oil output looks set to rise this year from a record in 2014 as new production from third largest producer CNOOC helps to counter reductions from its two bigger rivals. Output growth from China would add to a global glut even as exporters such as the Organization of the Petroleum Exporting Countries (OPEC) and Russia produce at near record highs and U.S. shale producers keep ramping up output. With the global oversupply as much as 2.6 million barrels per day (bpd), international crude prices have been nearly cut in half over the past year. While there is no official Chinese production outlook, information from the biggest state oil companies indicates the nation’s output will rise slightly in 2015, largely due to increased production from CNOOC Ltd, the listed unit of state-owned China National Offshore Oil Corporation. (CNOOC’s new output to lift China’s oil production from 2014 record)

5:30 am EDT. Markets trying to establish a trading range, as prices move higher, though the downward price trend remains in tack. — Reuters “Oil prices rallied on Tuesday, after one of their biggest selloffs this year, but looked vulnerable to further falls after China’s stock market took another tumble and Greece moved closer to leaving the euro zone. Investors also kept a close eye on talks in Vienna over Tehran’s nuclear programme that could lead to increased exports of Iranian crude at a time of global oversupply. Brent crude for August LCOc1 was up 70 cents at $57.24 a barrel by 0810 GMT (4.10 a.m. EDT), following a more than 6 percent drop in the previous session. On Monday, Brent briefly touched $56.38, its lowest since April 10. U.S. crude CLc1 traded at $53.10 a barrel, up 57 cents from the settlement on Monday, when it reached levels last seen in mid-April. Despite the rally, most analysts were bearish. (Oil rallies after huge selloff, outlook weak)

5:45 pm EDT. Markets closed mixed as it awaits tomorrows US Crude stockpile report. — Reuters “U.S. crude oil futures steadied on Tuesday after falling sharply a day earlier on worries about Greece’s indebtedness and China’s stock market losses, although charts indicated renewed selling could push prices into bear market territory. Traders turned their attention to the possibility of an inventory decline in U.S. crude last week. A Reuters poll found expectations that U.S. government data on Wednesday could show a 700,000-barrel decline. Industry group American Petroleum Institute (API) estimated a drop of nearly 960,000 barrels. [EIA/S] [API/S] U.S. crude CLc1 settled down 20 cents at $51.98 a barrel, a three-month low, and extending to more than 8 percent its drop since Thursday’s close. Brent LCOc1 settled up 31 cents at $56.85. (U.S. crude slump cools, market awaits inventory data)

7/8/2015

Tankers add to U.S. crude stock dynamics. — Reuters “U.S. crude stocks unexpectedly rose by almost 2.4 million barrels last week, breaking a run of eight consecutive weekly declines and sending oil prices sharply lower. But did the market overreact when the stock numbers were released on Wednesday — misinterpreting normal week-to-week variability in the data as a fundamental shift in the balance between supply and demand? Tanker arrivals create quite a bit of “noise” in the weekly inventory data which can easily be confused with shifts in the supply-demand balance over short periods. Reported crude stockpiles are driven by three factors: domestic crude production, crude imports, and refinery runs. Domestic output is fairly constant week to week, but imports and runs are highly variable.” (Tanker arrivals create volatility in U.S. oil stocks: Kemp)

How reliable is the oil market data? — Reuters “Accurate information is essential for good decision-making, so it is remarkable how little reliable and timely data exists about the production and consumption of crude oil and refined fuels outside the United States. The situation in the other advanced economies, not to mention emerging markets, is mostly guesswork. The result is that oil analysts cannot even agree on production and consumption yesterday and today, let alone predict what will happen tomorrow. And because the best and most readily accessible data is for the United States, the market puts excessive emphasis on what happens there and neglects developments elsewhere. (Data availability bias in the oil market: Kemp)

5:09 am EDT. Oil prices near $56 as China and Greece weights on markets. — Reuters “Oil fell toward $56 a barrel on Wednesday, trading close to a three-month low, as China’s accelerating stock market plunge and the Greek debt crisis raised the possibility of weaker economic growth that could hit oil demand. These concerns compounded downward pressure on prices from the supply side as the prospect of a deal on Iran’s nuclear work raised the possibility of more supply reaching a market many analysts see as already having too much oil. Brent crude fell 66 cents to $56.19 a barrel by 0843 GMT, having traded as low as $55.10, the weakest level since April 6, on Tuesday. U.S. crude was down 57 cents at $51.76. “The three main drivers pushing prices down are the steep fall in equities in China, with the implications that has for oil demand; the possibility of a nuclear agreement with Iran and the Greece crisis,” said Christopher Bellew, senior broker at Jefferies Bache.”( Oil sinks toward $56 as China, Greece and Iran weigh)

US Crude stockpiles rose as EIA data showed. — Reuters “U.S. crude oil and gasoline inventories rose last week, data from the Energy Information Administration showed on Wednesday, despite analysts’ expectations they would be lower while distillate stocks rose more than forecast. The surprise builds sent crude futures into retreat and pulled U.S. gasoline futures off intraday peaks. Crude inventories last week rose by 384,000 barrels to 465.76 million barrels, compared with analysts’ expectations for a decrease of 700,000 barrels. (U.S. crude oil, gasoline stockpiles rise unexpectedly last week: EIA)

3:51 pm EDT. Oil fell 1% on US Crude stockpile report — Reuters “U.S. crude futures fell more than 1 percent on Wednesday after a surprise build in stockpiles while gasoline rallied on bets for strong fuel demand through the peak summer driving season. The U.S. Energy Information Administration said inventories rose last week for crude, gasoline and distillates. That surprised market players a day after industry group the American Petroleum Institute had reported a draw of 1 million barrels. Analysts polled by Reuters had forecast a crude draw of 700,000 barrels. “We were not supposed to be building crude inventories in early July. This tells me the data will be additive to the macro-based selloff and perhaps make it worse,” said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington. (U.S. crude falls more than 1 percent on surprise stockpile build)

7/9/2015

Some market participants rethinking $60 shale prices through 2016. — Reuters” If U.S. shale drillers — the world’s new ‘swing’ producers — can still turn a profit at below $60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year. “If you take the curve at face value, it appears to be saying that U.S. shale can grow … if WTI stays below $60 for three years. That doesn’t seem very likely,” Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude” (Oil under $60 beyond 2016 suggests market rethinking shale)

Events driving the market. — Reuters “These include China’s stock market tumble, turmoil in Greece, prospects for a nuclear deal with Iran, rising oil output from OPEC, an uptick in rigs drilling for oil in the United States for the first time in over six months, and bearishness among commodity-focused hedge funds and banks. But the significance of the big move on Monday and the wider decline in oil prices over the last month is much harder to assess because large daily moves in the price of oil and other commodities do not correlate well with new information about supply and demand. Of the six factors identified by the Financial Times, we can discount three (Greece, Iran and OPEC) as explanations for the big move this week and over the last month because they have long been known and should already have been incorporated into prices. That leaves China, the uptick in U.S. rigs and increased bearishness among hedge funds and commodity banks as new information to explain the sudden plunge in prices. (Oil prices tumble: noise or fundamentals? Kemp)

3:00 am EDT. Oil back up on good economic news from Japan and Germany; reversal of China’s stock market. Will Brent’s trading range be $55–60 or $60–65? — Reuters “Crude oil prices bounced on Thursday on strong economic data from Japan and Germany, and as Chinese stocks picked up after the government launched new steps to halt a rout in its share markets. Front-month U.S. crude futures were up 84 cents at $52.49 per barrel at 0652 GMT, but remain almost 7.5 percent lower than the end of last week. Brent crude was 9 cents higher at $57.72 a barrel, though still 4 percent below last Friday. Chinese stocks rallied on Thursday after the securities regulator banned shareholders with large stakes in listed firms from selling, in Beijing’s most drastic step yet to stem a sell-off that has roiled global financial markets. The police are also investigating clues pointing to potentially “malicious” short-selling of Chinese shares, state news agency Xinhua said on Thursday. “There’s some sense that stabilization might start to take place,” said Herald Van Der Linde, head of Asia equity strategy at HSBC. (Oil prices bounce on China stock rebound, strong economic data)

3:43 pm EDT. Oil up 3% with Brent in the $55–60 and WTI in the $50–55 range. — Reuters “Brent crude settled up $1.56, or 2.7 percent, at $58.61 a barrel. On Monday, Brent hit a three-month low of $55.10. U.S. crude settled up $1.13, or 2.2 percent at $52.78. This week’s low of $50.58 was the lowest since April” “We’re up on a host of headlines and the natural rebound that follows a massive sell-off,” said Donald Morton, who runs an energy-trading desk at investment bank Herbert J. Sims & Coin in Fairfield, Connecticut. (Oil up nearly 3 percent on China equities rebound, Iran uncertainties)

7/10/2015

Morgan Stanley, UBS Group AG and Societe Generale SA. see global demand unaffected by Chinese equities rout and Greece’s economic crisis. — Bloomberg “Crude is set for a “modest recovery” after declining 13 percent in the five sessions through Wednesday, Morgan Stanley estimates, while demand will push prices up by year-end, according to hedge fund manager Andrew J. Hall. Any nuclear deal with Iran won’t quickly revive the OPEC member’s crude exports, so wouldn’t immediately weigh on prices, Societe Generale said. U.S. crude erased this year’s gains to trade at about $52 a barrel amid a stock-market rout in China, the world’s second-largest oil consumer. European leaders talked openly about a Greek exit from the euro before a weekend summit, a break from years dismissing the possibility. Nuclear talks between world powers and Iran, the fourth-largest producer in the Organization of Petroleum Exporting Countries, missed another deadline. “The market has no need to re-test the lows” of $42 reached in March, Paul Horsnell, head of commodities research at Standard Chartered Plc in London, said by e-mail Thursday. “Iran will be slow to return even if there is a deal. And the longer the market stays low, the greater the squeeze on supplies” from outside OPEC. (Oil Rout Seen Ending as Demand Trumps China’s Market Crash)

Oilfield services firms are scrambling for contracts from India. — Reuters “This fiscal year, state-run Oil and Natural Gas Corp (ONGC) plans to boost its capital spending by more than a fifth to 362.49 billion rupees ($5.7 billion), in stark contrast to analysts’ forecasts for energy firms globally to cut spending by a fifth in 2015. These prospects have attracted scores of bidders for Indian contracts as an increase in supply from U.S. shale oil producers and slower demand growth have halved crude prices since June 2014. India’s government has made boosting domestic energy a priority to end chronic current account deficits. Winners of ONGC’s recent oil services tenders include Transocean Ltd, one of the world’s top offshore drilling companies, Southeast Asia’s largest oilfield service firm SapuraKencana Petroleum, Indian conglomerate Larsen & Toubro and mid-sized Singapore-based offshore construction services company Swiber Holdings.” (Oil service firms jostle for India orders amid global spending cuts)

4:52 am EDT. Oil remains up, within the $55–60 range; as China’s markets recover and hopes of a resolution to Greek debt crisis, however demand concerns persists — Reuters “The day’s gains lagged those seen in stock markets, as worries about global demand growth kept oil prices in check. The International Energy Agency (IEA) said on Friday that oil prices are set to come under further pressure from easing global demand and an expanding glut of crude, while a rebalancing of the oil markets may last well into next year.The IEA, the West’s energy watchdog, said it expected global demand growth to slow next year to 1.2 million barrels per day from 1.4 million this year — far less than needed to balance stubbornly growing non-OPEC and OPEC supply. (Oil rises on hopes for China, Greece but demand worries weigh)

Gasoline consumption in U.S. seen surging as refineries go all out to meet fuel demand. — Reuters “Consumption of gasoline in the United States is surging according to estimates prepared by the Energy Information Administration. More than 9.5 million barrels per day (bpd) of gasoline were supplied to domestic customers over the last four weeks. Consumption is running about 480,000 bpd above the 2014 level and 250,000 bpd abovU.S. gasoline demand roars back to life: Kempe the 10-year seasonal average (link.reuters.com/wuh25w). The amount supplied to domestic customers has to be estimated from refinery production, imports, exports and stockpiles so it is subject to some estimating errors but the data all paint a consistent picture of strong demand.” (U.S. gasoline demand roars back to life: Kemp)

3:03 pm EDT. Oil steady after data showed the U.S. oil rig count barely rose this week; prices remain with their respective ranges. — Reuters “We expect rig counts to stay at current levels for the considerable future,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. U.S. crude futures CLc1 settled down 4 cents at $52.74 a barrel. It rose more than $1 at its height and fell nearly 80 cents at its low. Brent crude LCOc1, the more important global benchmark, settled up 12 cents, or 0.2 percent, at $58.573 a barrel. Brent jumped 3 percent on Thursday, rebounding from three-month lows. (Oil ends steady on small U.S. rig rise; eyes on Greece, Iran)

7/13/2015

Downward price pressure remains on easing global demand. — Reuters “Oil prices are set to come under further pressure from easing global demand and an expanding glut of crude while a rebalancing of the markets may last well into next year, the West’s Energy watchdog said on Friday. The International Energy Agency (IEA) said it expected global demand growth to slow next year to 1.2 million barrels per day (bpd) from 1.4 million this year — far less than needed to balance stubbornly growing non-OPEC and OPEC supply. “The bottom of the market may still be ahead,” the IEA said in its monthly report. (Oil may have further to fall due to oversupply: IEA)

China is opening its crude oil imports to independent refiners — Reuters “The volumes that could go to the independents are 50 percent higher than what was expected when the policy was announced in February as more of the private refineries qualify for quotas, trading sources with independent and state refiners said. This could lead to the world’s second largest oil consumer buying more crude in a market where values have been cut in half since mid-June last year by oversupply. [O/R] “The granting of more crude import quotas to the independents is likely to provide further support to crude imports and exert more pressure on fuel oil imports toward year-end, with the impact expected to be more pronounced in 2016,” said Wendy Yong, an analyst with energy consultancy FGE. (China to let independent refiners import more crude)

Expect more rigs to come on line even as prices fall near $50 — Reuters “A handful of optimistic U.S. shale drillers are sticking with plans to deploy more rigs in the coming months even as oil prices take a sharp dive well below many producers’ $60-a-barrel breakeven point. On Wednesday, Pioneer Natural Resources Co. became the first big company to publicly confirm it was drilling more wells, saying it had already added two rigs in the Permian Basin of Texas this month and would keep on adding two a month as long as the oil price “remains constructive.” Smaller shale oil producer WPX Energy Inc, whose operations are focused on North Dakota’s Bakken shale, said this week that its decision to add two rigs later this year was unaffected by a nearly $8 drop in crude prices since June to toward $50 a barrel. (As oil teeters at $50, a few shale producers still drilling more)

Hedge funds cut bullish exposure to U.S. oil most since 2012. — Reuters “Hedge funds and other speculators have made their sharpest cut in more than two and a half years to their bullish exposure toward U.S. crude oil, trade data showed Friday, a further sign that investor confidence in the oil market recovery may be ebbing. U.S. crude prices sunk to three-month lows on Tuesday as Greece’s debt woes and China’s stock market plunge escalated, while Iran continued with efforts to remove Western sanctions on its exports so it could more ship more oil into an already flooded market. Corresponding with the oil price tumble, data from the Commodity Futures Trading Commission (CFTC) showed money managers’ net long position in U.S. crude futures and options fell by nearly 20 percent in the week to Tuesday, the biggest weekly decline since December 2012” (Hedge funds cut bullish exposure to U.S. oil by most since 2012)

4:52 am EDT. Oil falls as Iran deal draws close. This is a set-up for an upside trade move. — Reuters “Oil prices tumbled on Monday as Iran and six world powers closed in on a nuclear deal that would end sanctions on the Islamic Republic and let more Iranian oil on to world markets. News of a unanimous agreement by European leaders on a bailout loan for Athens, which should allow Greece to stay in the euro zone, helped pare early losses. Brent crude for August fell $1.89 to a low of $56.84 a barrel before rallying back to around $57.30 by 4.40 a.m. EDT. U.S. light crude, also known as West Texas Intermediate (WTI), was down $1.15 at $51.59 a barrel. (Oil tumbles as Iran nuclear deal looms)

Saudi Arabia oil production at record highs as OPEC forecasts stronger demand in 2016. — Bloomberg “The world’s biggest oil exporter pumped 10.564 million barrels a day in June, exceeding a previous record set in 1980, according to data the kingdom submitted to the Organization of Petroleum Exporting Countries. The group expects demand for its crude to rise in 2016 compared with this year as supply elsewhere falters and consumption growth quickens. OPEC said it expects global oil markets to rebalance as diminished output from rival producers such as U.S. shale drillers whittles away a glut. The strategy is taking time to have an impact, with crude prices remaining 46 percent below year-ago levels and annual U.S. production forecast to reach a 45-year high. (Saudis Pump Record Crude as OPEC Sees Stronger Demand in 2016)

4:21 pm EDT. Market trading off of Iran potential deal ends the day down, with a 4 percent drop in gasoline prices also weighing on prices. — Reuters “ Oil fell more than 1 percent on Monday after the United States kept alive hopes of reaching a nuclear deal with Tehran that could bring hundreds of millions of additional barrels of crude into an oversupplied market. A nearly 4 percent drop in gasoline prices also weighed on crude, as the fuel continued to lend direction to the broader oil market due to the ongoing peak U.S. summer driving season. Greece’s $86 billion euro bailout by its international creditors had little positive impact on oil, even though the Greek debt crisis had been one of the most serious factors depressing the market in the past two weeks. Brent futures, the global benchmark for crude, settled down 88 cents, or 1.5 percent, at $57.85 a barrel. U.S. crude futures finished 54 cents, or 1 percent, lower at $52.20. (Oil dips as U.S. keeps alive hopes of Iran nuclear deal)

7/14/15

Oil refineries profitable run coming to an end? — Reuters “A brief period of high profitability for the world’s oil refineries is likely to come to an end as quickly as it began, the International Energy Agency (IEA) said on Friday. Weak crude oil and relatively high prices for gasoline, diesel and petrochemical feedstock have pushed up refining profits sharply over the last six months, helping oil companies cope with much lower profits from upstream production. In the first quarter of this year, combined profits for the likes of BP (BP.L), Royal Dutch Shell (RDSa.L), Exxon Mobil (XOM.N), Total (TOTF.PA) and Eni (ENI.MI) from refining and trading represented 60 percent of total earnings, compared with 18 percent last year, according to Reuters calculations. (Oil refiners’ ‘mini golden era’ will end soon: IEA)

North Dakota, the No. 2 U.S. crude producer, had output of 1,201,159 barrels of oil per day (bpd) in May, up from 1,169,045 bpd in April, according to the DMR, which reports on a two-month lag. — Reuters “ North Dakota’s daily oil production rose 3 percent in May, state regulators said on Friday, hinting that the state’s Bakken shale formation may be more resilient to sliding crude prices than expected. The state’s well count hit a record high in the month with producers deciding to hydraulically fracture more freshly drilled wells, bucking a trend to mothball them. Drilling permit applications also spiked. “I was surprised by the increase in output for May,” said Lynn Helms, head of the state’s Department of Mineral Resources (DMR). “It’s pretty astounding at how good (oil producers) have gotten at what they do.” The data signaled that Whiting Petroleum Corp, Continental Resources Inc and other producers in the state have been able to weather a more than 50 percent drop in U.S. crude prices since last summer. (North Dakota oil output jumps in May despite low prices)

Gasoline retail prices fall, lowest in two weeks. — Bloomberg — Retail prices slid 1.66 cents in the period through July 10 and are down 3.34 cents since June 12. Gasoline was cheapest in Jackson, Mississippi, at $2.42 a gallon, according to the survey, which is based on information obtained at about 2,500 filling stations by the Camarillo, California-based company. “The slide in crude-oil prices has been a gift to refiners, who are passing those cost cuts through the system and down to the consumer,” said Trilby Lundberg, president of the survey. “It’s likely we’ll see another national decline at the pump as refiners continue slashing wholesale prices for retailers and distributors.” (U.S. Gasoline Cheapest Since Mid-May After Rout at Pumps)

4:06 am EDT. Brent and WTI fall to the lower end of their respective trading ranges on the Iranian nuclear deal. — Oil prices tumbled more than $1 on Tuesday after Iran and six global powers reached a landmark nuclear deal that would see an easing of sanctions against Tehran and a gradual increase in its oil exports. Iran and the six powers have reached a deal that will grant Tehran sanctions relief in exchange for curbs on its nuclear programme, Iranian and Western diplomats said. “Yes, there is agreement,” said a Western source, who declined to be identified. There were no immediate details on how sanctions would be eased on oil. Front-month Brent crude futures LCOc1 had dropped 95 cents to $56.90 a barrel by 0740 GMT. U.S. crude CLc1 was trading down $1.10 at $51.10 per barrel. (Oil prices tumble as Iran, global powers reach nuclear deal)

The impact of the Iranian deal on Global Crude Oil Market — Bloomberg “The nuclear accord reached in Vienna on Tuesday could eventually reshape global oil markets. After almost two years of talks, the holder of the world’s fourth-biggest crude reserves will benefit from an easing of international sanctions on exports in return for curbs on its nuclear program, according to an official involved in the talks. How Much More Oil Can Iran Produce?Iranian Oil Minister Bijan Namdar Zanganeh says the country can increase exports by 500,000 barrels a day as soon as sanctions are lifted, and then an additional 500,000 a day in the following six months. Iran produced an average of 2.8 million barrels a day this year. Goldman Sachs Group Inc. says adding 500,000 barrels a day will take about a year because Iran must first demonstrate its compliance with the terms of the nuclear accord and revive aging wells. Further expansion will need foreign investment, BNP Paribas SA says. The country also has 30 million barrels stored on tankers that it could ship more quickly, according to Bank of America Corp. (What Iran’s Nuclear Deal Means for the Global Crude Oil Market)

4:56 pm EDT. Oil traded to the high end of their respective ranges on the obvious; that the impact of the Iranian deal on the oil market will not be realized for some time. — Reuters “Under the agreement, sanctions imposed by the United States, European Union and United Nations are to be lifted in exchange for curbs on Iran’s nuclear program. But analysts said the fourth largest crude exporter will be able to raise oil shipments only gradually. “Oil from Iran will take time to return, and will not be before next year, most likely the second half of 2016,” said Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects. A Reuters survey forecast that Tehran will be able to raise crude exports by only 60 percent within a year. Benchmark Brent crude futures LCOc1 settled up 66 cents, or 1.1 percent, at $58.51 a barrel. Prices had fallen almost $2 earlier, weighed by news of the Iran nuclear deal. U.S. crude futures CLc1 finished up 84 cents, or 1.6 percent, at $53.04 after declining earlier to $50.38. (Oil rises as Iran exports seen slow to resume after deal)

7/15/2015

Oil production from U.S. shale in August is expected to fall by the most since at least 2007 — Reuters “Oil production from the largest U.S. shale plays will plunge in August for a fourth consecutive month, forecasts from the U.S. Energy Information Administration showed on Monday. Output was expected to decline by 91,000 barrels per day, 12 percent over July’s forecast production decline, to 5.4 million bpd, the lowest level since November for the seven shale plays tracked in EIA’s productivity report.” (Oil output from U.S. shale plays seen down for fourth month: EIA)

Crude oil production stable as reported by the state of North Dakota. — Reuters “Bears can point to the unexpected resilience of shale production in the face of lower oil prices while bulls can point to the fact that production is no longer growing after five years of tremendous gains. The state pumped an average of 1.2 million barrels per day (bpd) in May, an increase of 32,000 bpd compared with April, according to the Department of Mineral Resources (link.reuters.com/kan25w). Production remained steady with an average of just 80–90 rigs drilling in May, far fewer than the 120–130 rigs the department forecast at the start of the year would be necessary to maintain 1.2 million bpd. (North Dakota’s oil output stabilizes but does not fall: Kemp)

5:14 am EDT. Oil back in trade mode is slightly off from the high end of the range; the Iranian deal still influencing price movement. — Reuters “A milestone nuclear deal reached on Tuesday between six world powers and Iran will mean sanctions that have limited sales of Iranian oil for several years are likely to be lifted in early 2016. Analysts at Goldman Sachs estimate Iran could supply and extra 200,000–400,000 barrels of oil per day (bpd) in 2016 on top of a release of 20–40 million barrels from floating storage, unleashing a ramp-up in supply from a nation that holds some of the world’s largest oil reserves. Other analysts’ estimates for Iranian exports by early 2016 varied between 300,000 and 700,000 bpd. “We view the 2016 prospects for higher OPEC production including from Iran as a growing downside risk to our oil price forecast,” analysts at Goldman Sachs said in a note to clients. Goldman’s current oil price forecast is for Brent to average $58 in 2015 and for $62 next year, while it expects U.S. crude to average $52 and $57 this year and in 2016, respectively. (Oil falls on prospect of higher Iranian exports)

What is the “Term Structure” telling us about the return of Iran? — Reuters “The rise in Brent was ascribed to the view that even if the deal gets final approval from all parties, it will still take several months to start being implemented, meaning that increased Iranian oil shipments are unlikely to hit the market until sometime in 2016. While movements in the front-month futures contract tend to be the focus of market reports, as far as Iran is concerned, the back end of the curve is more relevant. The Brent futures curve has flattened in recent months, as the Iranian deal inched toward conclusion. The 12-month contract was at a 7.2-percent premium to the front-month in early Asian trade on Wednesday, narrowing from a premium of 21 percent six months ago. (Oil futures curve shows caution over Iran’s return)

3:28 pm EDT. Oil trading within their respective ranges fall 3% as they continue to bounce around maintaining their ranges — Reuters “Oil prices fell about 3 percent on Wednesday on expectations increased exports from Iran will add to a global supply glut and on rising inventories at the delivery hub at Cushing, Oklahoma. Tuesday’s agreement on Tehran’s nuclear program between six world powers and Iran is expected to result in the lifting of sanctions, which have limited sales of Iranian oil for several years, in early 2016. Brent August crude fell $1.46, or 2.5 percent, to settle at $57.05 a barrel. The August contract expires on Thursday. U.S. August crude slumped $1.63, or 3 percent, to settle at $51.41. Oil prices slumped even though U.S. crude inventories fell 4.3 million barrels last week, according to the Energy Information Administration (EIA), as refiners boosted throughput to a record level. [EIA/S] (Oil slumps on prospect of increasing Iranian exports)

7/16/2015

Is market “Term Structure” setting up for a lower price range? — Reuters “he structure of the oil market is shifting with the one-year price curves for global Brent and U.S. crude converging, a signal that traders say may portend the next leg down in the price rout. U.S. oil firmed over the past two months and global Brent weakened, but the two are now changing course. The reversal undermines conventional wisdom that the U.S. market is rebalancing on a pickup in demand and Brent is backlogged with barrels in floating storage. While punters watch oil prices bounce up and down, real oil traders tend to monitor so-called “term structure” or the differences in contract prices for future delivery. That structure is a key indicator of the market’s health. “WTI is playing some catch-up to Brent structure that’s been weaker for some while, reflecting global realities,” said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. “A lot of the speculative lengths in the front of the WTI market — hedge funds, ETFs — have exited the market less than gracefully.” (U.S., Brent curves align as oil traders caution slump may be ahead)

China oil demand rises in June — Reuters “China’s implied oil demand grew 3.5 percent in June, as rising air travel and vehicle usage boosted fuel consumption, but a drop in passenger car sales amid a recent stock market rout could limit demand growth over the next few months. China consumed roughly 10.56 million barrels per day (bpd) of oil in June, up from 10.20 million bpd in the same month a year ago and up 2.3 percent from 10.32 million bpd in May, according to Reuters calculations based on preliminary government data. That would mean China’s implied oil demand in the first half of 2015 was up 5.7 percent year-on-year at 10.43 mln bpd, using the preliminary data. Demand growth, however, may weaken after China’s automakers association cut its 2015 forecast for vehicle sales growth to a meager 3 percent last week as a major slump in the stock market depressed sales to consumers already concerned about the slowing economy. (China oil demand rises in June, car sales slump may cap growth)

OPEC expected to keep production the same despite the Iranians market return — Reuters “OPEC is likely to keep oil output steady and defend its market share this year after Tehran’s nuclear deal with major powers, since a full return of Iranian crude to the market will not be swift, Gulf OPEC delegates said. But 2016 will be a tough year for the producer group when international sanctions on Iran are expected to ease, allowing it to boost oil production and exports. Tehran’s determination to reclaim its position as OPEC’s second largest producer after it clinched the deal on Tuesday will cause new rivalries within the group. But Saudi Arabia and its Gulf OPEC allies are betting that higher demand next year may help the market absorb extra volume. (Iran’s oil return a game changer for OPEC, but not for now)

4:35 am EDT. U.S. crude inventories dropped and refinery demand was robust while global market remained extremely well supplied this according to the Energy Information Administration. Prices steady in early trading. — Reuters “U.S. crude inventories fell by 4.3 million barrels last week, according to the Energy Information Administration (EIA), as refineries boosted throughput to a record level. The data suggested demand in the United States, the world’s biggest oil consumer, was holding up well and still absorbing fuel at a time of ample global production. Brent crude for August was unchanged at $57.05 a barrel by 0750 GMT. U.S. light crude, also known as West Texas Intermediate or WTI, was up 10 cents at $51.51. Daniel Ang of brokerage Phillip Futures said the U.S. crude inventory figures looked bullish for both global oil benchmarks. “As a result of this, we would believe that both WTI and Brent … should move upwards today,” Ang said. (Oil prices steady as stock draw balances supply)

Contrarian oil stocks play taking hold? — Bloomberg “Oil stocks, the worst performing shares in the world, are starting to lure investors, with dividend yields the highest since the financial crisis that began in 2008. Their payouts are more remarkable in this era of record-low interest on cash and zero to negative yields on government bonds. Chaos in Greece and tanking Chinese markets only add to investor losses, with more than $3 trillion wiped off global equities in the past month. Royal Dutch Shell Plc’s dividend offers 6.7 percent on shareholders’ cash, a rate not seen since the global financial meltdown and almost double the average for London’s FTSE-100 stock index. Morgan Stanley says the extra yield offered by oil companies over the equity market is the most in 30 years. “Undervalued share prices, continuous high dividend: It’s a good time for investors to get into the oil companies,” Richard Hulf, co-manager in London of Artemis Global Energy Fund, part of a group overseeing $32 billion for investors, said June 30. (It’s a Troubled World When Oil Is a Refuge for Equity Investors)

3:34 pm EDT. Brent trading off of UK production outage moved higher; remains within trading range. WTI traded lower — Reuters “Front-month Brent crude prices rose on Thursday after a power outage shut production at Britain’s largest oilfield and as the August contract approached expiration. U.S. crude futures settled lower after giving up gains reacting to data from industry intelligence firm Genscape showing higher crude inventories at the Cushing, Oklahoma, hub, traders said. Expiring Brent August crude LCOQ5 rose 46 cents to settle and go off the board at $57.51 a barrel, having reached $58.21. September Brent crude LCOU5 fell 20 cents to settle at $56.92, off its $58 intraday peak. August Brent moved to a premium to September LCOc1-LCOc2 and reached 75 cents intraday, the highest for front-month Brent to the nearby month since June 2014, according to Reuters data. U.S. August CLc1 crude fell 50 cents to settle at $50.91, having swung from $50.34 to $52.71. “Another build at Cushing would be bearish for U.S. crude, and the Buzzard outage and contract expiration are supporting Brent,” said Phil Flynn, analyst at Price Futures Group in Chicago. (Brent up on UK outage, U.S. crude falls on Cushing data)

7/17/2015

Are the Saudis extending price war strategy to the refined fuels market? — Reuters “The world’s top crude oil exporter Saudi Arabia has turned itself into a major power of refined fuels, offering customers millions of barrels of diesel and potentially triggering a price war with Asian competitors as its exports feed into a glut. Saudi Arabia, a leading member in the Organisation of Petroleum Exporting Countries (OPEC), already pledged last November to keep crude output high to defend its market share against higher-cost producers. While the strategy has kept crude markets well-supplied and prices low, the Kingdom has seen mixed success in defending its market share as global production remains high despite low prices. Saudi Arabia is now processing more of its crude at home as its massive refineries turn it into the world’s fourth-largest refiner, in a tie with Royal Dutch Shell, that allows the Kingdom to export more fuel products than ever before. (Saudi Arabia triggers potential fuel price war by flooding market with diesel)

What will Iran’s re-entry into the market look like? — Reuters “Iran has big ambitions to increase oil and gas production once sanctions are lifted but a substantial increase in exports is probably years away. The country has the world’s fourth-largest proved reserves of crude oil (behind Venezuela, Saudi Arabia and Canada) and the largest proved reserves of natural gas (ahead of Qatar and Russia), according to BP. It is the oldest major oil producer in the Middle East and output peaked at more than 6 million barrels per day (bpd) in 1974 (link.reuters.com/ryq25w). But decades of revolution, war and sanctions have cut production of crude and condensates to just 3.6 million bpd in 2014 (“BP Statistical Review of World Energy” 2015). In contrast, Saudi Arabia, Iran’s main rival, has raised liquids output from 8.6 million bpd in 1974 to 11.5 million bpd in 2014. (Iran needs time and favorable conditions to boost oil output: Kemp)

Iran’s National Iranian Oil Co. will meet with customers in Asia and in the Mediterranean region to gauge customer demand amid plans to renter the market — Bloomberg “The state-run company, known as NIOC, will assess whether former customers upgraded refinery configurations or changed the quality of crude used since the last time Iran supplied them, said the people, who asked not to be identified, citing company policy. NIOC officials will ask buyers to take delivery of oil at Iranian ports after restrictions on shipping insurance are eased, they said. Iran previously supplied about 500,000 barrels a day to Mediterranean buyers, including in Italy, Greece and Spain, they said. Under the international sanctions, Iran was allowed some sales to buyers in Asia and Turkey. Two calls to NIOC’s public relations department in Tehran weren’t answered. Iran’s oil reserves are estimated at 157.8 billion barrels by BP Plc. (Iran Oil Demand, Hanergy Trading, Bond Liquidity: Compliance)

BHP Billiton Ltd.’s $2.8 billion write down for its U.S. shale assets took some banks by surprise: 2 thought it was too small. Bloomberg — “After the latest charge, Melbourne, Australia-based BHP values its U.S. onshore business at $24 billion. That’s more than 40 percent higher than what analysts at JPMorgan Chase & Co. think it is worth and over twice Citigroup Inc.’s estimate. The producer said its U.S. onshore assets would generate positive cash flow in the year to June 2016 with oil at $60 a barrel, above current prices. “Given the deteriorating conditions of the U.S. oil and gas market, we thought an impending impairment could have been larger,” analysts at JPMorgan including Lyndon Fagan wrote in a research note Wednesday. (BHP Shale Writedown Has Some Banks Asking: Where’s the Rest?)

5:03 am EDT. Brent rose slightly in early trading. While prices are bouncing around in the range price pressure remains to the downside — Reuters “Brent crude oil rose slightly on Friday, underpinned by a weaker dollar and a power outage at Britain’s largest oilfield, though a supply glut kept prices pinned near $57 per barrel. Brent crude LCOc1 was up 15 cents at $57.07 by 0827 GMT. Front-month U.S. crude futures CLc1 were trading at $50.87 per barrel, down 4 cents from their last settlement. “With the Iran deal people are aware there is more supply coming so all impetus for a price correction higher has gone,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. (Oil rises on weak dollar, North Sea outage but glut weighs)

4:38 am EDT. Markets end mixed, Brent rose, WTI traded down. — Reuters “Crude prices received support late in the session from Baker Hughes Inc (BHI.N) data showing U.S. drillers cut seven rigs this week, after adding rigs the previous two weeks. “The rig count is a bullish element and might help keep U.S. crude above $50 and we might see some short covering rallies,” said Dan Flynn, analyst at Price Futures Group in Chicago. Earlier, dollar-denominated oil was pressured by the U.S. dollar’s strength as it traded near a seven-week high against a basket of currencies after being bolstered Thursday by lower U.S. jobless claims. (Brent up, U.S. crude dips as both post third weekly loss)

7/20/2015

Refineries profits driven by high margins maybe on the decline, due to weaker exports to key customers in Latin America. — Reuters “Big U.S. oil refiners along the Gulf of Mexico, which have led an almost charmed life for the past five years, may have to brace themselves for leaner times in the months ahead. A boom in domestic shale production yielded a gusher of high-quality oil available at discounted prices thanks to an longstanding ban on U.S. crude exports. Refiners made billions by turning half of that extra supply into products such as gasoline and diesel that could be freely exported to countries including Brazil and Colombia. (U.S. refiners’ golden era fading as LatAm export boom stalls)

Crude price spread remains steady; what’s the message? — Reuters “The oil market was massively oversupplied in the second quarter and remains so today, the International Energy Agency (IEA) wrote in its latest monthly oil market report. “The market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited. So is the tanker fleet. New refineries do not get built every day. Something has to give,” the agency warned starkly. If so, someone forgot to tell the futures markets, where timespreads have remained firm and give no indication storage might be running out (link.reuters.com/zyt25w). Brent and WTI futures imply the market is willing to pay less than 45 cents per barrel per month to finance and store crude on average over the next half-year, down from more than $1 at times between January and March. According to the IEA, global crude oil stocks should have risen by a massive 3.3 million barrels per day between April and June given the reported imbalance between supply and demand. In the face of such a massive implied stock build, the agency wondered why prices had not fallen more sharply, and where the oil ended up, given reported stockpiles increased by just one-third of the implied amount. (Crude spreads remain firm in the face of ‘massive oversupply’: Kemp)

3:18 am EDT. Despite record output data showed Saudi Arabian exports fell to the lowest in five months pushing prices lower. WTI drillers cut seven oil rigs last week. — Reuters “Brent September crude was 14 cents lower at $56.96 a barrel by 0708 GMT. The benchmark fell nearly 3 percent last week and more than 10 percent for the month. U.S. crude futures, also known as West Texas Intermediate (WTI), were down 7 cents at $50.82 on Monday, after falling more than 3 percent last week and more than 14 percent in July. The August contract expires on Tuesday. Saudi Arabia’s crude oil exports fell in May to their lowest since December, with official data showing daily shipments stood at 6.935 million barrels a day (bpd) compared with 7.737 million bpd in April. (Oil edges lower as Saudi crude exports fall, U.S. cuts drill rigs)

3:42 pm EDT. WTI fall below $50 lower range before bouncing back to settle $50.15 — Reuters “Oil futures fell on Monday and U.S. crude slipped below $50 a barrel intraday as ample supply, the prospect of more Iranian crude for export and a strengthening dollar combined to pressure prices. U.S. refined-products futures also oscillated. An increasing supply of refined products, especially diesel fuel being offered by Saudi Arabia, helped push U.S. ultra-low diesel futures to multi-month lows intraday, adding to bearish concerns about prices in the oil futures complex. Brent September crude fell 45 cents to settle at $56.65 a barrel, having traded between $56.33 and $57.44. U.S. August crude, set to expire on Tuesday, fell 74 cents to settle at $50.15, having fallen to $49.85, its first time below $50 since April. (Oil prices dips below $50 on ample supply, strong dollar)

7/21/2015

Iran’s ability to ramp-up production may be under estimated. — Bloomberg “Iran could restore oil production halted by sanctions faster than anyone anticipates if the history of previous shutdowns is any guide. The consensus among analysts and traders is that Tehran needs at least a year after sanctions are lifted to raise output to the level prevailing before restrictions were imposed in 2012. Similar pessimistic assessments for supply disruptions at OPEC members Libya and Venezuela were confounded by quicker-than-expected recoveries, according to data compiled by Bloomberg.” (History Shows Iran Could Surprise the Oil Market)

Franklin Resources Inc. and some fund managers’, energy portfolio hit hard. — Bloomberg “Doubling down on the debt of drillers and miners is coming back to bite money manager Franklin Resources Inc. amid a prolonged commodities slump. Losses are accelerating in bonds that the firm’s been buying up for the past two years as prices on everything from crude to iron ore resume declines. Debt of coal producer Peabody Energy Corp., in which Franklin was the biggest public holder as of March, plunged 51 percent in the past two months. While Franklin’s not alone in feeling the pain of the steep drop in commodity prices from their peak last year, few mutual-fund managers have been as aggressive in staking their fortunes to the industry’s debt even as defaults begin to mount. “This is a difficult time in the market, especially for anyone who’s had a meaningful energy exposure,” said Ed Perks, who manages the $90 billion Franklin Income Fund, which has had about 20 percent of its holdings in energy-related assets in 2015. “We’re always kind of evaluating our outlook for different companies and the best way forward.” (Franklin Hit With Losses as Billion-Dollar Energy Bets Sour)

Saudis exports at lowest since May. — Reuters “Saudi Arabia’s crude oil exports fell to their lowest in five months in May despite near record production, as the OPEC kingpin turns itself into a major refined-fuels power and as domestic consumption rises. Saudi Arabia, the world’s top crude oil exporter, shipped 6.935 million barrels per day (bpd) on average in May, down from 7.737 million bpd in April and the lowest since December, official data showed on Sunday. As crude exports slide, the OPEC producer is offering customers millions of barrels of diesel from new refineries as it turns itself into a major supplier of refined oil products, potentially triggering a price war with Asian competitors as its exports feed into a glut. (Saudi crude oil exports fall to lowest in five months in May)

4:36 am EDT. Oil stable helped by a dip in the dollar. — Reuters “Brent crude for September LCOc1 was 15 cents lower at $56.50 a barrel by 0825 GMT, after settling 45 cents lower on Monday. Brent has fallen in 10 out of the last 12 months, making this its weakest period since 2008. U.S. August crude CLc1, set to expire on Tuesday, fell 15 cents to $50.00 a barrel. The front-month contract fell below $50 a barrel on Monday for the first time since April and is down some $9 a barrel for the month. Last week, the International Energy Agency said it expected global oil demand growth to slow next year to 1.2 million barrels per day (bpd) from 1.4 million this year — far less than needed to balance stubbornly growing supply. “Definitely, the current set of data on the oil markets doesn’t give you much room for optimism at the moment,” Commerzbank head of commodities research Eugen Weinberg said. (Oil stable as dollar dips, but oversupply persists)

3:41 pm EDT. Oil higher on inverse dollar correlation trade. — Reuters “Crude oil futures held on to gains after a volatile session that saw the U.S. front-month August contract expire and go off the board above $50 a barrel, with a weaker dollar providing support. Weak U.S. RBOB gasoline futures helped curb gains for crude, especially Brent, traders said, as expectations that inventories rose again last week weighed on prices. The dollar .DXY retreated from a three-month high against a basket of currencies on mild profit-taking and as the euro rebounded as traders pared bearish bets as Greece started to adopt measures to avert bankruptcy. [USD/] (Oil gains after choppy trade, U.S. Aug crude expires above $50)

7/22/2015

U.S. banks preparing for the worst in regards to deteriorating loans made to energy companies. — Reuters “U.S. banks are setting aside more money to cover bad loans to energy companies after oil prices plunged over the last year, raising the possibility that deteriorating loans could start to weigh on their earnings, some analysts said. Loan credit quality for U.S. banks has been improving since the financial crisis. In the first quarter, 2.49 percent of loans on banks’ books were delinquent, the lowest level since the fourth quarter of 2007, according to the Federal Reserve, which hasn’t released second quarter data. The rate peaked at 7.4 percent in the first quarter of 2010. Weakness among energy company loans could be a sign that overall credit quality among U.S. banks has little room to improve, analysts said. Executives from both JPMorgan Chase & Co. (JPM.N) and Wells Fargo & Co. (WFC.N) told investors last week, when posting earnings, that they were increasingly concerned about loans to oil and gas companies. ( U.S. banks prepare for oil and gas company loans to worsen)

Banks increasing credit limit pressure — Bloomberg — “Halcon Resources Corp. almost ran into trouble with its banks in June 2013. And again in March 2014. And in February 2015. Each time, the shale driller came close to violating debt limits set by its lenders, endangering a credit line that provided as much as $1.05 billion in much-needed cash. Each time, Halcon’s banks, led by JPMorgan Chase & Co. and Wells Fargo & Co., loosened their restrictions, allowing Halcon to keep borrowing. That kind of patience may be coming to an end. Bank regulators have issued warningson the risks involved in lending to U.S. drillers, threatening a cash crunch in an industry that’s more dependent than ever on other people’s money. Wall Street has been one of the biggest allies of the shale revolution, bankrolling thousands of wells from Texas to North Dakota. The question is how that will change with oil prices down by half since last year to about $50 a barrel. “Lenders in general are increasing pressure on oil companies either to raise more equity or do some sort of transaction to pay down their credit lines and free up extra cash,” said Jimmy Vallee, a partner in the energy mergers and acquisitions practice at law firm Paul Hastings LLP in Houston. (Wall Street Lenders Growing Impatient With U.S. Shale Revolution)

Hedge funds boosted oil market short positions. — Reuters “Hedge funds and other money managers have rarely been so bearish about the outlook for oil prices, according to the latest positioning data from the U.S. Commodity Futures Trading Commission. Hedge funds boosted short positions in futures and options linked to the price of U.S. crude to 138 million barrels by July 14, from 84 million four weeks earlier. Over the same period, they cut long positions from 340 million to 292 million barrels. The hedge fund community has an inherent long-bias, but the ratio of long to short positions, at just over 2:1, down from 4:1 a month ago, is among the lowest in the last six years. The number of hedge funds with reported short positions was equal to the number of longs last week, which is highly unusual. The liquidation of long positions and establishment of fresh shorts help explain the downward pressure on U.S. crude prices over the last month. (Hedge funds turn unusually bearish on oil: Kemp)

5:13 am EDT. Oil prices down on unexpected rise in U.S. crude stocks.Reuters — “Industry data released on Tuesday by the American Petroleum Institute (API) showed crude inventories at the Cushing, Oklahoma hub rose 2.3 million barrels last week, compared with analyst expectations for a decrease of the same volume. [API/S] “The U.S. crude oil stocks build reported by the API last night is weighing on prices,” said Tamas Varga, analyst at London brokerage PVM Oil Associates. U.S. crude CLc1 held above $50 a barrel, trading down 71 cents at $50.15 at 0832 GMT. The August contract CLQ5, which expired on Tuesday, settled at $50.36 a barrel on its last day of trade, after slipping as low as $49.77 during the session. Brent crude LCOc1 was down 62 cents at $56.42 a barrel. U.S. government crude stocks data to be released by the Energy Information Administration (EIA) at 1430 GMT on Wednesday is expected to shed further light on the build-up in inventories.” (Oil prices fall on unexpected rise in U.S. crude stocks)

3:33 pm EDT. WTI closed below $50 on unpredicted buildup of U.S. crude stock. — Reuters “Oil prices fell and U.S. crude settled below $50 a barrel on Wednesday after government data showed crude inventories in the United States rose last week and as a stronger dollar and weaker global equities applied pressure. U.S. crude oil stocks rose 2.5 million barrels, the Energy Information Administration (EIA) said in its weekly report, contrasting with expectations of a 2.3 million-barrel drawdown. [EIA/S] “The crude oil inventory rise was driven by a strong rebound in crude oil imports, which neared 8 million barrels per day,” said John Kilduff, partner at Again Capital LLC in New York. Crude oil imports from Saudi Arabia rose to 1.44 million barrels per day (bpd), up from 1.32 million the previous week, according to EIA data. (Oil falls, U.S. crude settles below $50 as inventories rise)

7/23/2015

Oil companies having trouble selling North Sea assets — Reuters “Oil firms trying to sell aging North Sea oilfields are considering shouldering hundreds of millions of dollars in future dismantling costs to help find buyers, industry sources say. One of the world’s oldest and most important offshore oil and gas production basins, the UK North Sea faces dwindling output and a growing number of redundant platforms that require decommissioning in a scale and complexity never seen before. The near halving of oil prices over the past year to below $60 a barrel has forced the industry to slash spending, increase efficiencies and sell or shut down assets that are least profitable or which do not fit their portfolios. But despite a large rise in the number of assets up for sale in the North Sea in recent months, only a few deals have been completed. “There remains a very big gap between buyers and sellers and that hasn’t been narrowing the way some expected,” said Christopher Young, director of the Strategy Group at KPMG.” (Oil firms may retain clear-up costs for hard-to-sell North Sea assets)

OPEC expected to maintain production levels irrespective lower pricing pressure — Reuters “A drop in oil prices this month is likely to be short-term and will not deflect OPEC from its policy of keeping output high to defend market share, delegates from Gulf OPEC members and other nations said. Falling Chinese stock markets and the Greek debt crisis have raised concern about demand, while the Iranian nuclear deal could lead to higher oil exports from the Islamic Republic. Benchmark Brent crude, trading below $57 a barrel on Wednesday, has fallen more than 10 percent in July. OPEC, in a major policy shift, decided in November against cutting its production target of 30 million barrels per day (bpd) to prop up prices, seeking instead to defend market share against U.S. shale oil and other competing sources. The group reconfirmed the strategy at a meeting in June.(OPEC sees oil drop as short-term, expects stronger demand: delegates)

Asian oil refining margins at 5 yr lows and risk falling lower on supply glut. — Reuters “Asian gasoil margins plunged to the lowest in more than five years this week and risk falling further in the coming months, as seasonally weak demand adds pressure on a market already saddled with mounting supplies. Overall oil refining margins hit a 2015 trough earlier this month, led by weaker gasoil cracks in the region — where demand from key consumers such as China, Indonesia and Vietnam has slowed while supply from traditional importers in the Middle East has built up.

The recent plunge in gasoil margins to below $10 a barrel from above $16 in January could prompt Asian refiners to reduce runs. The last time margins fell to a single digit during the 2008–2009 global financial crisis, millions of barrels of gasoil found no takers and had to be stored at sea.” (Asian gasoil margins at five-year lows, risk more falls on supply glut)

5:41 am EDT. Oil steady on U.S. Crude stockpile and flat to weaker dollar — Reuters “The opposing forces of a weaker dollar and evidence of rising U.S. crude stockpiles in an already oversupplied market kept oil prices steady on Thursday. Crude oil stocks in the United States rose by 2.5 million barrels last week to above the five-year seasonal average, according to data from the Energy Information Administration (EIA), trumping expectations for a drop of 2.3 millions. U.S. September crude futures were 3 cents lower at $49.16 by 0620 EDT, having fallen by $1.67 on Wednesday to settle below $50 for the first time since April. Brent crude was down 11 cents at $56.02 a barrel. (Oil flat as weaker dollar offsets rising U.S. stocks)

4:02 pm EDT. Oil trading off of a stronger dollar ended the day with Brent below $50 and WTI at $48.45 — Reuters “Brent crude oil futures settled at its lowest since April on Thursday and U.S. crude fell into bear market territory and ended below $49 a barrel for the first time since late March, as persistent concerns about ample supply and shaky demand offset support from the dollar’s weakness. U.S. crude’s $48.45 a barrel settlement is down 21 percent from the June 10 close at $61.43 and a 20 percent downturn is considered by many traders to constitute a bear market. The weaker dollar supported oil early, but the U.S. currency trimmed losses after a report showing tumbling jobless claims in the United States. [USD/]” (Oil falls on concerns about supply glut, shaky demand)

7/24/2015

Iran targeting oil and gas projects worth $185 billion by 2020.- Reuters “Iran’s Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh said the Islamic Republic would focus on its oil and gas, metals and car industries with an eye to exporting to Europe after sanctions have been lifted, rather than simply importing Western technology. “We are looking for a two-way trade as well as cooperation in development, design and engineering,” Nematzadeh told a conference in Vienna. “We are no longer interested in a unidirectional importation of goods and machinery from Europe,” he said.” (Iran eyes $185 billion oil and gas projects after sanctions)

Lower gas prices empowering U.S. motorists to fill-up with premium octane — Reuters “U.S. motorists’ habit of filling up with costlier “premium” gasoline when pump prices drop is delivering extra profits to refiners, such as Royal Dutch Shell and traders like Noble Group. For the second time in the past decade, a sharp fall in pump prices has triggered a spike in demand for the higher-octane fuel that has far outpaced the overall rise in consumption. In the first four months of the year, sales of premium grade gasoline — which makes up around a tenth of the market — surged by 12.6 percent, according to the latest data available from the U.S. Energy Information Administration. Regular grade sales rose by only around 3.7 percent during the period. The extra demand combined with a supply squeeze in California, where cleaner fuel that uses similar additives as high-octane gas is the norm, has widened the price difference between regular and premium fuels and sent the price of specialized components used to make premium gas soaring. (As pump prices drop, U.S. motorists splurge on premium gas)

U.S. oil imports increase as “cash and carry” strategy tied to WTI pays off. — Reuters “Futures prices are making it increasingly profitable to store surplus crude in the United States, coinciding with a strong period of oil imports and a further build up of already swollen stockpiles. WTI crude futures prices imply the market is paying more than 61 cents per month to cover the cost of financing and storing oil at the Cushing delivery hub during the fourth quarter of 2015. The WTI contango for the fourth quarter of 2015 has tripled from less than 20 cents per month at the start of June.

Over the same period, the contango for fourth-quarter Brent has increased by much less, from 37 cents to 48 cents per month (link.reuters.com/puc35w). (U.S. oil imports rise, WTI contango deepens: Kemp)

7:24 am EDT. Oil edge up, demand and oversupply concerns remain. — Reuter “Oil prices hovered near four-month lows on Friday after data showed a contraction in China’s factory sector and the dollar rose against a basket of currencies. Activity in China’s manufacturing sector shrank at the fastest pace in 15 months in July, according to a preliminary private purchasing managers’ survey. “Concerns around the demand environment were heightened further today by the PMI (Purchasing Managers’ Index) read out of China,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. Brent crude was down 15 cents at $55.11 a barrel by 1112 GMT, having hit an intraday low of $54.80, its lowest since early April. (Brent crude nears four-month low as China factories contract, dollar firms)

4:02 pm EDT. Oil prices falls, lowest in 4 weeks as the number of rigs added in production rose by 21 — Reuters “Brent and U.S. crude futures settled on Friday at their lowest since March and posted their fourth straight weekly decline as weak economic data from China and a rise in U.S. oil drilling rigs applied pressure. U.S. energy firms added 21 oil rigs this week after pulling seven rigs last week, oil services company Baker Hughes Inc said. [RIG/U] The rig count data arrived a day after U.S. crude fell into bear market territory, as a drop of 21 percent from its June 10 close at $61.43 a barrel indicated the market’s prevailing negative sentiment. China’s factory sector contracted in July by the most in 15 months, a preliminary private survey showed. The weaker-than-expected result followed a stock market slide that began in June. [MKTS/GLOB] Brent September crude fell 65 cents to settle at $54.62 a barrel, the lowest close since March 19 and off 4.3 percent for the week. The $54.30 session low was the lowest front-month price since April 2. U.S. September crude fell 31 cents to end at $48.14, its lowest settlement since March 31 and down 5.5 percent for the week. The session low of $47.72 was the lowest intraday price since April 1. (Oil falls to lowest close since March, down a fourth week)

7/27/2015

Oil companies balance sheets to be hit further as downward price pressure trend decrease profits. — Reuters “The world’s top oil companies are set to report yet another sharp drop in quarterly profits that could force more spending cuts due to a dim outlook for oil prices. Oil companies rarely scale back capital expenditure (capex) in the middle of the fiscal year. But with oil prices failing to recover and even lurching lower in recent weeks after a nuclear accord between Iran and world powers, boards could take more action beyond cuts already announced, analysts say. “Oil companies are hunkering down for a downturn that will take longer than some initially thought,” Martijn Rats, head of European oil and gas equity research at Morgan Stanley, told Reuters.

International oil companies including Exxon Mobil, Chevron, Royal Dutch Shell, BP and Total all reduced 2015 spending by 10 to 15 percent from last year’s levels in response to the low oil prices, cutting operating costs, laying off thousands of workers and scrapping huge and costly projects around the world. (Dim crude price outlook may force more spending cuts for oil majors)

Approach oil companies with caution at these price levels — Reuters “The battered energy sector may begin to brighten a little as companies report second-quarter results, but barring a big increase in the price of oil, the sector won’t be able to sustain even current share prices going forward, analysts and investors say. Oil prices have fallen at a much steeper clip than energy shares in the 13 months since June 23, 2014 — when oil prices hit a nine-month peak — keeping valuations high even as share prices have plunged. The S&P energy sector .SPNY has fallen about 30 percent since then while oil prices have fallen 50 percent. With the energy sector’s second-quarter earnings seen doing better than the prevailing consensus forecast for a decline of almost 59 percent from the year-ago quarter, according to a Thomson Reuters analysis, shares could get a benefit. The S&P energy sector’s price to earnings ratio is around 23 compared with 17 for the S&P 500. But the S&P energy subsector of exploration and production companies .SPLRCOILP is at its most expensive on a price-earnings basis since Reuters started tracking the data in 1995. Consensus estimates for oil producer earnings this year imply an average crude oil price of $65.19 a barrel in 2016, says Fadel Gheit, an analyst with Oppenheimer & Co. (Energy sector may prove expensive even if results beat estimates)

Iraq’s southern oil exports rose above 3 million barrels — Reuters “The Iraqi boost is an indication of continued high output from the Organization of the Petroleum Exporting Countries, which is focusing on keeping market share rather than curbing supply to support prices. <OPEC/O> Exports from Iraq’s southern terminals averaged 3.06 million bpd in the first 23 days of this month, up from a record 3.02 million bpd in all of June. Shipments jumped in June after Iraq’s decision to split the crude stream into two grades, Basra Heavy and Basra Light, to resolve quality issues. This has allowed some companies working at Iraqi oilfields to increase production. “It looks like another strong month above the 3 million level,” said the industry source, who tracks the exports. “It’s very impressive what they are doing.” The southern fields produce most of Iraq’s oil. Located far from the parts of the country controlled by Islamic State militants, they have kept pumping despite the conflict. (Iraq’s southern oil exports head for another record in July)

5:16 am EDT. Oil falls on concerns of China’s economic growth. — Reuters “Oil prices fell to near four-month lows on Monday after a steep drop in Chinese stock markets and on more evidence of a global oil supply glut that has halved prices over the past year. Chinese stocks tumbled more than 8 percent on Monday, the biggest one-day drop in eight years, amid renewed fears about the outlook for the world’s second-largest economy. “Today’s oil price fall has been driven by the slump in Chinese stock markets,” said Carsten Fritsch, senior oil market analyst at Commerzbank in Frankfurt. Brent crude for September LCOc1 touched an intra-day low of $54.25 a barrel, down 37 cents and its lowest since April 2. Brent was down 15 cents at $54.47 by 0858 GMT. On Friday, Brent closed at $54.62, its lowest since March 19. U.S. crude for September CLc1 was down 26 cents at $47.88 a barrel. (Oil prices slide on China stocks rout, supply glut)

5:19 pm EDT. Oil fell on increasing glut concerns and global growth concerns. — Reuters “Crude oil futures hit four-month lows on Monday after a steep drop in China’s stock markets sparked concern about the economic health of the world’s biggest energy consumer, while evidence of a growing crude glut mounted. Oil was also pressured by a sharp increase in U.S. drilling activity with data on Friday showing producers added 21 rigs last week, the most in over a year, suggesting a ramp up in output as crude futures recovered from six-year lows seen in the first quarter. A weaker dollar .DXY on Monday cushioned some of oil’s losses as crude and other commodities denominated in the greenback saw higher demand from users of the euroEUR=. [FRX/] Chinese stocks tumbled more than 8 percent in Asian trading, the biggest one-day drop in eight years, driving European equities markets to a two-week low. Brent crude oil LCOc1 settled down $1.15, or 2 percent, at $53.47 a barrel. In post-settlement, it fell to as low as $52.90, its lowest since mid-March. U.S. crude CLc1 closed down 75 cents, or 1.6 percent, at $47.39. It fell below $47 post-settlement, the lowest since late March. (Oil hits four-month low on China stock market dive, supply concern)

7/28/2015

Bulls flee as long positions contract to a two year low. — Bloomberg “Speculators’ conviction that oil will rally weakened at the fastest pace in three years, just before futures tumbled into a bear market. The net-long position in West Texas Intermediate contracted 28 percent in the seven days ended July 21, U.S. Commodity Futures Trading Commission data show. Long positions dropped to a two-year low while short holdings climbed 25 percent. “Supply is still in excess of what would balance the market,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone July 24. “We see the global balance improving in the second half of this year and in 2016 but it hasn’t happened yet.” (Oil Bulls Are Fleeing at the Fastest Pace in Three Years)

4:39 am EDT. Oil nearing 6-month low; fundamentals prevail — Reuters “Oil prices fell for a fifth straight session on Tuesday to their lowest in almost six months, as a rout in Chinese equities cast further doubt over the outlook for crude demand in the world’s top commodities consumer. China’s already-volatile benchmark stock index, with a combined market capitalization of $4.6 trillion, has lost 10 percent in the last two days of trade. Most household debt is linked to real estate rather than the stock market, but with Chinese economic growth struggling to stick at 7 percent, analysts say demand for crude may not be enough to help mop up a global supply glut. “Typically, equity markets do have a high correlation to quarterly GDP growth,” Deutsche Bank strategist Michael Lewis said. “Naturally, there is some risk that this could spill into the real economy. The more these things go down on a day-by-day basis, that is starting to affect the potential of Chinese demand growth being weaker.” (Oil prices fall to near six-month lows, rattled by China)

5:36 pm EDT. Oil steady after a four day decline; are we in a new trading range Brent ($50–55) WTI ($45–50) before the next lower leg? — Reuters “Oil prices steadied on Tuesday, with Brent recovering from near six-month lows and U.S. crude settling more than 1 percent higher as bets for a drop in U.S. stockpiles offset concern over a global oil supply glut and China’s stock market meltdown. Trades also cited short-covering after a four-day selloff that wiped between 6 and 7 percent from crude futures prices. Some stayed convinced, however, that oil has more to lose, and that a bottom for crude futures was still far off. “We’re getting a bounce of sorts but I’ll be selling into any strength I see,” said Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Holllow, New York.Brent futures settled down 17 cents, or 0.3 percent, at $53.30 a barrel. It had hit $52.28 earlier in the session, its lowest since early February, on concern about the stock market plunge in China, the world’s largest energy consumer. U.S. crude futures settled up 59 cents, or 1.2 percent, at $47.98 a barrel. (Oil steadies after four-day loss; U.S. inventory draw eyed)

7/29/2015

Russell 2000 Energy Index carnage as some Hedge Funds feel the pain. — Bloomberg “Small-cap shares tracked by the Russell 2000 Energy Index have plunged 34 percent in three months, including a 24 percent skid since June 26 in which the group posted four straight weekly losses averaging 6 percent each. Rex Energy Corp. and Penn Virginia Corp. fell more than 50 percent in July alone. Bottom fishing was rife in the Russell gauge after it plunged 52 percent in the six months ended Jan. 15, driven down by the drop in oil prices. Hedge fund ownership among the 93 companies in the gauge is roughly twice what it is in the rest of the American stock market, data compiled by Bloomberg show. “Energy tourists like macro funds, technicians and general equity funds that aren’t commodity specialists are now getting hammered,” Benjamin Dunn, president of Alpha Theory Advisors, which advises hedge funds with about $6 billion in assets, said from Crested Butte, Colorado. “There’s no reason to be long in these names based on the fundamentals.” (These Small Cap Energy Stocks That Hedge Funds Love Have Been Getting Crushed)

China to buy more crude from Africa, will this have an impact on price as Saudis adjust? — Reuters “Weakness in global oil benchmark Brent has prompted China to buy more crude from Africa. The question now is how will top exporters Saudi Arabia and Russia respond to the shifting dynamics? Chinese imports from Africa are expected to jump to 6.51 million tonnes (47.5 million barrels) in July, up about 41 percent from June, according to data compiled by Thomson Reuters Oil Research and Forecasts. The bulk of the increase will come from Angola, China’s top supplier in Africa, which is expected to ship 3.4 million tonnes in July, up from 2.88 million in June, the forecast team said. Also gaining are cargoes from South Sudan, with eight exported to China in July for a total 767,000 tonnes, an increase of 8 percent from June. (China switching to African oil may lead to Saudi price cut: Russell)

2:58 am EDT. In early trading (Asia) oil prices fall on fundamentals — Reuters “Oil prices fell in Asian trade on Wednesday as concerns over global oversupply outweighed the impact of a likely larger than expected draw in U.S. crude stocks and a weakening dollar. Asian investors focused on OPEC production figures that showed members of the Organization of the Petroleum Exporting Countries produced around 3 million barrels of oil per day more than daily demand in the second quarter, a Reuters survey showed. “Glut is the word,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets. OPEC members pumped 31.25 million barrels per day (bpd) in the second quarter against demand of 28.26 million bpd, the Reuters data showed. (Oil prices fall on oversupply concerns, weaker dollar support)

3:23 pm EDT. Oil advanced the most in three weeks, as U.S. stockpile unexpectedly decreased; However prices remained within the new established range Brent ($50–55) WTI ($45–50) — Bloomberg “Inventories fell 4.2 million barrels last week, Energy Information Administration data show. An 850,000-barrel gain was forecast by analysts surveyed by Bloomberg before the report. Crude production declined to a two-month low. Imports of both crude and fuels slipped in the week ended July 24. Crude in both New York and London entered a bear market in the past week on signs the global surplus will be prolonged as Iran bids to restore output after its nuclear accord. Leading members of OPEC are pumping oil at record levels. Concern that turmoil in China’s stock market will reduce demand in the country has weighed on commodities. “This is a supportive set of numbers for crude,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The crude production estimate was down sharply and imports fell from what was too high of a level.” West Texas Intermediate for September delivery rose 81 cents, or 1.7 percent, to settle at $48.79 a barrel the New York Mercantile Exchange. It was the biggest gain since July 9. Prices are in a bear market after having lost more than 20 percent from their closing peak this year on June 10. (Oil Climbs Most in Three-Weeks After U.S. Crude Supplies Decline)

7/30/2015

Asian Oil producer profits take a hit as prices fall due to fundamentals — low demand and oversupply — Reuters “Asian oil producers Malaysia, Vietnam and Australia have seen prices for their crude grades fall to multi-year lows this month as refinery margins weakened amid slowing regional demand and a buildup of product stocks over the first half of the year. Asian refiners’ appetite for crude has decreased as profits from turning a barrel of oil into fuel, diesel in particular, dropped back this month from higher-than-average margins in the first six months of 2015. Diesel margins last week plunged to their lowest in more than five years. The strong first-half margins had pushed refiners across Asia to operate their plants at near full capacity, pumping out more fuels at a time of slowing diesel demand growth in global No.2 oil consumer China. “The Asian market is set to bear the brunt of rising middle distillates production in the face of relatively lackluster demand,” analysts at Energy Aspects said in a note. (Goldman adds fuel to raging bear-bull copper fire: Andy Home)

U.S. Major Oil producer, Whiting Petroleum Corp cut its 2015 budget expect other producers to do the same. How will this impact shale production. — Reuters “Whiting Petroleum Corp cut its 2015 budget on Wednesday less than two weeks after raising it, a turnaround that underscores the uncertainty engulfing the energy industry while crude prices sit roughly 50 percent below last year’s levels. The company, North Dakota’s largest oil producer, tends to be seen as a key barometer of the health of the U.S. shale industry. Its spending trepidation is sure to have ripple effects on drilling contractors and other oilfield service providers.Whiting now plans to spend $2.15 billion this year, running eight drilling rigs instead of a previous plan for 11, and mulling small divestments to bolster the company’s balance sheet. (Whiting cuts budget less than two weeks after raising it)

Production companies under pressure to squeeze out a profit are turning to creative production techniques. — Reuters “U.S. oil companies, under renewed pressure from falling crude prices, are increasingly tweaking and mixing fracking technologies as they scramble to squeeze more out of wells and eke out profits after rounds of cost-cutting. Shale oil firms need the experiments to payoff now more so than before given that oil prices have resumed their slide to trade around $49 per barrel this week from $60 a few months ago. Quarterly earnings — and the reams of data that accompany them — throughout the next few weeks will offer Wall Street the first opportunity to assess those efforts and pick potential winners and losers. For example, Continental Resources Inc is blending so-called plug and perforate well completion techniques with a “sliding sleeve” approach, betting that gains in oil volumes will outstrip additional costs of using more than one technology. (U.S. oil firms turn to fracking mixology as crude slides again)

4:25 am EDT. Strong dollar seen pressuring prices to trade within new range. — Reuters “Oil prices steadied on Thursday after a larger-than-expected draw in U.S. crude and gasoline stocks was balanced by a stronger dollar, making fuel more expensive for holders of other currencies. Benchmark Brent crude oil LCOc1 was up 30 cents a barrel at $53.68 by 0805 GMT, after settling 8 cents higher in the previous session. U.S. crude CLc1 was down 1 cent at $48.78, after ending the previous session up 81 cents, or 1.7 percent. “Oil is consolidating,” said Carsten Fritsch, senior oil analyst at Commerzbank. “U.S. stocks data were supportive but the dollar strength is putting a brake on the market. The dollar neared a one-week high ahead of U.S. economic growth data likely to reinforce expectations that the Federal Reserve will raise interest rates as early as September. [FRX/] (Oil steady as strong dollar balances U.S. stocks draw)

3:12 pm EDT. Oil pressured by a strong dollar traded lower. — Reuters “Crude futures settled down on Thursday, pressured by a rally in the dollar which countered bullish sentiment from a drawdown in U.S. stockpiles that was much steeper than expected. Position squaring ahead of the expiry of the front-month contracts in gasoline and diesel also diverted some investor attention from crude, brokers said. Brent LCOc1 settled down 7 cents, or 0.1 percent, at $53.31 a barrel. U.S. crude CLc1 closed lower by 27 cents, or 0.6 percent, at $48.52. “You have a stronger dollar to deal with,” David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington, said, explaining the market’s reversal. (Oil dips as robust dollar offsets stock drawdown)

7/31/2015

U.S. inventory report seen tempering bearish pressure — Reuters “Oil bears who drove the market to multi-month lows this week are throttling back on their selling after an unexpectedly large drawdown in U.S. crude stocks showed demand to be stronger than thought — at least temporarily. U.S. government data on Wednesday showed a weekly inventory drop of over 4 million barrels, more than 20 times what analysts expected, putting the market in better light. The draw also diverged sharply from the prior week’s build, which took stockpiles to above a five-year seasonal average. “I see a rebound of about five bucks off the recent lows in the most likely scenario,” said Chris Jarvis at Caprock Risk Management, an oil risk consultancy in Frederick, Maryland. (Oil bears may hit pause button in short term after big U.S. stocks draw)

OPEC has been talking up demand for the last few months as they iterate again. — Reuters “OPEC expects increasing oil demand to prevent a further fall in prices and sees a more balanced market in 2016, its secretary-general said on Thursday, the latest sign the group I s sticking to its policy of defending market share. Oil LCOc1 has dropped about 15 percent this month and halved in value in the past year but neither OPEC nor Russia, the world’s top producer, have cut output to support prices, hoping cheaper oil will hit U.S. shale and other rival sources. “I would not expect they (prices) are going to fall because demand is growing,” OPEC Secretary-General Abdullah al-Badri told reporters in Moscow. OPEC pumps around 40 percent of global oil production. “The current situation is a test for all producers and investors. While the prices … no doubt will rebound, it is still too early to say when this will happen,” Badri said. He did not indicate what price he expected. (OPEC says oil should not fall further, sees stability in 2016)

Oil industry’s pain is manufacturing gain — Bloomberg “There’s a manufacturing boom underway tied to the chemical industry” building new plants that refine oil and natural gas into other products, said Joe Carson, director of global economic research at AllianceBernstein LP in New York. “The gift is long term. The energy renaissance triggers a manufacturing revival.”

Spending on chemical plant construction in the private sector stood at a seasonally adjusted annual rate of $48.4 billion in May, up almost 10 percent from a month earlier, according to the latest data from the Census Bureau. During the first five months of this year, an unadjusted $15.9 billion was spent on chemical plants, more than double the $7 billion for the same period in 2014. (How Cheap Oil Is Fueling a Surge In New Factories)

5:46 am EDT. Oil fell on OPEC’s comments, expecting demand to increase in 2016 not cutting production. — Reuters “Oil prices fell on Friday as concern over global oversupply intensified after the head of oil producers’ cartel OPEC indicated there would be no cuts in production despite a huge global oversupply. Benchmark North Sea Brent crude LCOc1 headed for its fifth consecutive weekly fall after comments on Thursday in Moscow by Abdullah al-Badri, secretary-general of the Organization of the Petroleum Exporting Countries.Badri said rising demand would prevent a further fall in oil prices and suggested cuts in OPEC output would have little impact on the market. Brent LCOc1 was down 70 cents at $52.61 a barrel by 0935 GMT (0535 EDT) after settling 7 cents lower in the previous session. U.S. light crude CLc1 was down 90 cents at $47.62 a barrel. OPEC members produced around 31.25 million barrels per day (bpd) in the second quarter, about 3 million bpd more than daily demand, a Reuters survey showed this week. (Oil falls after OPEC comments imply no supply cut)

4:02 PM EDT. An increase in U.S. rig count eclipsed a weaker dollar pushing prices lower — Reuters “U.S. crude posted its biggest monthly drop since the 2008 financial crisis on Friday after a string of losses in July triggered by China’s stock market slump and signs that top Middle East producers were pumping crude at record levels. A higher U.S. oil rig count for a second straight week added to the market’s downside Friday despite a weaker dollar, which would normally support commodities. Heavy hedging activity in gasoline RBc1 and diesel HOc1 futures ahead of front-month contract expiration dominated play on the petroleum complex, diverting some attention from crude. Oil prices fell for a fifth straight week. U.S. crude CLc1 settled down $1.40, or almost 3 percent, at $47.32 a barrel. It slid more than 2 percent on the week. Through July, U.S. crude was down 21 percent, its largest monthly decline since October 2008, when oil had an epic collapse at the outbreak of the financial crisis. Brent LCOc1 settled down $1.10, or 2 percent, at $52.21 a barrel. It lost 5 percent on the week and 18 percent on the month. (Oil drops for fifth week; U.S. crude in biggest monthly fall since 2008)

8/3/2015

Hedge funds bullish sentiment lowest in 5 years. — Reuters “Hedge funds and other speculators have slashed their bullish exposure to U.S. crude to the lowest in nearly five years, trade data showed on Friday, as local drillers continue to add rigs and pump at full throttle despite a global oil glut. U.S. crude prices posted their largest monthly decline since the 2008 financial crisis on Friday, ending down 21 percent, as global demand continued to trail production by about 2 million barrels. Corresponding with the price tumble, data from the Commodity Futures Trading Commission (CFTC) showed money managers’ net long position in U.S. crude futures and options at the lowest levels since September 2010. “People are just piling out of WTI and the hedge funds are among the forerunners in the selling,” said Tariq Zahir, a fund manager at New York’s Tyche Capital Advisors, referring to West Texas Intermediate, the benchmark for U.S. crude. “We are going to be swimming in even more oil with the way OPEC is pumping,” he added. (Hedge funds’ bullish exposure to U.S. oil near five-year low)

Despite OPEC’s confidence prices will increase, they’ve been talking up the price of oil for months; the derivative market sentiment remains bearish. — Reuters “OPEC policymakers seem confident in a sustained recovery of oil prices from this year’s lows as demand improves, but the derivatives market is geared for an alternative scenario: a fall below $50 a barrel by the end of the year. The level of volatility in the market, a broad measure of risk sentiment that determines the price of an option, has been edging higher. And for oil derivative contracts expiring in December, volatility has touched its highest in nearly four months, particularly for deeply bearish sell-options. Typically, December is when producers and consumers hedge their future requirements, prompting volatilities to rise. (Options market sees oil price fall despite OPEC confidence)

U.S. drillers increased rig count despite lower prices — Reuters “U.S. energy firms added 5 oil rigs this week after putting 21 rigs into service last week, the most in over a year, despite a collapse in U.S. crude prices from recent highs in June, data showed on Friday. That was a sign some drillers followed through on plans to add rigs announced in May and June when U.S. crude futures were averaging $60 a barrel. U.S. crude futures so far this week however have traded around $48.Drillers added oil rigs in two of the four major U.S. shale oil basins, with three in the Permian in West Texas and eastern New Mexico and one in the Bakken in North Dakota and Montana. They cut one rig each in the Eagle Ford in South Texas and the Niobrara in Colorado and Wyoming. The rig count gain this week was the fourth increase in the past 34 weeks, bringing the total rig count up to 664, the highest early May, oil services company Baker Hughes Inc said in its closely followed report.( U.S. oil drillers add rigs despite crude prices collapse: Baker Hughes)

6:32 am EDT. Oil continues its slide — Bloomberg “August’s first full day of trading showed no let-up in July’s major themes — oil led commodities lower, currencies of resource-rich countries fell, Chinese stocks slid on economic concerns and European equities rose on earnings. Greek shares slumped as a five-week market suspension ended. Brent crude dropped 2.2 percent to $51.04 at 11:10 a.m. in London, following the biggest monthly slump in almost seven years, while aluminum fell to the lowest since July 2009. The ruble slipped to the weakest since March, alongside declines for the Canadian and Australian dollars. The Stoxx Europe 600 Index rose for a fifth day, as the Athens stock benchmark plummeted 17 percent and the Shanghai Composite Index added to its worst monthly drop since 2009. (Oil, Metals Drop With Ruble After China Data; Greek Stocks Slump)

4:21 pm EDT. Oil hit a six month low as Brent fall below $50. — Reuters “Oil prices lurched 5 percent lower on Monday to their lowest since January, taking global benchmark Brent below $50 a barrel as weak factory activity in China deepened a commodity-wide rout. Growing concerns over excess global oil supplies, heavy selling in pumped-up gasoline futures and technically driven momentum trading knocked prices to within a few dollars of the six-year lows touched at the start of this year. U.S. crude had already fallen 21 percent in July, its worst month since 2008 amid mounting evidence of an expanding global glut and a stock market collapse in China, the world’s largest energy consumer. On Monday, the rout deepened after data showed Chinese manufacturing growth unexpectedly stalled in July and U.S. consumer spending advanced at its slowest pace in four months in June as demand for automobiles softened. Brent LCOc1, the global benchmark for crude, settled down $2.69, or 5.2 percent, at $49.52 a barrel. Brent’s session bottom of $49.36 was within striking range of its 2015 low of $49.19. U.S. crude CLc1 settled down $1.95, or 4.1 percent, at $45.17, just about $3 above its 2015 bottom. (Oil dives 5 percent to six-month low under $50 on China worry)

8/4/2015

Saudis planning on raising prices to Asian customers in September — Reuters “Saudi Arabia is expected to raise prices for crude it sells to Asia in September due to a stronger Dubai benchmark, traders and analysts said on Monday, adding that the top oil exporter will be wary of a hike so big it would threaten its market share. OPEC’s efforts to discourage growth from rival supply sources are bearing fruit as the group continued to pump at record levels in July. Still, raising prices when Asian refiners are cutting runs because of weak margins could hurt demand for Saudi oil, the traders and analysts said. “It’s an awkward decision,” a Singapore-based trader said. “They have to follow their formula to ensure price continuity, but at the same time they have to keep their prices competitive when compared with other grades in the market.” (Saudis to raise September oil price, but wary of losing market share)

Oil companies increasingly bearish — Bloomberg “The world’s biggest oil companies are painting a grim picture of the future and speculators are listening. Hedge funds reduced bullish bets to the lowest level in five years as oil capped the worst month since the financial crisis. The net-long position in West Texas Intermediate contracted 7 percent in the seven days ended July 28, U.S. Commodity Futures Trading Commission data show. BP Plc said oil prices will be lower for longer and Royal Dutch Shell Plc said it’s preparing for a prolonged downturn. Exxon Mobil Corp. and Chevron Corp. reported their worst earnings in years. Supply will outpace demand by 1 million barrels a day through 2016, according to Bank of America Corp. Prices need to stay below $40 a barrel for months for U.S. output to fall enough to erode the global surplus, IHS Inc. said. “The speculators are looking at the bad earnings and the oil executives’ negative tone of commentary, and taking it as a bearish sign,” Phil Flynn, senior market analyst for Price Futures Group Inc. in Chicago, said by phone July 31. “Everybody is running out of this market in droves.” (Oil CEOs’ Grim Outlook Rubs Off on Speculators Fleeing Market )

With refinery slow season approaching are prices in for lower lows? — Bloomberg “The slump may have further to go. U.S. refineries, which turned a record amount of crude into gasoline during July, typically slow down from August through October for maintenance.” “We still have a lot of global oversupply,” Michael Wittner, head of oil-market research at Société Générale in New York, said on Bloomberg TV Monday. “We’re getting close to the autumn, [when] demand for crude and products hits a seasonal low point, so it’s hard to see where the uplift is going to come from.” (Oil’s Drop Below $50 May Be Just the Start as Demand Swoons)

5:15 Am EDT. Oil Back above $50 aided by a weaker dollar; however oversupply concerns remain the issue. — Reuters “Oil recovered to just above $50 a barrel on Tuesday after touching a six-month low in the previous session, although high global production and concern over the economic outlook in China weighed on the outlook. The bounce came after a sharp slide in commodities on Monday due to economic worries, with a key global commodities price index sinking to a 12-year low. By 0849 GMT, Brent crude LCOc1 was up 57 cents at $50.09 and U.S. crude Clc1 gained 61 cents to $45.78. Brent fell to $49.36 at one point on Monday, its lowest since Jan. 30. “I think we will stabilize around current levels,” said Olivier Jakob, head of Swiss oil consultancy Petromatrix. “You can never exclude a further correction, but I think we are in the last 5 dollars rather than the next 15 dollars.” Crude has come under pressure from mounting signs of ample supply and a weakening of the demand outlook. Brent fell 18 percent in July, while U.S. crude’s 21 percent decline was its biggest monthly decline since the 2008 financial crisis. (Oil edges back up to $50 a barrel from six-month low)

5:13 pm EDT. Oil rose on short covering and momentum from the Chinese market. Are Brent and WTI trading in the same range? — Reuters “Global crude prices rose from multi-month lows on Tuesday, helped by a stock market rally in No. 2 oil consumer China, but abundant supply and a weak demand outlook make crude’s rebound unlikely to hold, traders and analysts said. Brent, the world benchmark for oil, and U.S. crude settled up for the first time in four sessions, a day after Monday’s 5 percent rout triggered by weak factory activity in China. While the recovery was aided by an overnight rise in Chinese equities — and the short-covering normal after a selloff in oil — the widening gulf between demand for crude and projected supply could negate any rally, traders said. Brent LCOc1 settled up 47 cents, or 1 percent, at $49.99 a barrel. It hit a six-month low on Monday, coming within cents of its 2015 bottom of $49.19. U.S. crude CLc1 finished up 57 cents, or 1.3 percent, at $45.74. It plumbed a four-month bottom of $45.17 the previous session, about $3 from the year low. U.S. crude CLc1 finished up 57 cents, or 1.3 percent, at $45.74. It plumbed a four-month bottom of $45.17 the previous session, about $3 from the year low. (Oil climbs from multi-month lows on China stock market gains)

8/5/2015

Will oil retest the mid $40’s before stabilizing? — Reuters “BMI Research, a subsidiary of Fitch Ratings, said on Tuesday that a strong U.S. dollar, China’s weakening economy and the prospect of rising Iranian oil exports would keep downward pressure on prices in the coming months. “A retest of Brent crude’s 2015 low around $45 per barrel looks inevitable given current ample market supply and intensifying bearish market sentiment toward prices,” the firm said in a note to clients. But while analysts say a return to extremely high prices of $100 a barrel or more is unlikely any time soon, barring a sudden production crash, they also don’t expect a return to super-cheap oil, effectively opening up a third, mid-priced era of prices. A Reuters poll of oil price forecasts by brokerages and banks shows that the majority of analysts expect Brent prices to average $60 to $70 a barrel in 2016, with only a small minority forecasting significantly higher or lower levels than that. (As oil falls below $50, analysts eye ‘mid-price’ era)

Producers outside shale and OPEC production are feeling the pain. — Reuters “Expensive production from the North Sea, Canada’s oil sands, offshore megaprojects, weaker African and Latin American members of OPEC, and frontier exploration areas around the world are all being squeezed hard by the price slump. According to oilfield services company Baker Hughes, the number of rigs drilling for oil outside North America has fallen by over 200, or about 19 percent, since July 2014 (link.reuters.com/ser35w). Rig counts have fallen in every region, with 28 fewer active rigs in Europe, 47 fewer in the Middle East, 33 in Africa, 66 in Latin America and 34 in Asia Pacific. Proportionately, the hardest hit regions have been Europe and Africa, where more than 30 percent of rigs operating in the middle of last year have since been idled. But the slowdown is broad-based, with big downturns in countries as far apart as Mexico, India, Turkey, Brazil, Iraq, Colombia and Ecuador. Major drilling contractors including Transocean, Schlumberger and Baker Hughes have all reported a sharp drop in international business.” (Caught in the cross-fire — non-OPEC, non-shale producers: Kemp)

Saudis refineries seen adding fuel to the fire “oversupply”. — Reuters “Oil prices are unlikely to recover soon as Saudi Arabia’s drive to boost its refining activities is expected to force refineries elsewhere to slow down their operations, thus creating an even bigger glut of unwanted crude oil. Two big new refineries in Saudi Arabia are adding to growing supplies of diesel and jet fuel, which could mean other refiners will use less crude as they respond to the oversupply of oil products. Oil prices currently near $50 a barrel are already under pressure, in part from an oversupply of fuels produced by refiners enjoying healthy margins from cheap crude as a result of the U.S. shale boom and record OPEC output. A big difference now is that the world’s largest oil exporter, Saudi Arabia, whose new refineries have added to a flood of the fuels now swamping global markets. (Oil price unlikely to recover as Saudi refining hits market)

5:06 am EDT. Oil prices, Brent, above $50, weekly data showed U.S. crude stock fall aiding the increase however a stronger dollar limited the magnitude. — Reuters “Oil prices rose for a second day on Wednesday, recovering from a drop below $50 a barrel after weekly data showed a fall in U.S. crude stocks, although a stronger dollar tempered gains. The dollar rose to its highest in over three months after a voting member of the U.S. Federal Reserve’s policy-setting committee expressed support for an interest rate hike in September. A stronger dollar tends to undermine crude oil by making it more profitable for non-U.S. investors to sell it. Growing oversupply, slowing demand from China and the prospect of crude flooding onto the market from Iran after Tehran’s deal with the West over its nuclear program have knocked 21 percent off the oil price this quarter. (Oil prices rise for second day after U.S. inventories fall)

3:05 pm EDT. Brent ended below $50 WTI fell below $45 but ended @ $45.15 — Reuters “Oil prices hit multi-month lows on Wednesday after a surge in gasoline stockpiles in the United States as the summer season, the country’s biggest demand period for motor fuels, neared its end. Futures of Brent, the global oil benchmark, hit a six-month bottom while that of U.S. crude touched a 4–1/2-month trough, despite a bigger-than-expected drawdown in U.S. crude stockpiles announced by the Energy Information Administration. Traders and investors focused instead on the unexpectedly large build in gasoline inventories and its impact on refining margins. “The resulting lower refining margins will decrease the incentive for crude oil processing, leading eventually to a renewed rise in crude oil stocks from an already lofty level,” Carsten Fritsch, senior commodity analyst at Frankfurt-based Commerzbank AG, told the Reuters Global Oil Forum. (Oil hits multi-month lows on U.S. gasoline build worries)

8/6/2015

Oil companies still in distress at $50 prices; look for additional carnage as prices fall into the mid $40s — Reuters “Analysts at investment bank Jefferies say international oil companies lowered their break-even points by $10 a barrel after the latest round of spending cuts, but will still need a price of $82 a barrel in 2016 to cover spending and dividends, which have been the main investment attraction for the sector for decades. “In order to cover the shortfall, the sector will increase its borrowing. While leverage remains manageable within the sector, this is not a practice that can continue in perpetuity,” Jefferies said in a note on Wednesday. Oil majors such as Royal Dutch Shell (RDSa.L), Chevron (CVX.N) and Total (TOTF.PA) are helped by profitable refining operations. Most are increasing oil and gas output, squeezing as much revenue as they can from past investments but exacerbating the oversupply. Spending next year is expected to decline by a further 5 to 15 percent depending on the oil price, according to Oslo-based consultancy Rystad Energy. The world’s top oil companies used second-quarter results to show they were ready for deeper, more painful measures. (With crude at $50, oil firms fear deeper crisis than in 1980s)

The long end of the price curve is falling indicating prices may be traded at or around lower levels, $50–70 for an extent time (well into 2016). — Reuters “Some are now reconsidering that view, as long-term oil prices take the lead in the market’s latest dive, swaying sentiment toward a lengthier slump that would mean prolonged pain for big producers, from Exxon Mobil Corp to Saudi Arabia.While immediate delivery benchmark global Brent crude oil futures at $50 a barrel are still about $4 higher than they were at their lowest point in January, prices for delivery in December 2020 are nearly $8 lower than the start of this year, trading at a contract low of less than $67 on Tuesday. A year ago the contract hovered at around $100 a barrel. The reason for the deterioration of the forward curve and decline in “long-dated” futures is a subject of debate. But even some who disagree with the fundamental logic of lower long-dated prices are coming round to the scenario that prices will be lower for longer. (Oil bulls’ hope for quick price dip dimmed by 2020 crude under $70)

5:16 am EDT. Oil trading below their respective ranges: Brent $49.68, WTI $44.82 are we sliding into new trading ranges? — Reuters “Oil traded near multi-month lows on Thursday with Brent at under $50 a barrel as a supply glut persisted despite record U.S. refinery runs, and little sign of any reduction in production “Prices are likely to consolidate or weaken further,” Carsten Fritsch, an oil analyst at Commerzbank, said. “The perception is that over-supply will be there for much longer.” Analysts at Goldman Sachs said in a note that because U.S. shale oil had dramatically reduced the time between when capital is committed and when oil is produced, prices needed to remain lower for longer to “keep capital sidelined and allow the rebalancing process to occur uninterrupted”.(Oil trades close to multi-month lows, Brent below $50)

3:11 pm EDT. Oil traded below $50 as the slide continues towards $45. — Reuters “Oil set multi-month lows on Thursday as investors and traders sought clues about the market’s next bottom after a large drop in U.S. crude inventories failed to boost prices. A bigger-than-expected build in U.S. gasoline stockpiles last week proved more important to investors than crude storage numbers that came in three times below forecast on Wednesday. Brent LCOc1, the global oil benchmark, settled down 7 cents at $49.52 a barrel, after setting a six-month low at $48.88. U.S. crude CLc1 finished 49 cents lower at $44.66 after touching a 4–1/2 month bottom at $44.20. “We need to see a capitulation trade, and we have not gotten that yet,” said analyst Chris Jarvis of Caprock Risk Management in Frederick, Maryland. “We believe that will come once oil breaks below $40.” (Oil at multi-month lows; hunt for new bottom as gasoline piles up)

8/7/2015

Oil companies liquidating assets to strengthen balance sheets. — Bloomberg “Energy explorers reeling from the rout in oil prices are looking for liquidity in an obvious place: their rocks. Having exhausted other ways to raise cash as a glut of global supply depresses prices, a slew of producers from Anadarko Petroleum Corp. to Comstock Resources Inc. announced more than $2.4 billion in asset sales last month, according to data compiled by Bloomberg. Selling oil and gas fields to pay off lenders and fund new drilling — often a wildcatter’s option of last resort — is surging after a six-month lull. There’s more to come — by one estimate, another $20 billion this year — as executives at Occidental Petroleum Corp., Whiting Petroleum Corp., Penn Virginia Corp., Exco Resources Inc., Chesapeake Energy Corp. and Ultra Petroleum Corp. have all said in recent weeks that they are selling assets or exploring sales. (Explorers In Need of Cash Are Selling Oil Fields as Last Resort)

Saudis back off full price increase to Asian customers to defend market share — Reuters “Saudi Arabia has increased the September prices for crude it sells to Asia by less than forecast, traders said on Thursday, as the world’s biggest oil exporter defends its market share amid slowing demand. Refining profits have fallen to the lowest level of the year in Asia, prompting refiners to cut output even as the Organization of the Petroleum Exporting Countries (OPEC) pumped at historic highs in July, helping to depress global oil prices to multi-month lows. [O/R] OPEC kingpin Saudi Arabia maintained output near record levels in July as the group showed no sign of wavering in its focus on defending market share instead of prices. [OPEC/O] Asia is the only region where Saudi Arabia raised oil prices in September. “The region’s refiners may rue the fact that term crude prices will rise as they roll over or fall elsewhere, but in fact the Asian increases were likely limited by developing weakness in margins and spot crude differentials,” analysts at Vienna-based consultancy JBC Energy said in a note. (Saudi tempers oil price hikes in Asia to defend market share)

5:06 am EDT. Oil moved slightly higher as market awaits U.S. jobs data later on Friday and Chinese trade figures over the weekend — Reuters “Oil futures clawed back some losses on Friday after setting multi-month lows in the previous session, but remained on track to close the week more than 4 percent lower. Both Brent and U.S. crude futures faced a sixth consecutive week of losses, the longest run since the turn of the year. While investors awaited U.S. jobs data later on Friday and Chinese trade figures over the weekend, analysts said there was little chance for significant price movement in either direction. “The flat price already made a big move,” said Olivier Jakob, managing director of PetroMatrix. “Brent has been consolidating.” Brent crude futures LCOc1 were 40 cents higher at $49.92 at 0847 GMT, after reaching a six-month low in the previous session. (Oil edges up, on track for sixth week of losses)

3:21 pm EDT. Oil remained under pressure falling as it hit multi-month lows; adding to bearish sentiment Baker Hughes’ report that the U.S. oil rig count rose by six this week. — Reuters “Brent LCOc1 settled down 91 cents, or 1.8 percent, at $48.61 a barrel on Friday, after touching a more than six-month low of $48.45. U.S. crude CLc1 closed down 79 cents, or 1.8 percent, at $43.87, after hitting a more than four-month session low of $43.80. Brent was down 7 percent for the week. It fell 23 percent over the past six weeks. U.S. crude also slid 7 percent on the week and lost 26 percent in the last six weeks. Analysts said crude futures could be pressured in coming months by seasonal refinery maintenance and stock builds in key oil products such as distillates, which include diesel. (Oil down, heads for 6th weekly loss on gasoline glut)

8/10/2015

U.S. Shale companies continue to feel as WTI prices remain under pressure. — Reuters “North America’s shale drillers are struggling with the renewed slump in oil prices, despite cutting costs, boosting output, and in some cases employing hedging to improve realized prices. Stock prices for most of the main shale drillers have fallen faster than the price of U.S. light crude since the middle of April. Spot WTI has fallen 20 percent since mid-April but the share price of Pioneer Natural Resources has dropped 30 percent and Continental Resources is down almost 40 percent over the same period. Both companies increased production during the second quarter. Pioneer produced 197,000 barrels of oil equivalent per day (boepd) in April-June, up from 194,000 in January-March, while Continental reported output of 227,000 boepd, up from 207,000. (U.S. shale drillers struggle amid slumping prices: Kemp)

Do Oil shippers have more room to run? — Reuters “Shippers of crude oil and refined oil products have been able to charge their highest daily rates in years because elevated oil production has led to strong shipping volume. Investors see high volume oil shipments keeping the tanker fleet busy as the Organization of the Petroleum Exporting Countries focuses on market share over oil prices. “The next 18 months or so should be pretty good,” said Ian McDonald, an analyst at asset manager T. Rowe Price, which holds shares of Teekay Tankers, (TNK.N), which have risen 42.7 percent this year. Even after that runup, Teekay Tanker is relatively cheap with a 5.4 ratio of enterprise value to earnings before interest tax, depreciation and amortization compared with a 9.3 average since its late 2007 initial public offering, according to McDonald.” (Shipping: Oil tankers sheltered from gas, dry bulk weakness)

Hedge funds raise bullish exposure to WTI; are they putting the cart before the horse again? Reuters “Hedge funds and other big speculators have raised their bullish exposure to U.S. crude for the first time in seven weeks, trade data on Friday showed, even as most traders and investors fear weaker demand and higher supplies for oil. Global crude futures have lost a quarter of their value in the past six weeks as the approaching end of the U.S. summer driving season and impending start of refinery maintenance signals less gasoline demand and higher crude inventories. A rising U.S. oil rig count and record pumping of crude by Middle East producers have also exacerbated concerns about a glut. [RIG/U] Yet, data from the Commodity Futures Trading Commission (CFTC) showed the largest money managers, including hedge funds, raising their collective net long position in U.S. crude futures and options during the week to Aug. 4, the first time since mid-June. Just a week ago, this group held the smallest number of net longs in U.S. crude since September 2010, a near five-year low.” (Hedge funds raise bullish exposure to U.S. crude even as prices tank)

5:19 am EDT. Brent and WTI fall on China data. Though the price trend remains down on fundaments; the market will be in trade mode, bounce around, as it trades off of the inverse dollar correlation. — Reuters “Crude oil futures fell on Monday, touching fresh multi-month lows after disappointing data from China over the weekend showed exports tumbled in the world’s second-largest economy. Exports fell 8.3 percent in July, the biggest decline in four months, as weaker global demand for Chinese goods and a strong yuan policy hurt manufacturers. Producer prices in July were at the lowest point since late 2009, during the aftermath of the global financial crisis, and have been sliding continuously for more than three years. China’s economy is officially forecast to grow at 7 percent this year, strong by global standards, but some economists believe it is growing at a much slower pace. “The trade data over the weekend would probably have the market a little uneasy,” said Mark Pervan, senior commodities strategist at ANZ in Melbourne. Brent LCOc1 was down 24 cents at $48.37 a barrel at 0537 GMT, after touching a more-than-six-month low of $48.26. U.S. crude CLc1 fell 21 cents to $43.66 and fell to $43.35 earlier, a nearly-five-month low. Both benchmarks have fallen for six straight weeks, weighed down by chronic oversupply and sagging demand. (Brent, U.S. crude fall on oversupply, poor China data)

3:46 pm EDT. Oil rebounds as it trades off a falling the dollar. Reuters “Oil jumped almost 4 percent on Monday after a rally in U.S. gasoline and diesel due to a refinery outage helped crude futures advance from multi-month lows. The dollar’s .DXY drop to a near two-week low also made oil and other commodities denominated in the greenback more affordable to holders of the euro and other currencies. [USD/] Brent, the global benchmark for oil, rose 3.7 percent, posting its largest gain since end-May. U.S. crude rose 2.5 percent, its most in two months. The rally came after a malfunction at the 240,000-barrels-per-day crude distillation unit at BP’s Whiting, Indiana refinery sent gasoline prices RBc1 soaring more than 4 percent. Ultra low sulfur diesel HOc1 gained more than 3 percent, rebounding from last week’s six-year lows. “A reduction in refinery activity should logically decrease the demand for crude, all things being equal,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington. “But the strong link between refined products and crude in the instance of a refinery issue creates the dynamic where the increased demand for the now, temporarily scarce gasoline outweighs the lessened demand for crude.” Brent crude settled up $1.80 at $50.41 a barrel. It hit a six-month low of $48.24 earlier in the session. U.S. crude CLc1 settled $1.09 up at $44.96 a barrel. It plumbed a 4–1/2 month of $43.35 in Asian trading. (Crude oil rebounds along with U.S. gasoline, weaker dollar helps)

8/11/2015

Is the WTI pipeline infrastructure over done? — Reuters “A doubling of pipeline capacity in one of the most prolific U.S. shale plays may have gone overboard in its rush to move oil to market, top pipeline company executives said during earnings announcements over the past week. With more than 1 million barrels per day of additional pipeline capacity moving oil from the Permian Basin of West Texas added since early 2014, companies dependent on new projects to drive revenue growth are now faced with a limit. The buildout has also caused some temporary inbalances in spot prices, traders say, as pipelines flood Houston-area refiners with surplus crude. The race for new and bigger pipelines to ease bottlenecks has led to a slew of new projects coming online through 2017, even as output wanes with oil prices down nearly 60 percent from a year ago on a global supply glut. Plains All American Pipeline, one of the biggest players with a long string of Permian projects, reduced its growth guidance and said 2016 could be flat on lower-than- expected pipeline volumes. (Pipeline overbuild forces company executives to seek new opportunities )

Though WTI prices are down 25% production seem to be shaking it off — Bloomberg “Oil traded near the lowest level in almost five months in New York as a rebound in U.S. drilling signaled production is withstanding the slump in prices. West Texas Intermediate futures fell 0.2 percent, paring an earlier drop to the lowest price since March 20. The number of rigs seeking oil rose by 6 to 670 for a third weekly gain, Baker Hughes Inc. data show. Societe Generale SA and JPMorgan Chase & Co. cut their price forecasts on weaker demand growth and oversupply. Oil has slumped more than 25 percent since this year’s peak in June amid signs the global surplus that drove prices into a bear market will be prolonged. OPEC’s largest members have sustained record output, while U.S. inventories remain more than 90 million barrels above the five-year seasonal average. “The problem is the continued robustness of U.S. production levels, which has failed to deliver the expected slowdown in production,” Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. “The near-term outlook for oil is pretty dim.” West Texas Intermediate for September delivery fell as much as 52 cents to $43.35 a barrel on the New York Mercantile Exchange. The contract was at $43.85 at 9:25 a.m. London time. Prices have decreased 18 percent this year. (Oil Trades Near Five-Month Low as U.S. Drillers Deploy More Rigs)

Hedge funds too early to the party? As price pressure remains to the down side — Bloomberg “Speculators increased bullish bets on U.S. oil for the first time in seven weeks, a move that came too early in a market that continues to slide. Money managers’ net-long position in West Texas Intermediate crude climbed 13 percent in the week ended Aug. 4, U.S. Commodity Futures Trading Commission data show. That’s a rebound from last week’s figure, which was the lowest level since 2010. Funds curbed bullish bets on Brent, the international benchmark, to the lowest since February, according to data from ICE Futures Europe. Major oil companies are preparing for a longer downturn and banks including Societe Generale SA are reducing their price forecasts as crude approaches a six-year low. The plunge has gathered strength as U.S. producers return drilling rigs to service and Iran seeks to increase exports after last month’s nuclear agreement with world powers. (Bullish Oil Bets Boosted Too Early as Price Slide Continues)

5:23 am EDT. Oil trades lower on a stronger dollar as China devalued the Yuan — Reuters “Oil prices fell on Tuesday after China devalued its currency in its latest effort to prop up economic growth, making dollar-priced commodities more expensive and weighing on the oil demand outlook for the world’s top energy consumer. A slowdown in China’s economy, which is still expected to grow by around 7 percent annually, has been a key driver for the sharp drop in oil prices over the past year along with rising global supplies. Front-month Brent futures LCOc1 were down 10 cents at $50.31 a barrel at 0845 GMT (0445 EDT), cutting short oil’s biggest daily rally since late May the previous session. U.S. crude CLc1 fell 25 cents to $44.71. China’s central bank made a “one-off depreciation” of nearly 2 percent in the yuanCNY=SAEC after a run of poor economic data, guiding the currency to its lowest point in almost three years. “It’s bad news for oil because China will have to pay more for it,” Hamza Khan, senior commodities analyst at ING Bank, said. “On the other hand, if this devaluation is strong enough to lead to a recovery in Chinese exports and improve China’s GDP figures, then it will be bullish for oil.” “The short-term impact is muted and the long-term impact is bullish,” Khan said. (Oil prices fall after China devalues yuan)

OPEC continues to pump at an alarming rate, chasing elusive demand, as output hits a 3 year high — Bloomberg “OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The Organization of Petroleum Exporting Countries, responsible for 40 percent of world oil supplies, raised output by 100,700 barrels a day to 31.5 million last month, the group said in its monthly market report, citing external sources. This increase came even as Saudi Arabia, which often curbs output toward the end of peak summer demand, told OPEC it cut production by the most in almost a year. Oil prices slumped to a six-month low below $50 a barrel in London last week as rising OPEC supplies, resilient U.S. production and concerns over Chinese demand prolong a global glut. Iran reached an accord with world powers on July 14 that may ease sanctions on its oil exports later this year in return for curbing nuclear activity. “Given the better-than-expected growth in global oil demand so far this year, together with some signs of a pickup in the economies of the major consuming countries, crude oil demand in the coming months should continue to improve and, thus, gradually reduce the imbalance in oil supply-demand,” OPEC’s Vienna-based secretariat said in the report. (OPEC Output Reaches 3-Year High as Iran Pumps Most Since 2012)

5:24 pm EDT. WTI falls to six year low, Brent falls 2.4% on yuan devaluation and OPECs production output — Reuters “U.S. crude settled at a more than six-year low on Tuesday after China’s currency devaluation raised questions about oil demand in the No. 2 consumer and a new OPEC estimate showed non-member producers are likely to keep output high despite low prices. A BP refinery outage in Whiting, Indiana, that could last at least a month, idling some 240,000 barrels per day of crude distillation, also weighed on oil prices, traders said. U.S. crude CLc1 fell $1.88, or more than 4 percent, to$43.08 a barrel, its lowest settlement since March 2009, and about $1 above the 2015 contract low on March 18. Brent LCOc1 fell $1.23, or 2.4 percent, to $49.18 a barrel, paring more than half of its gains in a rally on Monday. The market continued to weaken in post-settlement trade after the American Petroleum Institute (API), an industry group, reported a smaller-than-expected drawdown in U.S. crude inventories last week. [API/S] “It’s time to sell any and all rallies,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York, who bets on crude hitting $30 a barrel or lower. (U.S. crude ends at six-year low on China devaluation, OPEC data)

8/12/2015

China increases the number of independent refineries to directly import crude. — Reuters “China’s Ministry of Commerce said on Monday it will grant licenses to two independent refineries to directly import crude oil, shortly after the companies won import quotas, as Beijing continues to open up the tightly state-controlled sector. Beijing has already widened the pool of companies to which it will award quotas for imported crude, starting early this year to boost private participation in the oil trade ahead of a planned launch of a crude oil futures contract. Most quota winners still have to nominate a state-affiliated trading company as agent for any shipments. But Shandong Dongming Petrochemical Group [SDHLYD.UL] and Panjin Beifang Asphalt Fuel Co have now been approved for licenses to import crude on their own, according to a short statement posted on the ministry’s website (www.mofcom.gov.cn). (China grants independent refiners licenses to import crude oil)

U.S. Sale drillers continue to struggle as price pressure remains to the downside. — Reuters “North America’s shale drillers are struggling with the renewed slump in oil prices, despite cutting costs, boosting output, and in some cases employing hedging to improve realized prices. Stock prices for most of the main shale drillers have fallen faster than the price of U.S. light crude since the middle of April. Spot WTI has fallen 20 percent since mid-April but the share price of Pioneer Natural Resources has dropped 30 percent and Continental Resources is down almost 40 percent over the same period. Both companies increased production during the second quarter. Pioneer produced 197,000 barrels of oil equivalent per day (boepd) in April-June, up from 194,000 in January-March, while Continental reported output of 227,000 boepd, up from 207,000. Pioneer’s production is mostly from the Permian Basin and Eagle Ford in Texas, while Continental’s operations focus on North Dakota’s Bakken and Oklahoma. (U.S. shale drillers struggle amid slumping prices: Kemp)

2:47 am EDT. Oil continues its slide as Yuan hits a four low eroding China’s purchasing power for dollar-denominated commodities. — Reuters :” Crude oil prices continued to fall on Wednesday as China allowed its currency to drop for a second day, triggering concerns over its economic health just as oil production hit multi-year highs. China’s yuan hit a four-year low on Wednesday, slipping further a day after authorities devalued it to support its struggling economy. Analysts noted that China’s overall currency fall was relatively low by historical standards in foreign exchange markets, but were quick to add that China’s case was different. “It is China — the largest consumer of most commodities and a large producer of many — and it’s the yuan, which rarely moves much against the U.S.-dollar and when it does, it traditionally appreciates not depreciates,” Australian bank Macquarie said in a note to clients. (Oil prices fall further as China lets yuan slide)

4:00 pm EDT. Oil market stabilizes on a weaker dollar. Reuters “Oil ended up on Wednesday as a weaker dollar and lower U.S. crude stockpiles provided a modest bounce off six-year lows hit the previous session, when worries about China’s plummeting currency and economic slowdown deflated prices. Concerns that U.S. inventories could build again from higher crude imports and refinery outages kept a lid on the rebound. “The market needed a big drawdown to reverse the current trends and didn’t get it,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. Crude stockpiles in the United States fell by 1.7 million barrels last week, just short of market expectations for a draw of 1.8 million barrels, government data showed. Gasoline inventories also fell, by 1.3 million barrels versus the 647,000 barrels forecast. (Oil steady on U.S. stockpile decline, dollar weakness)

8/13/2015

The International Energy Agency expects oil glut to persist through 2016 despite growing demand. — Reuters “World oil demand is growing at its fastest pace in five years thanks to rebounding economic growth and low prices, but global oversupply is so great that it will last through 2016, the West’s energy watchdog said on Wednesday. The International Energy Agency said in a monthly report that it was steeply raising its demand growth outlook for this year and 2016, and expected non-OPEC supply growth to decline next year, with U.S. producers hardest hit. “While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 — suggesting global inventories will pile up further,” the Paris-based IEA said. The view from the IEA chimes with that of the U.S. government, which on Tuesday lowered U.S. production forecasts, signaling that a 60 percent rout in benchmark prices since last summer may finally be weighing on shale output. (IEA sees oil glut persisting in 2016 despite soaring demand)

Iran’s post sanctions production can eclipse expectations — Reuters “Iran could raise its oil output by as much as 730,000 barrels per day (bpd) from current levels fairly quickly after sanctions are removed, the International Energy Agency said on Wednesday. The West’s energy watchdog estimated that Iranian oilfields, which pumped around 2.87 million bpd in July, could increase production to between 3.4 million and 3.6 million bpd within months of sanctions being lifted. “While significantly higher production is unlikely before next year, oil held in floating storage — at the highest level since sanctions were tightened in mid-2012 — could start to reach international markets before then,” the IEA said in a monthly report. (Iran oil output could jump sharply post-sanctions: IEA)

Pain continues for Oil producers — Reuters “North America’s leading independent oil and gas producers reported large losses in the second quarter despite cutting costs and increasing output. Ten of the largest independent oil and gas producers in the United States reported total losses of almost $15 billion between April and June, compared with profits of almost $3.5 billion a year earlier. Three more independents remained profitable, but reported net income of only $66 million, down from more than $1 billion in the second quarter of 2014 (link.reuters.com/vyc45w). Of the 13 companies in the sample, 11 had increased production compared with the prior year, in some cases by 30 percent or more. Most firms reported they had been able to reduce the average cost of drilling and completing each well by about 20 percent compared with the end of 2014. Average output per well has been boosted by pulling rigs back to the most consistently productive areas of the major shale plays. (U.S. shale firms slide deep into the red on low oil prices: Kemp)

Unbelievable but due to efficient technology, some U.S. Shale producers can sustain oil at $30 a barrel. — Bloomberg “The lowest crude prices since 2009 might still not be enough to end the U.S. energy renaissance. Some parts of North Dakota’s Bakken shale play are profitable at less than $30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That’s less than half the level of some estimates when the oil rout began last year. The lower bar for profitability is one reason why U.S. oil production has remained near a 40-year high even as crude prices fell more than 50 percent over the past year to the lowest level since March 2009. “One of the explanations for why production hasn’t fallen off is that the cost has gone down so much,” David Hackett, president of Stillwater Associates LLC, an energy consulting firm in Irvine, California, said by phone. “The marginal cost to produce has shrunk pretty dramatically with the drop in prices. The efficient drillers are now able to take advantage.” (Oil at $30 Is No Problem for Some Cost-Cutting Bakken Drillers)

5:08 am EDT, Speculation around rising demand and reassurance by China that there was no need for Yuan to fall further moved Oil higher; though the bias remains to the downside. — Reuters “Oil prices rose on Thursday as lower U.S. crude stocks and optimistic global demand projections overrode concerns about a glut of supply. U.S. stockpiles of crude and gasoline fell last week, data from the Energy Information Administration (EIA) showed on Wednesday, bolstering sentiment in the U.S. market. [EIA/S] Benchmark North Sea Brent crude oil LCOc1 was up 60 cents at $50.26 a barrel by 0855 GMT. U.S. crude CLc1 was trading at $43.50 per barrel, up 20 cents. Traders said a slide in the value of the dollar against a basket of currencies .DXY this week also helped strengthen oil markets. The U.S. currency rallied on Thursday but reached a one-month low on Wednesday. A weaker dollar makes oil more affordable to holders of other currencies and tends to support commodity prices.”It matches very well with the U.S. dollar curve,” Bjarne Schieldrop, chief commodities analyst with SEB in Oslo, said of oil’s gains. “That was a clear driver in my view. Despite the rise, plenty of bearish factors loomed. (Oil price up on U.S. stock draws, demand outlook)

2:56 pm EDT. Fundamentals prevail as oil falls to a six year low. — Bloomberg “Oil sank to a six-year low as rising crude output and signs that China’s economy is weakening increased concern that a global surplus will worsen. West Texas Intermediate futures tumbled as much as 3.2 percent as the deteriorating outlook for Chinese growth follows the highest output from OPEC in three years in July. Iran’s nuclear deal with world powers last month fueled speculation that it will bolster output, adding to the glut. Oil moved into a bear market in July, and the biggest producers are preparing for an extended downturn. U.S. crude supplies were almost 100 million barrels above the five-year seasonal average as production has been slow to decline even as prices fell by more than half. “I have a really hard time painting a bullish scenerio for oil,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. “Once prices break through the six-year lows traders will be gunning for $39.” (Oil Falls to a Six-Year Low)

8/14/2015

Expect glut to persist despite growing demand says The International Energy Agency — Reuters “World oil demand is expanding at its fastest pace in five years thanks to rebounding economic growth and low prices, but global oversupply will last through 2016, the West’s energy watchdog said on Wednesday. The International Energy Agency said in a monthly report that it was steeply raising its demand growth outlook for this year and 2016, and expected non-OPEC supply growth to decline next year, with U.S. producers hardest hit. “While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 — suggesting global inventories will pile up further,” the Paris-based IEA said. The view from the IEA chimes with that of the U.S. government, which on Tuesday lowered U.S. production forecasts, signaling that a 60 percent rout in benchmark prices since last summer may finally be weighing on shale output. (IEA sees oil glut persisting despite soaring demand)

Expectations that U.S. crude surplus will escalate on lower autumn refinery demand. — Reuters “Concerns among oil traders are escalating that a combination of surprisingly resilient U.S. shale production and lower autumn refinery demand will cause storage tanks in Cushing, Oklahoma, to fill to the brim with surplus crude as early as October. The biggest U.S. refinery in the Midwest is suffering through an unexpected outage that may take months to resolve. The shutdown may free up enough crude to top off Cushing in just 2 months, a month earlier than the market expected as recently as last week, sparking a sell-off of oil futures spreads. “Looks like Cushing is going to be full in October now,” said one oil trader. “That’s very bearish.” (Indiana refinery outage escalates fears Cushing will top out)

Oil companies to cut back further on speculation that lower prices will continue for a long duration. — Bloomberg “The world’s biggest producers will need to trim investments by a further $26 billion to meet sacrosanct dividend payments, according to Jefferies Group LLC. Capital spending will have to fall 10 percent next year, Banco Santander SA says. Oil companies are bracing for “lower for longer” prices as a global supply glut persists, dragging crude to the lowest close since March 2009 in New York on Tuesday. Royal Dutch Shell Plc, which has reduced spending 20 percent this year, has “more levers to pull” should the market weaken further, according to Chief Executive Officer Ben Van Beurden. The tightening means international producers such as Shell and Chevron Corp. can break even at a lower crude price — about $10 lower than before they started cuts last year, according to Jefferies analyst Jason Gammel. (Oil Majors’ $60 Billion Cuts Don’t Go Far Enough as Crude Slides)

Energy high-yield bonds, are they worth the paper? — Bloomberg “Most junk-bond investors can’t sell their energy-related holdings fast enough. Then there’s Matt Eagan. The money manager at Loomis Sayles & Co. is going the other way, buying debt in an industry where an alarming number of borrowers increasingly can’t meet their obligations. He’s lured to yields that have surged to the highest since 2009 on the speculative-grade securities of oil and gas companies — in some cases to over 30 percent. “You’re already getting compensated for a very high level of defaults,” Eagan, whose Boston-based firm oversees $242 billion, said in an interview. “Your upside to downside looks pretty attractive.” (In High-Yield Energy Debt, Contrarian Sees Value Where Everyone Else Sees Defaults)

5:14 am EDT. Oil continues its decline on fundamentals, U.S. Crude at a 6 ½ yr. low — Reuters “U.S. crude oil fell to its lowest in almost six-and-a-half years on Friday as huge stockpiles and refinery shutdowns added to concerns about global oversupply and slowing economies in Asia. Oil had already tumbled more than 3 percent on Thursday, driven by a report that stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, rose more than 1.3 million barrels in the week to Aug. 11. U.S. crude CLc1 was down 30 cents at $41.93 a barrel by 0845 GMT. The contract earlier hit an intraday low of $41.35, its lowest since March 4, 2009. Brent crude LCOc1 traded at $49.00, down 22 cents and some way off its 2015-low of $45.19 reached in January. U.S. crude is much weaker than the North Sea benchmark, partly due to a spate of refinery outages that has sapped U.S. demand. The largest of those refineries — BP PLC’s (BP.L) 413,500 barrels per day (bpd) facility in Whiting, Indiana, also the biggest in the U.S. Midwest — has been forced to shut two-thirds of its capacity for repairs to a leak that could last a month or more. (U.S. crude oil hits six and a half year low on high stocks, China)

3:40 PM EDT. Oil traded higher however bias remains to the downside — Reuters “U.S. crude oil edged higher after falling to a fresh 6–1/2-year low on Friday, posting a seventh weekly loss amid concerns over global oversupply, while Brent futures slipped as the front-month September contract approached expiration. Data showing North Dakota crude oil production rose a second straight month in June helped pull U.S. crude off its session high, along with the stronger dollar .DXY and weaker-than-expected consumer sentiment. “Producers don’t seem to want to blink,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut, commenting on the North Dakota data. (U.S. crude edges up from six-and-a-half-year low, expiring Brent dips)

8/17/2015

U.S. Crude price low enough to open the door for Private Equity firms to capitalize on desperate need for funds by oil companies — Reuters “A renewed slide in crude prices is having the effect U.S. energy sector dealmakers and private equity managers have been looking for: oil companies are now returning calls from potential buyers. Throughout much of the crude market rout that started in mid-2014 oil firms could rely on generous capital markets investors betting on a quick recovery in prices, which made any asset sales look unattractive. But since crude prices began tanking again in early July after a partial three-month recovery, oil firms have finally started to feel the squeeze. A torrent of $44 billion in high-yield debt and share sales in the first half of this year has slowed to a trickle with oil now at just above $42 a barrel, 30 percent below its June levels and 60 percent down from June 2014, CLc1 and a more pessimistic view taking hold that global oversupply could keep oil cheap for years. The number of high-yield bond and share issues has tumbled more than two-thirds from levels seen in May, Thomson Reuters data show. (link.reuters.com/fyf45w) That opens up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks’ slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow. (U.S. shale firms turn to private equity as market funding tails off)

Deal making activity to intensify as carnage fall out from low prices reverberates thru the industry — Reuters “With a sinking oil price driving Canadian energy shares to decade lows, activist hedge funds are pushing hard for companies to look at mergers and acquisitions or asset sales to curb costs and help the funds reduce their own investment losses. The funds’ shift away from a focus on smarter capital deployment, such as dividend payments and share buybacks, comes as a renewed price slide deals another blow to many companies’ financial results and balance sheets. Activist involvement in the Canadian energy sector has been increasing, with more proxy contests so far this year than in all of 2014, according to proxy solicitation firm Kingsdale Shareholder Services. U.S. hedge funds FrontFour Capital, Orange Capital and Livermore Partners, as well as Toronto-based West Face Capital, have been the most active. “The activists are more emboldened than ever. They are carrying a bigger stick than they have in the past,” said Shane Fildes, head of global energy investment banking at BMO Capital Markets.(Activist investors push for Canadian energy deals as prices languish)

Citi lowered 2015–16 price outlook on weak fundamentals — Reuters “Citigroup Inc lowered its base case price outlook for 2015 and 2016 crude oil prices citing weak market fundamentals, including an increased supply from OPEC and challenging demand growth in China and emerging markets. “Huge crude and product inventories are likely to bloat further during refinery maintenance season and expected production growth out of Iran and Iraq should exacerbate this further,” analysts with the U.S. bank said in a note Friday. Citi lowered its base case Brent price forecasts to $54 per barrel for 2015 and $53 in 2016 from $58 and $63, respectively. It also lowered its 2015 and 2016 West Texas Intermediate (WTI) price forecasts to $48 per barrel from its prior view of $53 and $56, respectively. Citi said it assigns a probability of 55 percent to its base case forecasts. “It is now clear that neither a V- nor a U-shaped oil price recovery is in order,” the investment bank said (Citigroup lowers base case 2015, 2016 crude oil price outlook)

4:46 am EDT. Oil at nearing six year low on 4:46 am EDT. Oil nearing six year low on oversupply, slowing demand and strengthening dollar — Reuters “Oil prices fell towards six-year lows on Monday after data showed Japan’s economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices. Japan’s economy, the world’s third biggest oil consumer, shrank in the second quarter from a year earlier, adding to fears that slowdowns in Asia’s biggest economies will weigh on oil demand. The global oversupply picture was exacerbated by another weekly jump in U.S. oil rig additions, hinting at growing production, and news that Oman produced a record-breaking 1 million barrels a day in July. U.S. crude CLc1, or West Texas Intermediate (WTI), for September was trading 70 cents lower at $41.80 a barrel at 0830 GMT (0430 EDT), close to its lowest level in more than six years. Brent LCOc1 for October was down 60 cents at $48.59 a barrel, still a few dollars shy of its six-year low of $45.19. The September contract expired on Friday. (Oil near six-year low on Japan data, oversupply)

3:53 pm EDT. Oil fell 1% on the strength of the dollar and Japan’s economic contraction — Reuters “Oil fell about 1 percent on Monday, with U.S. crude settling within range of a new 6–1/2-year low, after No. 3 oil consumer Japan said its economy contracted in the second quarter and China’s slowdown continued to weigh on sentiment. A stronger dollar .DXY, after a report that U.S. industrial output grew at the fastest pace in eight months, also made greenback-denominated commodities, including crude, less affordable for holders of the euro and other currencies. [USD/] U.S. light crude CLc1 settled down 63 cents, or 1.5 percent, at $41.87 a barrel. Monday’s intraday low of $41.64 came within striking distance of Friday’s low of $41.35, the weakest front-month price since March 2009. Trading in expiring options for U.S. crude dominated the action. Brent LCOc1, the global crude benchmark, settled down 45 cents, or nearly 1 percent, at $48.74 a barrel. It earlier hit a session low of $48.35, about $3 above its six-year low of $45.19 set in January. Japan’s economy shrank at an annualized pace of 1.6 percent in the second quarter. China fixed its exchange rate slightly higher for the second day running, after a surprise devaluation last week sliced 3 percent off the yuan. (Oil down 1 percent; U.S. crude near six-and-a-half-year low on Japan, China)

8/18/2015

The effect on arbitrage opportunity as U.S. opens Shale exports to Mexico. — Reuters “Last week’s U.S. decision to further ease a longstanding ban on most oil exports arrived just as the economic window for selling more domestic crude abroad is, at least for the moment, shutting. After years of relentless shale-driven supply growth, U.S. oil production is shrinking and may fall as much as 10 percent over the next 12 months as drillers slash spending. Meanwhile, global output continues to grow, with Iran alone set to add as much as 1 million barrels per day next year. As a result, some analysts, including Bank of America-Merrill Lynch, are warning that U.S. benchmark crude prices could rise back above global marker Brent, if only temporarily, next year. That would invert a key price spread for the first time since 2010. A closed export arbitrage may not stop Mexico from taking advantage of permits to import U.S. crude in exchange for more of its own exported oil, something it has been seeking for years as a means of improving its refinery operations. On Friday, a U.S. administration official said swap licenses would be issued in the coming weeks, the latest milestone loosening the contentious decades-old U.S. ban. (U.S. opens oil export window to Mexico just as arbitrage shuts)

Hedge funds are reducing their long exposure to oil after Fund Managers increased their long position (see 8/11/15) — Bloomberg — “After showing some short-lived optimism, hedge funds resumed their retreat from the U.S. oil market, cutting bullish positions for the seventh time in eight weeks as prices dropped to the lowest since 2009.Money managers’ net-long position in West Texas Intermediate crude declined 11 percent in the week ended Aug. 11, U.S. Commodity Futures Trading Commission data show. Short positions climbed to the highest level since March, signal speculators see prices continuing to fall. (Hedge Funds Resume Flight From Oil as Prices Sink to 6-Year Lows)

5:36 am EDT. Oil remains lower on slowing demand, this time its China’s economic concerns along with the strengthening dollar weighing on the market down. — Reuters “U.S. oil prices fell towards six-year lows on Tuesday after stock markets tumbled in China, the world’s largest energy consumer, adding to worries about global fuel demand at a time of heavy oversupply. Chinese stocks fell 6 percent on Tuesday as the yuan weakened against the dollar, raising fears that Beijing may further devalue the currency. Such a move could decrease China’s consumption and import levels. Industrial metals, including copper, also traded near six-year lows, adding to bearish market sentiment. “That is dragging oil lower — it was in bearish territory to start with,” SEB chief commodity analyst Bjarne Schieldrop said.(U.S. oil prices near six-year lows as China weighs)

Profitable upside trade, as the market moves up on a relief trade, expect momentum in the form of short covering to exacerbate the upside move making for quick profits before market normalizes — Reuters “Hedge funds remained unusually bearish on U.S. oil prices last week even as the cost of WTI tumbled towards the lowest level since 2009. Hedge funds and other money managers held short positions in WTI-linked futures and options equivalent to more than 193 million barrels of oil, according to the U.S. Commodity Futures Trading Commission. Money managers had never held a short position that large before, except for a brief period in March, when U.S. crude stockpiles were rising fast and there were fears storage space would run out. More hedge funds expect prices to rise than the number predicting a fall, and the oil bulls have a larger position overall, amounting to nearly 310 million barrels. But the ratio of hedge fund long to short positions in WTI is just 1.6:1, down from 4.6:1 in the middle of May, and the lowest in almost five years (link.reuters.com/vyk45w). (What might prompt a short-covering rally in U.S. oil price? Kemp)

3:02 pm EDT. Oil rose on bullish U.S. housing data and expectations that U.S. glut will decrease given the housing news; this is just a trade play that will intensify with short covering — Reuters “Oil rallied on Tuesday, with U.S. crude settling up nearly 2 percent, after bullish economic data and bets for lower crude stockpiles in the United States, the world’s largest oil consumer. Short-covering ahead of Thursday’s expiry of the key front-month contract in U.S. crude also helped the market advance from a 6–1/2 year low hit on Friday. New York-traded U.S. crude CLc1 settled up 75 cents, or 1.8 percent, at $42.62 a barrel. That put it at more than $1 above Friday’s low of $41.35, which was the market’s bottom since March 2009. Brent LCOc1, the London-traded global benchmark for crude, settled up 7 cents at $48.81, steadying from a three-day decline. Brent was initially down on Tuesday after stock markets in China, the second largest oil consumer, fell 6 percent.[MKTS/GLOB] The rally in U.S. crude helped cut its discount to Brent CL-LCO1=R to below $6 a barrel, from Friday’s three-month high above $7. (Oil rises on U.S. data; bets for stockpile drop)

8/19/2015

Oil traders are positioning themselves for falling prices. — Reuters “Many oil traders are positioning themselves to profit from a further fall in prices, taking large short-positions in U.S. crude contracts while going long in put options for oil at lower than current prices. Oil prices dipped again in early Asian trading on Tuesday as traders expected lower refinery consumption after the U.S. summer, while Asia’s weakening economies and high global production raised concerns about oversupply. U.S. crude futures were trading at $41.84 per barrel at 0014 GMT, not far off more than six-year lows touched earlier this week, and almost a third below their last peak from May. Trade data shows that speculators have taken huge bets on further falls. Open interest for short positions in WTI prices — which shows the number of deals betting on lower prices — has almost doubled since the beginning of August to nearly 247,000, even as prices have slumped almost 15 percent. (Oil traders position themselves for further price falls)

Canadian Oil companies to cut dividends again. — Bloomberg “Dividend cuts among Canadian energy producers are poised to accelerate as cost reductions fail to boost shrinking cash flow. Companies from Canadian Oil Sands Ltd. to Baytex Energy Corp. are in line for deeper payout decreases, according to analysts, after Crescent Point Energy Corp. slashed its dividend for the first time last week as crude sank to a six-year low. Just 38 percent of the 63 energy companies in Canada’s Standard & Poor’s/TSX Energy index had positive free cash flow, defined as operating cash flow minus capital expenditures, as of Aug. 17. That’s down from 43 percent in 2013, data compiled by Bloomberg show. The dwindling cash flow comes even after Canadian companies joined some $180 billion in global cutbacks this year, the most since the oil crash of 1986, according to Rystad Energy AS, an Oslo-based energy consultant. “There’s so much cash being spent on dividends,” said Greg Taylor, a fund manager at Aurion Capital Management in Toronto, whose firm manages about C$7.2 billion ($5.5 billion). “You can get increased cash flow by cutting costs but that’s not a sustainable model. The idea dividends are a sacred cow, that’s being put on the backburner.” (Brace for More Dividend Cuts in Canada Oil Patch)

5:30 am EDT. Market stable as fundamentals — oversupply, slowing demand remain the major concern. Downward price pressure continues. — Reuters “Oil prices steadied on Wednesday, consolidating after a six-week rout driven by global oversupply and concerns about falling demand in Asian economies and the United States. U.S. crude oil futures CLc1, also known as West Texas Intermediate (WTI), were down 20 cents at $42.42 a barrel by 0925 GMT. The front month, September, U.S. contract expires on Thursday. North Sea Brent crude LCOc1 was down 10 cents at $48.71 a barrel. “I think the market has pushed too low and too fast,” ABN Amro energy economist Hans van Cleef said. He added that, although he could see oil prices rebound in the coming weeks, he thought they would remain low into next year. Oil has lost about a third of its value since June and prices have been hovering just above six-year lows for the past week. The downward trend has been driven by global oversupply and record stockpile levels, analysts say. Many analysts said they expect some temporary price stabilization as people take profits from short positions. But they said the downward price trend was likely to continue unless there was a significant reduction in global supply. “Any recovery in WTI prices from a six-year low may be short-lived with the U.S. entering the slow demand period in September,” ANZ bank said (Oil prices steady but oversupply a concern)

11:47 am EDT U.S. Crude stockpile rose 2.6 million barrels to 456.21 million in week to Aug. 14 as reported by Energy Information Administration. — Reuters “U.S. crude oil inventories rose and gasoline stocks fell last week as crude imports surged while refinery problems cut runs during the summer driving demand season, data from the Energy Information Administration (EIA) showed on Wednesday. Crude inventories rose 2.6 million barrels to 456.21 million in week to Aug. 14, compared with analysts’ expectations for a decrease of 777,000 barrels. U.S. crude imports rose last week by 465,000 barrels per day (bpd) to 7.46 million bpd. “The report is bearish, with the focus squarely on crude oil and the large increase in overall inventories, due mostly to a surge in imports,” said John Kilduff, partner at Again Capital LLC in New York. U.S. oil prices extended losses to a fresh 6–1/2-year low after the report. U.S. September crude was down $1.85 at $40.77 a barrel at 11:41 a.m. EDT, having fallen to $40.60, the lowest front-month price since March 2009. The September contract expires on Thursday. Brent October crude was down $1.81 at $47.00 a barrel. (U.S. crude stocks rise, gasoline draws down as refining slows)

4:23 pm EDT. U.S. Crude hit 6 ½ year low on inventory report. — Reuters “U.S. crude oil slumped over 4 percent on Wednesday to hit a 6–1/2-year low and almost break below $40 per barrel, as a huge unexpected stockpile build in the United States reinforced concerns about a growing global oil glut. U.S. crude inventories rose 2.6 million barrels last week to 456.21 million barrels, the government’s Energy Information Administration said. The figures stunned energy market analysts on Wall Street, as well as traders and investors who had been expecting a stockpile drawdown despite the peak U.S. summer driving season nearing its end and refinery problems cutting fuel processing capabilities. (U.S. crude down four percent to hit six-and-a-half-year low on surprise stock build)

8/20/2015

A number of hedge fund managers (relatively small #) betting prices will fall in the coming months. — Reuters “A relatively small group of hedge fund managers has placed a record bet on U.S. oil prices declining further in the months ahead. Hedge funds and other money managers had accumulated gross short futures and options positions totaling 163 million barrels in the main NYMEX light sweet crude contract by Aug. 11, according to data released by the Commodity Futures Trading Commission. The number of gross short positions was up from 59 million barrels on June 2 and closing in fast on the record 179 million barrels set back in March. The number of traders identified by the CFTC as having shorts above the reporting threshold has actually fallen slightly over the same period, from 60 to 57. The number of hedge funds with reported short positions is not especially high and well below the record 84 identified in March (link.reuters.com/hyn45w). But the average short position has almost tripled since June, from under 1 million barrels to almost 3 million, a record and nearly twice the 1.6 million barrels reported in March (link.reuters.com/kyn45w). (Hedge funds aggressively bearish towards U.S. crude: Kemp)

Is OPEC’s full-throttle production strategy a major mistake? The fall-out — Bloomberg- “The costs of OPEC’s plan to protect members’ share of the oil market by out-producing rivals are mounting. As oil prices slump to six-year lows, the risks of worsening political turmoil are rising in the organization’s most vulnerable nations. This includes Algeria, Iraq, Libya, Nigeria and Venezuela, a group dubbed the ‘Fragile Five’ by RBC Capital Markets Ltd. The pain doesn’t end there. With even Saudi Arabia facing its biggest budget deficit in almost three decades, consultant Petromatrix GmbH says the plan to produce at full throttle was a “strategic mistake.” (OPEC’s ‘Fragile Five’ Face Rising Cost in the Fight for Oil Market Share)

Citi, oil could fall to 2008 levels, in the $30s — Bloomberg “Oil could fall to lows last seen during the global financial crisis amid a persistent supply surplus, Citigroup Inc. said. “Balances point to further oversupply throughout 2015 begging the question how low can oil go,” Citigroup analysts led by Seth Kleinman said in an e-mailed report Wednesday. The U.S. crude price of $32.40 a barrel reached in 2008 “is a conceivable reality.” (U.S. Oil Could Return to 2008 Low of $32 in Citigroup View)

The Derivative Market is very bearish on long term prices, as indicated by the long end of the term structure. — Reuters “ Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth. Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers. That has led many analysts to predict that oil — on average around 5 percent of companies’ costs — will see price rises later this year or in 2016, pushing up inflation. But oil derivatives tell another story. Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil in five years’ time has collapsed in recent months. U.S. crude now costs around $42 a barrel for delivery next month, and only about $20 more for delivery in 2020. Prices of oil for future delivery are usually much more stable than volatile near-term prices, holding their value even when the spot market crashes. (Get used to cheap oil, derivatives markets say)

5:32 am EDT. Oil prices lower on fundaments, with WTI nearing $40 — Reuters “U.S. crude oil prices fell to almost $40 a barrel on Thursday, its lowest since the global financial crisis of 2009, as supplies rose in North America and the Middle East, filling stockpiles to record levels. Oil has lost a third of its value since June on high U.S. production, record crude pumping in the Middle East and concern about falling demand in Asian economies. All the main oil futures contracts looked to be heading lower, PVM Oil Associates director and technical analyst Robin Bieber said. “The trend is down and vicious,” Bieber said in a note to clients of the London brokerage. U.S. crude oil, also known as West Texas Intermediate or WTI CLc1, was down 45 cents at $40.35 a barrel by 0910 GMT, after hitting a new 6–1/2-year low of $40.23. Brent crude futures LCOc1, the global benchmark oil price, were down 60 cents at $46.56 a barrel, still some way off their 2015 low of $45.19 traded in January. (U.S. oil falls towards $40 on global glut)

4:31 pm EDT. Oil in trade mode finished higher; interesting to see if it trades within their respective ranges: Brent ($45–50); WTI ($40–45) — Reuters” Expiring front-month U.S. crude prices settled higher on Thursday in volatile trading after slumping to a fresh 6–1/2-year low as a supply glut and concerns about China’s economy pressured Brent crude. A weaker dollar and the formation of the first hurricane of the 2015 Atlantic season were supportive to crude, even with Hurricane Danny still far from affecting any land or oil infrastructure. [USD/] U.S. futures retested support near $40 a barrel early in the session, falling to their lowest level since 2009, and Brent fell to a fresh October contract low above $46 a barrel as a global supply glut and concerns about sputtering growth in China continued to weigh on oil prices. In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.5 percent to a two-year low, as anxiety about global economic growth pressured equities in Europe and the United States. (U.S. September crude ends higher at expiry, Brent slumps)

8/21/2015

After taking it on the chin some Mutual fund managers holding out hope that prices will rise, though prices are trending downward. — Reuters” Mutual fund managers who believed the slump in oil prices would be short-lived have been taking it on the chin, but some are not giving up, betting that the market will bounce back and they will have the last laugh. The FPA Capital Fund, the Towle Deep Value Fund and the Mount Lucas US Focus Equity fund are among several that are still plowing money into oil exploration and production companies, even as their performance numbers sank to the bottom 5 percent this year, according to Morningstar. (Graphic:link.reuters.com/nup45w) Their reason for buying oil stocks even as crude prices are tanking again after a tentative second-quarter recovery? A bet that U.S. production will retreat sharply over the next 12 months, setting the stage for a rebound toward $65–70 per barrel that would allow most U.S. shale oil producers to stay profitable in the longer term. (Burned by oil, some U.S. fund managers still bet on rebound)

Mexico locks in $49 floor for ½ of its 2016 oil exports. — Reuters “Mexico has concluded its vast oil hedging program for next year, paying more than $1 billion to guarantee it will get at least $49 a barrel for about half of its exported crude in 2016. Announcing the unusually early completion of the biggest sovereign oil derivatives trade in the world, Mexico’s finance ministry said late on Wednesday it had bought options based on Maya and Brent crude oil prices that will cover 212 million barrels of oil, at a cost of $1.09 billion. Mexico is “very unlikely” to reopen the hedge, a source close to the operation told Reuters, adding the program centered on Maya crude. Counterparties to the program included Barclays and JPMorgan, the source added. The program, a longstanding part of the country’s strategy for safeguarding oil revenues from market volatility, ended on Aug. 14, the ministry said, suggesting it had purchased most of the options as oil prices entered a second deep slump. (Mexico wraps $1.1 billion oil options hedge to lock in $49 floor)

4:31 am EDT. Oil trading lower; will WTI breach its lower range base $40? — Reuters “U.S. oil prices headed for their eighth consecutive week of falls on Friday, the longest losing streak since 1986, after a sharp drop in Chinese manufacturing increased worries over the health of the world’s biggest energy consumer. Activity in China’s factory sector shrank at its fastest pace in almost 6–1/2 years in August as domestic and export demand dwindled, adding to worries about lower consumption of crude in the second-biggest oil user. Asian stocks followed Wall Street lower as fears took hold of a China-led slowdown in global growth. [MKTS/GLOB] Both global oil benchmarks are near 6–1/2-year lows, with U.S. crude heading for its longest weekly losing streak in 29 years. (U.S. oil fall longest in 29 years after China data)

4:10 pm EDT. Oil fell below $40 for the first time since 2009; hitting $39.68 before closing @ $40.45 2.1% lower for the day. — Reuters ”U.S. oil prices traded below $40 a barrel for the first time since the 2009 financial crisis, ending 2 percent lower on Friday on signs of U.S. oversupply and weak Chinese manufacturing and notching the longest weekly losing streak in almost three decades. U.S. crude dipped below the $40 threshold following weekly data that showed U.S. energy firms added two oil drilling rigs last week, the fifth increase in a row. The rise in the number of rigs emerging after a second quarter lull in prices is adding to concerns U.S. shale production is proving slow to respond to falling prices, prolonging a global glut. [RIG/U] “Everyone is still looking at it saying ‘Wow, you still don’t have production coming down,’” said Tariq Zahir, founder at Tyche Capital in Laurel Hollow, New York. (Oil ends down more than 2 percent as U.S. drilling points to glut)

8/24/2015

Cost cutting sprouts innovation production techniques — Reuters “Top shale oil producer Pioneer Natural Resources Co (PXD.N) has found an unusual way to both save water and cut costs for its wells: tapping the treated runoff from toilets, sinks and showers in west Texas. Pioneer has signed an 11-year, $117 million deal with the city of Odessa, Texas that will guarantee it access to millions of gallons of treated municipal wastewater each day, for use in nearby oilfields. Deliveries of the so-called effluent, are expected to start at the end of the year. As crude oil has slid to its lowest level in six years — currently about $40 a barrel — oil and gas companies pumping from shale rock have tried to cut every unnecessary penny from their operations. Water acquisition and transportation can be up to 10 percent of the cost of drilling and fracking a well, according to consulting firm IHS. (In downturn, frackers turn to toilet water in drought-prone Texas)

Oil prices at these levels likely to intensify anxiety in oil dependent, revenue generating, countries, i.e. Saudi Arabia — Reuters “”A black economic cloud is covering the skies of Saudi Arabia,” Zamel tweeted last week, warning that prices might not recover for five or 10 years. Oil’s drop to six-year lows, less than half mid-2014 levels, is beginning to sour the business mood in the world’s top oil exporting nation. After a decade of sky-high oil revenues and rapid growth, Saudis are grappling with the idea they may be entering a long period of more modest economic circumstances That realization is reflected in a tumbling stock market and a public debate about the kingdom’s economic future — some of it coming close to criticizing government policy, which is unusual in a country where dissent is tightly controlled. “Over the past 10 years, expert advice has been ignored. The economic system did not heed it and preferred to sleep on the cushion of the oil boom,” tweeted prominent economist Abdulhamid al-Amri. (Mood sours among Saudi businessmen as oil slides)

4:18 am EDT. Oil continues to slide, on China and oversupply concerns; WTI trading below $40 and Brent under $45. — Reuters “Oil prices hit 6–1/2-year lows on Monday after Chinese stock markets suffered their biggest one-day fall since the global financial crisis, intensifying worries over the outlook for global oil demand. Inaction by the Chinese government following an 11 percent rout in local stock markets last week encouraged a free-fall in global equities and other commodities on Monday. “Today’s falls are not about oil market fundamentals. It’s all about China,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum. “The fear is of a hard landing and that things get out of the control of the Chinese authorities.” Brent oil LCOc1 was trading down $1.20, or 2.6 percent, at $44.26 a barrel at 0750 GMT (0350 EDT), after hitting an intraday low of $44.00, its weakest since March 2009. U.S. light crude CLc1 was down $1.15, or 2.8 percent, to $39.30 a barrel after hitting a low of $39.00. Steep losses last week capped the contract’s longest weekly losing streak since 1986. (Oil hits 6–1/2-year low on China and oversupply)

5:42 pm EDT. Oil tumbles 6 percent to a 6–1/2-year low — Reuters “ Oil’s biggest one-day drop in nearly two months suggested that worst-case fears over the economic outlook in China, the world’s second-largest oil consumer, have eclipsed immediate signs of persistent oversupply as the main motivator. “Today’s falls are not about oil market fundamentals. It’s all about China,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. “The fear is of a hard landing and that things get out of the control of the Chinese authorities.” Brent October crude LCOc1 fell $2.77, or 6.1 percent, to settle at $42.69 a barrel but fell to a contract low of $42.23 in post-settlement trading, the lowest front-month price since March 2009. Prices extended losses in after-hours trading, as the U.S. S&P Index .SPX fell by more than 4 percent at one point. U.S. October crude CLc1 fell $2.21 or 5.5 percent to settle at $38.24, the lowest since February 2009. The $37.75 session and contract low was the lowest since February 2009. U.S. crude, on pace for a 18 percent monthly loss, posted its eighth consecutive weekly loss on Friday, the longest weekly losing streak since 1986. (Oil tumbles up to 6 percent to new lows as China fears intensify rout)

8/25/2015

Is the Saudi’s strategy working for or against OPEC?- Reuters “Saudi Arabia’s strategy for rebalancing the oil market through a period of lower prices shows few signs of working so far — with rival producers claiming they will raise output even as prices slide to new lows. Saudi policymakers insist the kingdom will maintain its market share and let low prices take care of the surplus by forcing cuts from higher cost producers and stimulating fuel demand. With prices down by more than half compared with the same point in 2014, oil consumption is growing at some of the fastest rates for a decade. There are signs output growth from shale drillers and other producers outside OPEC is starting to slow, but it is not falling yet. Within OPEC, other producers, principally Iraq and Iran, are determined to continue raising their output even as prices slump. “We will be raising our oil production at any cost and we have no alternative,” Iran’s Oil Minister Bijan Zanganeh said in a news story carried on his ministry’s website. “If Iran’s oil production hike is not done promptly, we will be losing our market share permanently,” Zanganeh added. Saudi Arabia’s strategy may not be enough to eliminate the surplus and lead to a sustained rise in prices in the next two or three years. (Oil market loses faith in Saudi strategy: Kemp)

Falling oil prices negatively affecting liquefied natural gas exports — Bloomberg “Plummeting crude oil prices have dimmed prospects for soon-to-start U.S. liquefied natural gas exports, Bank of America Corp. said in a note to clients Monday. The gap between U.S. and global prices for the fuel has narrowed as oil’s collapse reduced the cost of crude-linked LNG contracts in Asia and Europe, Max Denery, an analyst at the bank in New York, said in the report. Oil in London has tumbled 25 percent this year, falling below $45 a barrel Monday for the first time since 2009, while U.S. gas has dropped 8.3 percent. The reduced price advantage comes as Cheniere Energy Inc. finishes construction of its Louisiana export terminal, which is poised to send the first shipment of U.S. LNG from the lower 48 states before the end of the year. North American cargoes will enter the market as gas from newly-built Australian terminals adds to a global supply glut. (BofA Says Collapsing Crude Drags U.S. LNG Exports Down With It)

4:55 am EDT. Oil rallies remaining in their respective ranges WTI ($35–40) Brent ($40–45) — Reuters “Oil bounced back from heavy losses on Tuesday but global oversupply and worries over the severity of the economic slowdown in China, the world’s top commodity consumer, kept prices near 6–1/2-year lows. European equity markets recovered on Tuesday but Chinese stock markets closed down more than 7 percent, with panic selling intensifying after the flagship Shanghai Composite Index .SSECcrashed through key support at 3,000 points. U.S. crude CLc1, also known at West Texas Intermediate or WTI, was up 65 cents at $38.89 a barrel by 0840 GMT (0440 EDT), while Brent LCOc1 was up 60 cents at $43.29. “It all depends on the European stock market,” Commerzbank oil analyst Carsten Fritsch told Reuters Global Oil Forum. “If stocks fall further, oil will follow suit.” (Oil rallies but still near 6–1/2-year lows)

4:49 pm EDT. Oil rose 3% while remain within their respective ranges. — Reuters “Oil rose as much as 3 percent on Tuesday as oversold conditions brought some buyers back to the market, but a lingering supply glut and worries about the slowing economy in top commodities consumer China kept crude prices near 6–1/2-year lows. Futures of U.S. crude and Brent, the global oil benchmark, are both down more than 16 percent on the month. About half of those losses were incurred in the past two sessions as plummeting Chinese equities sparked a selloff across global markets. Brent LCOc1 settled up 52 cents at $43.21 a barrel, after hitting $42.23 on Monday, its lowest since March 2009. “Forty dollars a barrel is not sustainable because only Middle East and some shallow water players can profit at that level,” Herve Wilczynski of Houston-based A.T. Kearney’s Oil & Gas Practice said, giving a reason for the rebound. (Oil recovers but still ends near six-and-a-half-year lows)

8/26/2015

Options traders seen buying insurance against deeper price falls. — Reuters “For most of this summer, the relentless decline in oil prices has raised only muted alarm in the options market. Even as crude lurched to six and a half year lows, the threat of a dramatic break far below $40 seemed remote. That changed abruptly on Monday, when a key oil option gauge surged to its highest since March as a quickening sell-off in the Chinese stock market sharpened fears about economic growth. Traders raced to buy insurance against a deeper, faster fall that could drag prices down to levels last seen in 2004. The CBOE crude oil volatility index — a broad gauge of activity based on trading in the U.S. Oil exchange traded fund — spiked more than 12 percent on Monday, its biggest gain since early July. Since early July, the index traded in a steady range, rarely moving more than 5 percent on any given day. The spike coincided with a similar surge in the better-known VIX index, Wall Street’s so-called “fear gauge,” as equity traders also scrambled to buy protection against future sharp moves in the market, largely to the downside (Oil options surge shows micro-market fears going macro)

Iran claims they will ramp-up production and reclaim market share faster than expected — Reuters “Iran will ramp up crude oil production and reclaim its lost share of exports shortly after international sanctions on the OPEC member are lifted, Iran’s Oil Minister Bijan Zanganeh said on Tuesday. “After lifting sanctions, Iran will take back the market share of more than 1 million barrels a day that it lost,” Zanganeh was quoted as saying by Shana, the oil ministry’s news agency. “To this end, in the first days after sanctions are lifted 500,000 barrels a day will be added to Iran’s production, and in a short time after that a further 500,000 barrels a day will be added.” Zanganeh also said Iran’s oil exports had increased by 15 percent in the first four months of the current Iranian year, which starts around March 20, compared to the same period last year. (Iran says will reclaim full oil market share post-sanctions : Shana )

Are oil fundamentals and physical markets out of sync? — Bloomberg “The global oil market is healthier than it looks, signaling that crude’s plunge to six-year lows has probably gone too far. While futures tumbled below $45 a barrel in London for the first time since 2009, Morgan Stanley and Standard Chartered Plc say other measures suggest physical markets for crude have stabilized or even strengthened in recent weeks. China, the world’s second-biggest oil consumer, will keep buying extra barrels to fill its strategic reserve this year, according to Goldman Sachs Group Inc. (Out in the Real World, Oil Market Is Much Better Than It Looks)

5:33 am EDT. Oil stabilizes after plunging near 2009 lows. Will WTI move above $40? — Reuters “Oil stabilized on Wednesday after China’s central bank moved to support the country’s economy, but prices stayed near 6–1/2-year lows as a heavy supply glut kept the market outlook bearish. “Oil is catching its breath a bit and seeing if markets have been oversold or not,” Capital Economics commodities economist Thomas Pugh said.Brent LCOc1 was unchanged at $43.21 a barrel by 0925 GMT, and U.S. crude CLc1 was up 5 cents at $39.36 a barrel. (Oil catches breath near six-and-a-half-year lows after falls)

4:20 pm EDT. Oil traded lower despite a sharp fall in U.S. crude oil stockpiles while maintaining their respective trading ranges. — Reuters “Crude inventories fell 5.5 million barrels in the week to Aug. 21, the biggest one-week decline since early June and counter to analysts’ expectations for an increase of 1 million barrels. U.S. crude imports fell last week by 740,000 barrels per day. Despite the fall in crude stocks, which was in line with the industry group the American Petroleum Institute’s late-Tuesday report, oil prices whipped lower following the data. U.S. crude futures fell 71 cents, or 1.8 percent, to settle at $38.60 a barrel, nearing the 6–1/2-year lows touched earlier this week. U.S. RBOB gasoline tumbled 8.37 cents, or 5.8 percent, to settle at $1.3549 a gallon as traders focused on rising fuel supplies, a worrying sign for U.S. demand. “The products builds are overwhelming the constructive crude draw,” said Scott Shelton, commodities specialist at ICAP in Durham, North Carolina. (U.S. fuel stocks rise, driving prices lower despite big crude draw)

8/27/2015

Physical and futures markets point to glut as the concern still remains — Reuters “When oil futures markets crash — as they have this summer — physical markets often move the other way as refiners jump on the opportunity offered by cheap oil to stockpile. With futures prices now hovering around six and a half year lows, the physical market would typically begin to strengthen and signal a potential rebound in futures — in a repeat of patterns seen during the previous crisis of 2008/09. But traders in barrels from Nigeria to Russia say the physical market remains stubbornly weak in further evidence a global crude oil glut is proving much more difficult to clear. “I can’t remember when during such a correction (in futures), differentials and values in the physical market stayed so weak. It tells me only one thing — the glut is still weighing on the market,” said a trader in the Mediterranean market. (Oil futures crash no help to sellers of the real thing)

Some U.S. Shale producers aren’t slowing production even at these prices — Reuters “Investors sent a surprising message to U.S. shale producers as crude fell almost 20 percent in August: keep calm and drill on. While most oil stocks have fallen sharply this month, the least affected by the slump share one thing in common: they don’t plan to slow down, even though a glut of supply is forcing prices down.Cimarex Energy Co. jumped more than 8 percent in two days after executives said Aug. 5 that their rig count would more than double next year. Pioneer Natural Resources Co. rallied for three days when it disclosed a similar increase. Shareholders continue to favor growth over returns, helping explain why companies that form the engine of U.S. oil — thefrackers behind the boom — aren’t slowing down enough to rebalance the market. U.S. production has remained high, frustrating OPEC’s strategy of maintaining market share and enlarging a glut that has pushed oil below $40 a barrel. West Texas Intermediate crude was trading at $39.58 a barrel, up 27 cents, at 9:29 a.m. London time. (For Oil Producers Cash Is King, and That’s Why They Just Can’t Stop Drilling)

Are dividend payments sustainable at these price levels — Bloomberg “hares of the largest oil companies have slumped so low it suggests investors expect the crash in crude prices to force cuts in dividends. History tells a different story. Oil’s collapse has driven the annual dividend yield at Royal Dutch Shell Plc to at least a 20-year high of 7.7 percent this week, compared with 4.4 percent for the benchmark FTSE 100 Index. The yield — the annual return divided by the share price — is also at a two-decade high at Exxon Mobil Corp. and Chevron Corp. “The market is telling us that investors think the dividend payouts may not be sustainable with oil at this level,” said Ahmed Ben Salem, a Paris-based analyst with Oddo & Cie. “History suggests otherwise. Oil companies are very attached to their dividend policy and if they were to cut it they’d lose a lot of investors.” Shell, Europe’s biggest oil company, has weathered market ups and downs for seven decades — including oil at less than $10 a barrel in the 1980s and 1990s — without cutting dividends. In the U.S., Chevron said last month it’ll keep increasing the annual payout — as it’s done for the past 27 years — even as profit dropped to a 12-year low. (Oil Investors Betting on Payout Cuts Ignore Years of History)

5:08 am EDT. Oil made a major upside move WTI back over $40; Brent nearing $45. The market is reclaiming its trading range, though the trend is still to the downside. — Reuters “Oil prices rose more than $1 a barrel on Thursday after a rally in equity markets and an unexpected fall in U.S. crude inventories, but worries over the health of the Chinese economy and a global oil glut kept the outlook uncertain. World stock markets rallied on Thursday as Chinese shares recovered on hopes that government measures to stimulate the economy would pay off, while the dollar also rallied as risk aversion eased. Oil markets moved up from six-and-a-half-year lows reached earlier this week, but investors are still worried about a huge oversupply in the oil market which is depressing oil for immediate delivery and filling stockpiles worldwide. “The trend is strong and down. However, do not be wrong footed by a correction higher,” PVM Oil Associates technical analyst Robin Bieber said. “Few markets head forever in one direction with no respite.” Front-month Brent, the global oil benchmark, was up $1.50 at $44.64 a barrel by 0900 GMT. U.S. crude was up $1.50 at $40.10 a barrel. (Oil prices rise more than $1 as equities rally)

4:08 pm EDT. The rally trade that has been working, on momentum from short-covering (see 8/18/2015), produced its biggest pay day as market soared 10%; expect profit taking as market normalizes. — Reuters “Oil rocketed more than 10 percent higher on Thursday, posting its biggest one-day rally in over six years as recovering equity markets and news of diminished crude supplies set off a short-covering scramble by bearish traders. Snapping back from a deep two-month slump that knocked U.S. crude to 6–1/2 year lows below $40 this week, oil climbed as world stock markets rose on hopes Chinese government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased. The rally was aided by news of a force majeure on Nigerian oil exports declared by Shell (RDSa.L) and private data indicating more drawdowns in crude this week at Cushing, Oklahoma, traders said. A big upward revision in second quarter U.S. economic growth helped. Front month Brent crude LCOc1 for October more than reversed a week’s worth of losses, rising $4.42 to settle at $47.56 a barrel, marking a 10.25 percent rise. Gains accelerated toward the close, locking in the biggest one-day jump since late 2008, when prices were bouncing back after the financial crisis. The contract traded on Monday at a March 2009 low of $42.23. “Whenever you have a short-covering rally in a bear market they’re always violent. I wouldn’t be surprised to see it continue another day or two,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York. As buying pressure eases, prices may test new lows, he added.” (Oil soars over 10 percent, biggest gain in six years as shorts scramble)

8/28/2015

The 9 percent drop in a key weekly measure of U.S. oil use, seen as anomaly — Reuters “A 9 percent drop in a key weekly measure of U.S. oil use, which helped fuel a sharp selloff in oil markets on Wednesday, is likely an unusually large blip in a volatile data series than a signal of waning demand. In its weekly petroleum report, the Energy Information Administration said total “Products Supplies” in the United States fell by almost 2 million barrels per day (bpd) to 19.4 million bpd in the week to Aug. 21, the biggest such weekly decline in the series since 1997. It was only the seventh time in the past decade that the figure has changed by more than 1.5 million bpd from one week to the next. A week earlier, it rose 1.3 million bpd to 21.4 million bpd, the highest figure since the end of 2007. This week’s decline was driven largely by a more than 500,000 bpd drop in gasoline supplied, and a more than 750,000 bpd slide in the “other oils” category, the data show.(Slump in weekly U.S. oil demand data may be short-lived blip)

Lessons from 1985/86 oil market. — Reuters “Saudi Arabia and its OPEC allies are counting on strong growth in demand coupled with slower growth in non-OPEC supply to rebalance the oil market in 2016. But the experience of the “lost decade” after prices slumped in 1986 suggests rebalancing could take longer than some OPEC members and market analysts expect. Following the price slump in 1985/86, the oil market struggled with persistent surpluses for much of the next 17 years. In real terms, oil prices did not rise above the 1986 crisis level on a sustained basis until 2003 (link.reuters.com/qax45w). Lower prices led to consistent strong growth in oil consumption after 1986, reversing the decline in demand that had occurred in the first half of the 1980s (link.reuters.com/bab55wandlink.reuters.com/dab55w). Non-OPEC supplies were flat between 1985 and 1989, as lower prices halted the exploration and production boom that had caused non-OPEC production to surge since 1976. (Lessons from the oil market’s ‘lost decade’: Kemp)

4:22 am EDT. Market back in their trading ranges; Brent ($45–50), WTI ($40–50) best to take profits and await the next opportunity (cycle — fall-bounce), the trend remains to the downside. — Reuters “Oil prices steadied on Friday after bouncing back from six-and-a-half-year lows on recovering equities markets, strong U.S. economic growth and news of low crude supplies from Nigeria.Oil saw its biggest one-day bounce since 2009 on Thursday, with North Sea Brent and U.S. light crude rising more than 10 percent. U.S. crude is on track for its first weekly gain in nine weeks, ending its longest losing streak since 1986. Global oil markets have fallen by a third since May and are still well under half their value a year ago thanks to a huge oversupply of fuel and sluggish demand. Worries over China’s economy have compounded the falls in recent weeks. But analysts said oil markets fell too far, too fast and a rebound was on the cards. A stock market rise, strong U.S. growth data and a pipeline outage in Nigeria provided an excuse for a recovery on Thursday, they added. “A short-covering rally, led by crude oil, pushed commodities higher across the board,” analysts at ANZ said in a note to clients. “Better-than-expected U.S. GDP numbers were the main spark, although the force majeure on … exports from Nigeria extended the gains.” Brent was down 40 cents at $47.16 per barrel by 0810 GMT. It settled $4.42 higher at $47.56 on Thursday. U.S. crude was down 30 cents at $42.26 a barrel, after ending up $3.96.(Oil steadies after strong gains as equities rally)

3:43 pm EDT. Oil up 6% as Brent and WTI move beyond the high end of their ranges; the market is definitely moving ahead of itself feeding off of climbing volatility. — Reuters “U.S. crude rose 6 percent on Friday, notching its first weekly gain in two months, after a rally in gasoline from refinery outages and concerns about strife in Yemen fed a second frenzied day of short-covering in oil. Market players also kept an eye on a storm that appeared to be approaching the oil-rich U.S. Gulf of Mexico. U.S. crude gained nearly 17 percent over two sessions, ending eight straight weeks of losses. It was also the second largest two-day rise for the market in 25 years, Reuters data showed. “A severely oversold and shorted oil market is creating a bid for covering in U.S. crude,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. U.S. crude’s front-month contract CLc1 settled up $2.66, or 6.3 percent, at $45.22 a barrel. At its session high, it was up more than $3, or 7 percent at nearly $46. For the week, it rose 12 percent. Brent, the global benchmark LCOc1, closed up $2.49, or 5 percent, at $50.05 a barrel, after hitting a session peak at $50.98. It gained 10 percent on the week. (U.S. crude jumps 6 percent in second day of short-covering frenzy)

8/31/2015

Funds taking trading advantage of the downward price trend — Reuters “The oil market’s 10 percent surge on Thursday offered a visceral reminder that many of its most active participants could not care less about global oil inventories, Saudi Arabia’s stressed finances or the American shale revolution. For dozens of commodity trading advisors (CTAs) from Rotterdam to Chicago, so-called “systematic” funds that typically use price charts or computer models to plot their trades, all that matters is finding a trend and sticking with it. That formula paid dividends for many this summer, as oil entered a nearly ruler-straight two-month decline. U.S. crude fell below $40 a barrel from $100 in June of last year. But with short positions at a near-record high as big hedge funds and speculators expected the supply glut to persist, it also made for an unruly exodus on Thursday. [O/R] While it is too early to say how many of those funds got out before the bounce, interviews with five of the largest or best-performing CTAs involved in the oil market this week show that the persistent downtrend has been friendly to most. (Trend-driven funds profit on oil’s slippery path)

Demand from developed nations expected to increase with oil prices at these levels — Reuters “Lower prices should help stimulate oil consumption in advanced economies, restoring some of the demand lost over the last decade, as the cost of crude soared from less than $50 to more than $100 per barrel. In the late 1980s and through the 1990s, strong growth in demand played a crucial role in rebalancing the market after the slump caused by the two oil shocks in the 1970s. Investments in energy efficiency and policies to encourage conservation ebbed as memories of the oil shocks receded and a long period of relatively low prices encouraged complacency. But it could prove much harder to stimulate increased oil consumption this time around because policies to encourage further reductions in fuel demand for years ahead are now entrenched in legislation. In the 1970s and 1980s, fuel efficiency mandates were enacted in response to concerns about energy prices and the security of oil supplies. (Efficiency mandates to cap recovery in oil demand: Kemp)

OPEC finally facing reality, expects prices to remain low through the end of the year see oversupply conditions persisting. — Reuters” A second oil price rout of 2015 has forced Arab OPEC members to cut their price expectations for this year, showing they are prepared to tolerate cheaper crude for longer to defend market share and curb rivals’ output. OPEC delegates, including those from core Gulf OPEC countries, see economic troubles in top energy consumer China as short term and unlikely to have much impact on demand for crude which will rise seasonally in the fourth quarter. But they also believe it will take more than just a few months for weak oil prices, which fell to a more than six-year low near $42 on Monday, to reduce supplies from higher-cost producers such as U.S. shale and stimulate demand. They expect the recent price drop will help reduce the crude oversupply towards the end of the year and thus lift oil prices slightly. The comments further indicate that the Organization of the Petroleum Exporting Countries is sticking to its policy of defending market share rather than cutting production to shore up prices — regardless of how low they would fall and how long it would take to balance the market. (Exclusive: Arab OPEC producers brace for oil-price weakness for rest of 2015)

5:01 am EDT. Oil prices fall back into trading ranges as markets move lower. — Reuters: “Oil fell below $49 a barrel on Monday after its biggest two-day rally in six years last week, pressured by a supply glut and renewed concern about a hard landing for China’s economy. International benchmark Brent crude climbed 10 percent last week but was still heading for its fourth straight monthly decline and has risen in only two of the past 14 months. At 0835 GMT, Brent LCOc1 was down $1.28 at $48.77 a barrel and U.S. crude CLc1, which had rallied 12 percent last week, dropped $1.00 to $44.22. “Volatility was high last week, so now we’re seeing some retracement — $50 is proving to be a resistance level,” said Olivier Jakob, analyst at Petromatrix, referring to Brent. “It is still a market which is very well supplied.” Volume is expected to be lower than normal on Monday because of a British public holiday. (Oil falls back below $49 as glut, China concerns weigh)

3:09 pm EDT. Market reversed direction on two reports; U.S. output estimates lowered by Energy Information Administration and the Saudis ready to talk about cutting output. Oil soared on the news, a combination of short-covering and bullish sentiment. OPEC talk proceedings will determine the markets’ behavior. We are in a wait and see period. — Reuters “Oil soared on Monday for a third consecutive day, with Brent crude rising more than 8 percent, as a downward revision of U.S. output data and OPEC’s readiness to talk with other producers helped extend the biggest price surge in 25 years. U.S. oil prices have skyrocketed more than $10 a barrel in three days, erasing the month’s declines as a series of relatively small-scale supply disruptions and output risks prompted bearish traders to take profits on short positions, which had been at near record highs a week ago. On Monday, prices fell initially but reversed course mid-morning to accelerate into the close. They were aided by a commentary in the latest OPEC Bulletin publication suggesting the group may be increasingly willing to talk to other producers about curbing output. “As the organization has stressed on numerous occasions, it stands ready to talk to all other producers. But this has to be on a level playing field. OPEC will protect its own interests,” according to the report. (Oil surges on lower U.S. output, OPEC talk; biggest bounce since 1990)

9/1/2015

A round of short-covering has push prices ahead of itself; the question is how much more covering will be transacted before the market settles down. — Reuters “Front-month Brent crude futures surged more than 10 percent higher yesterday, one of the largest daily percentage movements on record, as traders raced to cover short positions (link.reuters.com/teh55w). U.S. crude futures rose almost as much, with the October contract ending the day up by more than 9 percent. Various fundamentals have been cited as the trigger for the rally, including the rebound in global stock markets and the declaration of force majeure on some Nigerian crude exports. But whatever the initial cause, the main impetus driving the market higher was short-covering of futures and options. A bout of short covering had been expected at some point given the concentration of bearish bets on oil prices over the last two months (Oil prices surge in short-covering rally: Kemp)

5:13 am EDT. Oil demand concerns still an issue as China manufacturing sector contracted at the fastest pace in three years. Oil fell 3 percent in early trading. — Reuters “China’s official Purchasing Managers’ Index (PMI) fell to 49.7 in August from 50.0 in July, reinforcing concerns over the world’s second-largest economy. The figures helped spur a retreat in oil prices after three days of hefty gains. Investors took profits after Brent and U.S. crude both soared more than 8 percent on Monday, traders said. “It was primarily the China fear factor,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum. Benchmark Brent crude dropped $2.13 to a low of $52.02 a barrel, and was trading around $52.15 by 0815 GMT. On Monday, Brent climbed $4.10, or 8.2 percent, extending a rally from a 6–1/2-year low at just above $42 on Aug. 26. U.S. crude was down $2.00 at $47.20 a barrel. It settled up $3.98, or 8.8 percent, in the previous session. (Oil falls 3 percent on weak China factory data)

Fundamentals remain consistent, U.S. crude stockpiles forecast to increase by 700,000 barrels according to a Bloomberg survey before an Energy Information Administration report Wednesday. — Bloomberg “Futures dropped as much as 4.4 percent in New York after surging 27 percent in the three days through Monday, the most since August 1990. Prices fell as Chinese manufacturing slowed and U.S. crude inventories were forecast to have increased. Crude climbed Monday after OPEC said in its monthly bulletin that it’s prepared to speak with other producers about getting a “fair” price. Oil will remain at $40 to $60 a barrel into 2016 as rising crude supplies overwhelm demand, according to Ian Taylor, chief executive officer of Vitol Group BV, the biggest independent oil trader. The Organization of Petroleum Exporting Countries said it’s ready to talk to other global producers to achieve “fair and reasonable prices,” according to its bulletin published Monday. “The statement is really nothing new as OPEC said that non-OPEC also needs to do their part in rebalancing the market,” Giovanni Staunovo, an analyst at UBS AG in Zurich, said by e-mail. “It would be the first time that a policy change is communicated via the OPEC bulletin” instead of by officials, he said. (Oil’s Strongest Rally in 25 Years Stalls as Supply Seen Rising)

3:23 pm EDT. Oil traded 8% lower as bearish news dominated the day. Simply put the fundamentals haven’t changed to justify the run up in prices. However increasing volatility, 10% today, presents an ideal environment for traders to profit from intraday price changes. — Reuters “Oil prices tumbled 8 percent on Tuesday in volatile trading that sent Brent futures back below $50 a barrel as weak Chinese data revived concerns about demand for petroleum after crude’s three-day rally of more than 20 percent. China’s official Purchasing Managers’ Index (PMI) dropped to 49.7 in August from 50.0 in July, reinforcing fears of slowing growth. “It was primarily the China fear factor,” Carsten Fritsch at Commerzbank in Frankfurt told the Reuters Global Oil Forum. Other data showed U.S. manufacturing sector growth slowed in August to its weakest pace in more than two years, adding to concerns about faltering economic activity. Brent crude slumped $4.59, or 8.48 percent, to settle at $49.56 a barrel, after falling as low as $49.24. Brent rose $4.10, or 8.2 percent, on Monday, extending its rally to a third day as oil prices recovered from their lowest since the global financial crisis. Brent fell to a 6–1/2-year low at $42.23 on Aug. 24 as plunging Chinese equities markets battered global markets. U.S. crude fell $3.79, or 7.7 percent, to settle at $45.41, after dropping as low as $45.13 following an 8.8 percent gain on Monday. The CBOE’s crude oil volatility index rose nearly 10 percent intraday on Tuesday, trading at its highest since March. (Oil tumbles 8 percent as weak China data revives growth fears)

9/2/2015

Russia ready to discuss price stabilization with OPEC. — Reuters “Russian Deputy Prime Minister Arkady Dvorkovich said on Tuesday that Russia was ready to discuss measures aimed at oil price stabilization with the Organization of the Petroleum Exporting Countries and other key producers, TASS news agency reported. Dvorkovich was also quoted as saying that Russia would not deliberately cut production but if crude prices remained at current levels its oil output could fall, according to RIA news agency. (Deputy PM says Russia ready to discuss oil price stabilization with OPEC — reports)

Oil by rail still in a slump, however a small rail carrier seen bucking the trend. — Reuters “Big rail lines, such as Berkshire Hathaway-owned BNSF Railways or Union Pacific are losing what used to be their fastest-growing source of new traffic; refiners such as PBF Energy are left with millions of dollars worth of unused rolling stock; and leasing firms such as Trinity Industries and Greenbrier Companies Inc have seen monthly rates fall to a third of peaks above $2000 per car. There is one winner, though. Short-line railroads from Utah to Pennsylvania are making millions of dollars every month by providing refiners, producers and traders a place to park their unused tank cars. Outside this town of 14,000, along sidings that once helped ship vast volumes of coal, lumber and other raw materials during the region’s industrial heyday, the Western New York and Pennsylvania Railroad is now collecting fees for about 800 cars. “They’ve been here for about five months, and we hear rumors more are coming,” Carl Belke, chief operating officer for the line, told Reuters. WNY&P’s main rail line is about 190 miles (306 km) long. By comparison, BNSF has 32,500 route miles in 32 states. (Big Rail’s little cousins find boon in U.S. oil-by-rail bust)

New Rig technology spurs production — Bloomberg “Have you ever seen an oil rig walk? Some of the newest rigs can travel hundreds of yards to the next well under their own power, lurching along like 150-foot-tallrobots on pneumatic legs that raise the equipment five inches at a time, nudging forward at about a foot per minute. While that sounds slow, it is faster and cheaper than dismantling a rig and trucking the parts to a new site nearby. More efficient drilling rigs that cost a third less than just a year earlier are changing the face of the U.S. shale industry, helping boost per-rig output in the four largest fields by at least 40 percent since the crude price plunge began in 2014. While helping producers pump more oil, the new rigs have a downside. Companies such as Helmerich & Payne Inc., Nabors Industries Ltd. and Patterson-UTI Energy Inc. that provide the equipment face investor concern that the improvements they’ve made might translate into fewer sales in the future. (Walking Oil Rigs Spur Cheaper, Quicker Drilling in Supply Glut)

4:37 am EDT. Oil fell 2% in early trading as the market anticipates the release of the Official inventory data by the U.S. Energy Information Administration later today. — Reuters “ Oil prices fell 2 percent in Asian trade on Wednesday, as a stronger-than-expected build in U.S. crude oil stocks and weaker U.S. manufacturing data fueled a rout in prices that started in the previous session. Brent and U.S. crude finished around 8 percent lower on Tuesday to end a 25 percent three-session surge, the largest three-day gain since 1990. That came after oil prices dropped to their lowest in six-and-a-half years last week. This roller-coaster volatility could continue especially if there are similar wild swings in the equity markets, said Ric Spooner, chief market analyst at Sydney’s CMC Markets. (Oil prices extend losses on U.S. oil inventory, manufacturing data)

3:26 pm EDT. Oil up as higher volatility presented a fertile trading environment. — Reuters ” Oil prices ended nearly 2 percent higher on Wednesday in volatile trade as rallying equities on Wall Street pulled crude up from lows after futures sank on concerns about global oversupply. U.S. stocks rose more than 1 percent in afternoon trading as technology stocks led a rebound from Tuesday’s steep losses and as China’s move to again support its financial markets eased investor concerns. “Looks like risk-on trade with a rising tide lifting all boats,” John Kilduff, partner at Again Capital LLC in New York, said. Oil continued its recent turbulent trajectory on Wednesday following Tuesday’s 8 percent slide that ended a 25 percent three-session surge of frenzied short-covering after a drop to 6–1/2-year lows early last week. Brent October crude rose 94 cents to settle at $50.50 a barrel, having recovered from a $47.74 low. It reached $51 post-settlement. U.S. October crude rose 84 cents to settle at $46.25, after falling to $43.21 and reaching $46.77. (Oil turns higher as Wall Street rally offsets inventory rise)

9/3/2015

Oil price crash drives demand for storage tanks in the Caribbean — Reuters “Crude inventories have been building up in recent months in most terminals, leaving limited space for subleasing, which could imply higher rents, he said. “We are at 100 percent capacity”, said a spokesman from NuStar Energy, referring to bookings at the company’s terminal in St. Eustatius, with tankage for 13 million barrels. Nustar, which in 2014 gained Venezuela’s state oil company PDVSA as a customer, is already in discussions to extend a contract set to expire in early 2017, he added. Buckeye Partners, which has about a third of the region’s storage capacity excluding tanks for refineries, has already leased out tanks it is adding in St. Lucia. It is also converting product tanks for crude in the Bahamas. “We expect those growth projects to be fully operational later this year. And those are all contracted under term agreements,” Khalid Muslih, head of Buckeye’s terminals business, said on the company’s July results call. PDVSA, Brazil’s Petrobras and Royal Dutch Shell regularly use Buckeye’s terminals in St. Lucia and the Bahamas, according to Thomson Reuters trade flows data.( Oil price crash prompts scramble for Caribbean storage tanks)

China may launch a global crude oil futures contract as early as October to compete with the existing London Brent and the U.S. WTI benchmarks — Reuters “The long-awaited crude contract would better reflect China’s growing importance in setting crude prices, as well as boost the use of the yuan in which it will be traded, although volatile global trading conditions and China’s recent interference in stock markets have raised some concerns. The Shanghai International Energy Exchange, also known as INE, circulated a draft of the futures contract to market participants last month, saying the launch could happen as early as October, the sources who saw the draft, told Reuters. China, the world’s second-biggest oil consumer, has already begun to loosen its grip on the physical oil sector this year by granting quotas for imported crude to privately-owned refiners for the first time, surprising market participants with the speed of reform.(China oil market reform paves way for new crude benchmark)

4:46 am EDT. Oil trading lower on buildup of U.S. inventory numbers though the market remains in trade mode. The fundaments still point to a downward price trend, the question is will the market being to stabilize or remain in trade mode (high volatility)? — Reuters “Crude oil prices softened on Thursday after a surprise build in U.S. inventory levels and on a firm dollar, although stronger equity markets helped support commodities. A respite from bearish economic news in China, closed for public holidays for the rest of the week, also helped stabilize oil prices that have seen volatile swings over the past two weeks. Brent was 20 cents lower at $50.30 a barrel by 0840 GMT, having gained 94 cents in the previous session. U.S. crude was just 5 cents lower at $46.20 a barrel, up from the day’s low of $45.65, after settling up 84 cents on Wednesday. Olivier Jakob, managing director of PetroMatrix, said the market was quietening down after the extreme moves, with public holidays in the world’s two largest oil consuming countries — the United States and China — helping to temper the appetite for risk taking. “We made a big move in flat prices, so we’re probably starting to stabilize,” Jakob said. He added that the U.S. Labor Day long weekend would “lessen a little bit the appetite for flat price trading.” (Oil down on stock builds, equity rally aids)

2:08 pm EDT. Oil seemly correlated with U.S. Equities lived up to expectation as prices followed a volatile path rising earlier then retreating, profit taking as market remained in trade mode. — Reuters” Oil prices seesawed on Thursday in line with volatile U.S. equities, rising early as market bulls supported prices for a second day, then retreating, with global benchmark Brent falling into negative territory. Despite data on Wednesday showing a huge build in U.S. crude inventories, oil rallied early in New York trade as investors regained their appetite for risk due to a respite in bad news out of China and the potential for more European monetary easing. But oil prices came sharply off session highs by afternoon as stocks on Wall Street pared their early advance. Brent gave back all its gains and turned lower. “Early strength and now a late fade,” Donald Morton, an oil trader with Fairfield, Connecticut-based Herbert J. Sims & Co., said, describing the action. Brent’s front-month contract LCOc1, was down 20 cents at $50.30 a barrel by 1:42 p.m. EDT. Earlier in the session, it had risen more than $2. U.S. crude’s front-month CLc1 was up 15 cents at $46.40, versus its session high above $48. (Oil seesaws, Brent turns lower following Wall Street )

9/4/2015

Oil markets’ wild ride, over the last few days, perplexing traders and analysis. — Reuters” Crude oil prices have been on a rollercoaster over the last four trading sessions that has seen some of the highest volatility in a quarter of a century. The market is providing a brutal reminder of the extreme side of commodity pricing, leaving many analysts and traders struggling to identify a safe strategy. Front-month Brent crude futures rose by more than 10 percent on Thursday, 5 percent on Friday and 8 percent on Monday, before plunging by more than 8 percent on Tuesday. To put that in context, the percentage daily price movements were 4.6 standard deviations away from the mean on Thursday, 2.4 standard deviations on Friday, 3.7 on Monday and 3.8 on Tuesday. If price changes followed a normal distribution, a move of 3.5 standard deviations should occur only once every eight years and a move of greater than 4.5 standard deviations should happen once every six centuries. The occurrence of three exceptional moves in the space of just four trading sessions underscores changes in oil prices do not follow a normal or Gaussian distribution, named after the 19th century mathematical genius Carl Friedrich Gauss. (Oil market takes a walk on the wild side (again): Kemp)

AS summer driving season and autumn refinery maintenance commence what’s the impact on U.S. stockpiles — Reuters” U.S. crude oil stocks are set to rise in the next few months as the summer driving season ends and refineries enter the autumn turnaround season, according to many analysts and traders. Rising stocks will emphasize continuing oversupply in the oil market and are expected to put renewed downward pressure on crude oil prices before the end of the year. The problem with this argument is that there is no evidence that the end of the driving season and autumn refinery maintenance, events which happen every year, normally cause crude stocks to build. Crude stocks and refinery throughput both exhibit distinct seasonal patterns which are evident in the weekly petroleum status reports published by the U.S. Energy Information Administration. But the end of the driving season and the onset of refinery maintenance have not automatically translated into a rise in stocks over the last decade. Between 2005 and 2014, stocks were generally flat between the middle of August and the middle of October, and fell between the middle of October and the end of December. (Maintenance season need not mean higher U.S. crude stocks: Kemp)

U.S. Refineries running at and overcapacity (100%) as demand for gasoline increases but is that the main reason? — Reuters “The refinery is operated by a Delta subsidiary, Monroe Energy, which declined to comment.The increased run rates are the result of, among other factors, the replacement and widening of pipes to allow for greater flows, the source said. Typically, crude units can safely run above their stated capacity, but processing units are limited by a number of factors, including piping and the type of crude, experts say. Delta is not alone. HollyFrontier Corp. ran its refineries in Tulsa, Oklahoma and El Dorado, Kansas at rates above 100 percent in the second quarter, Chief Executive Mike Jennings told analysts a month ago. In the entire Midwest region, refiners ran at 100.3 percent of capacity in the week to July 31, EIA data showed, matching their peak from a year earlier. U.S. motorists, encouraged by cheap gasoline prices, drove a record 275 billion miles in June, surpassing the previous peak from 2007. Gasoline demand, which accounts for a tenth of world oil demand, rose 4 percent that month from a year ago, data showed this week. “Demand for gasoline in the United States is high, perhaps as high as its ever been,” said John Auers, executive vice president at refinery consulting firm Turner Mason. “Refiners are taking advantage of it.”( Delta’s Philadelphia refinery running at 110 percent, margins swell)

4:47 am EDT. Oil lower in early trading, awaiting job numbers, will volatility rein or fundamentals reclaim the market? — Reuters “Oil prices fell on Friday, pushing benchmark North Sea Brent crude down towards $50 a barrel, after a cut in European growth forecasts heightened worries over the outlook for demand at a time of huge oversupply. The European Central Bank said on Thursday that economic troubles in China and emerging markets could drag the 19-member euro zone into deflation in the coming months. The ECB now sees the euro zone economy growing 1.4 percent this year, below its previous 1.5 percent projection. News of an attempted attack on a security facility in Saudi Arabia, the world’s biggest oil exporter, dampened some of the losses. Brent crude for October LCOc1 was down 20 cents a barrel at $50.48 by 0840 GMT, after touching an intra-day low of $49.68. U.S. crude CLc1 was down 30 cents at $46.45 a barrel. “There is still a supply-demand imbalance and on top of that is the overhang in the market,” said Abhishek Deshpande, oil analyst at Natixis in London. “The pressure will remain on oil prices.” (Brent crude oil slips towards $50 on demand concerns)

4:52 pm EDT. Oil ended lower as traders took profits before the long weekend — Reuters “Crude futures fell about 2 percent on Friday as traders paid little heed to a drop in the number of U.S. rigs drilling for oil and focused instead on a supply glut and declining stock prices on Wall Street. Trading volumes in crude were lighter than on Thursday, with players appearing hesitant to put on big positions ahead of the U.S. Labor Day holiday weekend. “I get the feeling the longs do not want to wait out the three-day weekend,” said Tariq Zahir, a trader in crude oil spreads at Tyche Capital Advisors in Laurel Hollow, New York. Despite the day’s drop, U.S. crude prices notched a second straight weekly gain, helped by gains in the past two sessions. U.S. crude CLc1 settled down 70 cents, or 1.5 percent, at $46.05. It was up 1.7 percent on the week, after last week’s near 12 percent gain, the biggest since 2011. Brent LCOc1, the global oil benchmark, settled down $1.07, or 2.1 percent, at $49.61 a barrel. It was down 0.9 percent on the week. (Oil falls with Wall St.; drop in U.S. drilling rigs ignored)

9/7/2015

Canadian oil production expected to increase — Bloomberg “The last place oil producers want to be when prices plummet to profit-demolishing lows is midstream on a billion-dollar project in one of the costliest parts of the planet to extract crude. Yet that’s exactly where half a dozen oil sands operators from Suncor Energy Inc. to Brion Energy Corp. find themselves with prices for Canadian oil now hovering around $30 a barrel. While all around them projects have been postponed or canceled, their investments were judged too far along when the oil game suddenly moved from offense to defense. These projects will add at least another 500,000 barrels a day — roughly a 25 percent increase from Alberta — to an oversupplied North American market by 2017. For companies stuck spending billions in a downturn, the time required to earn back their investments will lengthen considerably, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP. (The Oil-Sands Glut Is About to Get a Lot Bigger)

7:18 am EDT. Oil trading lower with U.S. markets closed. — Reuters “Oil fell on Monday as Chinese equities weakened, with a firmer dollar and global oversupply weighing on prices. The U.S. Labor Day holiday helped keep trade thin. China’s main indexes closed down on Monday as investors sold shares in the aftermath of a four-day market holiday, during which further restrictions on futures trading were announced. “Oil is only taking its cues from China this morning,” SEB chief commodity analyst Bjarne Schieldrop said. “The price is taking little notice of constructive data like stronger (European) equities, stronger base metals and last Friday’s fall in U.S. rig count,” he said. Brent crude for October was down 75 cents at $48.86 a barrel by 1030 GMT. U.S. crude for October was down 70 cents at $45.35.” (Oil prices fall on China equity losses)

3:02 PM EDT. Oil closed 3% lower on fundamentals. — Reuters “Oil fell more than 3 percent on Monday, hit by weaker Chinese equities and record North Sea crude production data that added to global oversupply concerns. China’s main indexes closed down on Monday as investors sold shares in the aftermath of a four-day market holiday, during which further restrictions on futures trading were announced. “Oil is only taking its cues from China,” SEB chief commodity analyst Bjarne Schieldrop said. “The price is taking little notice of constructive data like stronger (European) equities, stronger base metals and last Friday’s fall in U.S. rig count,” he said. Brent LCOc1 futures contracts for October fell $1.98 to settle at $47.76 a barrel, a 3.73 percent loss. U.S. crude CLc1 fell $1.80 to $44.25 per barrel by 2:48PM EST (1848 GMT), with trading volume of around 75,000 lots less than one-quarter the norm due to the U.S. Labor Day holiday. (Oil falls more than 3 percent on oversupply, China equity losses)

9/8/2015

Gulf heavyweight crude producers to meet in Qatar on Thursday (price drop is not on the agenda) — Reuters “Gulf oil ministers are due to meet this week in Qatar for an annual meeting, in the first gathering by the heavyweight crude producers since the latest slide in oil prices. But while the price drop is not on the agenda for the scheduled meeting of the six-nation Gulf Cooperation Council (GCC) — Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman, it will be a chance for oil ministers to air views on the market. Comments by Saudi Arabia Oil Minister Ali al-Naimi, in particular, will be closely scrutinized. The oil minister of the world’s top crude exporter has made no public comment on prices since June 18, when the oil price was above $63 and he said he was optimistic about the market in coming months. Oil prices have more than halved since peaks hit in summer last year due to abundant supplies and a policy change by producer group OPEC to defend market share and discourage competing supply from rival producers, rather than cut its own output. Saudi Arabia and its Gulf allies led the policy shift. (Gulf oil ministers to meet on Thursday amid price slide)

Iran hopes to tap EU market through Spain — Reuters “Iran hopes to bring its gas to the European Union by shipping liquefied natural gas (LNG) to Spain, its oil minister was quoted as saying on Monday at a news conference with his Spanish counterpart in Tehran. Iran has no ability to freeze its gas into LNG for tanker exports beyond the reach of pipelines, after several projects stalled due to Western sanctions that forced foreign companies to pull out of Iran. Experts reckon it will take around two years for that to happen, if partners are found. “Talks between Iran and Spain on this topic will continue,” Bijan Zanganeh said, after meeting Spain’s Minister of Industry, Energy and Tourism Jose Manuel Soria, Iran’s oil ministry’s news agency Shana reported. Shana quoted Soria, part of a Spanish delegation to Tehran, as saying his country could “act as a channel for Iran’s gas exports to Europe”. He did not elaborate and the ministry in Madrid declined to confirm the comment. (Iran hopes to export gas to EU through Spain)

Fund Managers exit Short position in WTI by 13 % weekending Sep 1, bullish wagers also declined. Price trend remains to the downside. — Bloomberg “Oil bears are cashing out. Hedge funds slashed short positions in West Texas Intermediate by 13 percent in the week ended Sept. 1 as the largest three-day rally in 25 years sent crude up by almost $10 a barrel before it dropped again. It was the biggest liquidation of bearish bets since May. The week made for a wild ride in the crude markets as volatility jumped to a five-month high amid anxiety about a stubborn worldwide glut of crude. Rising production from Iran and the U.S. combined with weaker demand from China put an end to three days of gains on Sept. 1, the last day of the report week, as oil plummeted 7.7 percent. “There’s a lot of nervousness in this market,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Everyone is retrenching in the face of this extreme volatility.” Money managers cut short positions, or bets that prices will fall, by 21,009 futures and options combined, U.S. Commodity Futures Trading Commission data showed. Net-long positions increased by 16,826 contracts as bullish wagers also declined. (Oil Bears Cashing Out From Crude Market’s Roller-Coaster Ride)

5:15 am EDT. With U.S. markets back we are more than likely to be into trade mode, a pick-up in volatility. — Reuters “Oil prices stabilized on Tuesday as strong German economic data and a year-on-year increase in Chinese crude imports balanced concerns about Asia’s economic growth and global oil oversupply. German exports and imports hit record highs in July. Exports climbed 2.4 percent on the month to 103.4 billion euros ($115.6 billion) while imports grew by 2.2 percent to 80.6 billion euros. Traders said the strong German data had helped counter a further darkening of Asia’s economic outlook. Brent futures LCOc1 rose 59 cents to $48.22 a barrel by 0853 GMT. U.S. crude CLc1 was at $44.75 a barrel, down $1.30 since Friday’s close, weighed down by the closure of the largest crude distillation unit at ExxonMobil Corp’s (XOM.N) 502,500-barrels-per-day (bpd) Baton Rouge, Louisiana, refinery. U.S. markets were closed on Monday for the Labor Day holiday, meaning there was no official close for U.S. crude. Brent was down $1.39 from its Friday close. (Oil stabilizes on German, Chinese data; oversupply weighs)

4:41 pm EDT. Markets closed mixed, Brent up 4% and WTI lower on volatile trading. Brent seemly correlated to U.S. Equites; watch the spread (Brent, WTI) — Reuters “Brent crude settled up 4 percent on Tuesday as strength in stock markets helped the global oil benchmark recoup the bulk of its losses from the previous session. U.S. crude fell slightly in volatile trade, reopening from Monday’s U.S. markets closure for the Labor Day holiday to news of refinery outages. The divergence between Brent and U.S. crude could grow if weekly crude inventories cited on Wednesday by industry group American Petroleum Institute (API) turn out to be higher than expected by the market. Analysts polled by Reuters expect U.S. crude stockpiles to have risen by 200,000 barrels for the week ended Sept. 4. API’s weekly inventory report, usually due on Tuesdays, will be issued on Wednesday this time due to Monday’s Labor Day holiday. The official report on weekly stockpiles, due on Wednesdays from the U.S. Energy Information Administration, will be delayed till Thursday. (Brent settles up 4 percent, riding equities rally; U.S. crude down)

9/9/2015

Oil Production in the North Sea highest since May 2012; Nigeria will ship the most crude in more than three years in October; Seen as pressuring Brent prices further. — Bloomber “Output of North Sea grades will reach the highest since May 2012 next month, according to loading programs compiled by Bloomberg. Supplies from Nigeria, the biggest oil producer in Africa, are set to reach a level not seen since August of that year.“It’s directionally bearish for crude,” Vikas Dwivedi, an analyst at Macquarie Capital Inc. said by e-mail. “The large loading programs will need buyers.” (Surging Atlantic Crude Adds to Seasonal Pressure on Prices )

Canadian Producer flips the switch as oil glut pressure prices –Reuters” Inside a six-foot-square wooden shed that houses a basic hydraulic pump, the Gear Energy Ltd employee demonstrates how shutting down a conventional heavy oil well in this lesser-known Canadian oil patch is as simple as flipping a switch. His company has already done so hundreds of times this year, making the Lloydminster industry among the first in the world to yield in a global battle for oil market share that has sent crude prices tumbling to six-year lows. Gear Energy Ltd, has idled up to 500 of its least efficient wells this year, many of them in the past weeks. Some cost of up to C$28 ($21.22) a barrel to operate. It costs another C$7 in royalty and transportation fees to get the crude, among the densest in the world, to regional rail hubs — where it was fetching barely $20 a barrel during last month’s lows. “We ask every day: is this well making money today? Will it make us money going forward?” says Roy. (In Canada’s prairies, crude slump puts first oil patch in reverse)

Russian Oil Producers outperforming Western counter-parts — Bloomberg “On measures including cash flow, profit margins and share prices,OAO Rosneft, Lukoil PJSC — Russia’s two largest oil producers — and OAO Gazprom Neft are performing better than Royal Dutch Shell Plc, BP Plc or Exxon Mobil Corp.“When oil goes down, the western companies are hurt more than the Russian companies,” said Maxim Edelson, a senior director at Fitch Ratings in Moscow. Because Russian tax rates adjust automatically to lower prices the nation’s companies enjoy a buffer to the slump in crude while “a lot of the hit is taken by the government,” he said. (Move Over Exxon, Russian Drillers Are Oil World’s Top Performers)

Shell’s merger with British rival BG Group incorrectly timed as oil prices continue to fall, valuation fell from $72 billion to around 38 billion. — Reuters “A look at valuations illustrates how regulatory concerns and stubbornly low energy prices have stoked investor anxiety over Royal Dutch Shell’s planned takeover of British rival BG Group. Hailed as an audacious and industry-changing merger when it was unveiled in April, the headline value of the deal has slipped from 47 billion pounds ($72 billion) to around 38 billion because of the lower price of Shell shares, which closely track oil prices. Concerns that the Australian and Chinese regulators could set high hurdles and, more broadly, that the persistently low oil prices could yet lead Shell to rethink the deal are dampening sentiment. That has left BG shares trading at a discount to the Shell cash and share offer. The wider malaise infecting the global equity market in recent weeks has also contributed to heightened caution among investors. (Regulatory worries, energy prices take shine off Shell-BG deal)

3:01 am EDT. Oil mixed in early trading; let’s see if correlation with Equites holds. Keep an eye on the spread and volatility as market remains in trade mode. Inventory report due– Reuters “Crude oil prices stabilized on Wednesday as Asian stock markets caught a tailwind from a strong performance in the United States and Europe, although fuel markets remained generally dogged by oversupply.nAsian shares extended a global rally on Wednesday, with markets in China stabilising and Japanese stocks posting their biggest one-day gain since the height of the global financial crisis in 2008, and traders said the more upbeat sentiment had flowed into oil markets. The Brent global crude benchmark was trading at $49.64 per barrel at 0654 GMT, up 12 cents from its last settlement after jumping 4 percent in the previous session. “Stabilisation in Chinese equity markets has… played an important role,” ABN Amro said on Wednesday, referring to firming Brent. (Oil markets rise as Asian stocks soar)

9/10/2014

A closer look at U.S. oil inventory numbers. — Reuters “Commercial crude stockpiles had climbed by more than 100 million barrels since the end of 2004, almost 38 percent, according to annual data published by the U.S. Energy Information Administration (EIA). By the end of April 2015, commercial stocks had climbed by another 105 million barrels to a record 491 million as the oversupply in the global oil market ended up at refineries and tank farms. Even after a strong summer driving season, with U.S. refineries processing record amounts of crude into gasoline and other fuels, stockpiles remained at 455 million barrels at the end of August. But the focus on rising inventories as a sign of the cyclical supply-demand imbalance has obscured deeper structural changes which have resulted in the industry holding higher stocks than a decade ago” (U.S. crude inventories might be tighter than they look: Kemp)

How China’s trading influences the Oil market. — Reuters “PetroChina’s trading arm Chinaoil and Sinopec’s Unipec have in the past year established a position of dominance in the daily price assessment for benchmark Dubai crude, used by Middle East producers such as Saudi Arabia, Iran and Iraq to price their crude cargoes to Asia. Aggressive trading by the two, heavy buying by Chinaoil and selling by Unipec, has made Middle East crudes more expensive relative to oil from the Atlantic basin, such as crudes from Angola, Nigeria and Latin American producers such as Brazil. As a result, life has become more difficult for everybody from producers to traders to refiners outside of China. For top exporter Saudi Arabia, the shifting dynamic has made it difficult for them to keep their official selling price at a level that ensures they can maintain market share. For traders such as Glencore, Trafigura, Mercuria and others they are no longer market makers and are being forced to accept prices that squeeze their margins, and they are finding it harder to source physical cargoes. (Can Middle East oil pricing be fixed after China breaks it?: Russell)

Continental Resources Inc cut its 2015 budget again. — Reuters “Continental Resources Inc cut its 2015 budget for at least the third time on Tuesday, as it grapples with the reality of cheap crude, but North Dakota’s second-largest oil producer said it still expects double-digit production growth this year. Founder and Chief Executive Harold Hamm canceled all of Continental’s oil hedges last fall after calling OPEC leader Saudi Arabia a “toothless tiger” in a bet that a price rebound would soon materialize. But no such sustained rebound has yet occurred, forcing thousands of layoffs across the oil industry and leading many of Continental’s peers to curb their own spending. Globally, oil companies have cut their budgets by about 20 percent this year, analysts at Barclays, the investment bank, said on Tuesday. But U.S. output has stayed quite resilient thanks to a rise in well productivity. Continental hopes to save as much as $350 million this year by reducing its rig count in North Dakota from 10 to eight and temporarily ending fracking of most wells. The company now plans to spend $2.35 billion to $2.4 billion this year, down from a previous forecast to spend $2.7 billion. “We are reducing capital expenditures to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve,” Hamm said in a statement. (Humbled by cheap oil, Continental Resources trims budget)

5:00 am EDT. Oil up in early trading, ahead of U.S. inventory data; the market remains in a trading environment; the net price move is 3% down for the week thus far. — Reuters” Crude prices have fallen more than 3 percent this week on persistent worries over global demand and a supply glut. Benchmark crude futures nevertheless posted modest gains ahead of the U.S. Department of Energy (DoE) oil stocks report at 1500 GMT, which is expected to show a rise, according to a Reuters survey. Brent crude futures rose 21 cents to $47.79 per barrel by 0845 GMT. U.S. crude futures were up 35 cents at $44.50 a barrel. “A lot of this rally will be profit-taking ahead of the DoE numbers,” said Hamza Khan, commodities analyst at Netherlands-based ING Financial Markets. (Oil prices rise ahead of U.S. data, Asia weighs)

Oil closed lower in an ideal environment for traders, high volatility; however concerns surrounding fundamentals remain the same with price pressure downward.

9/11/2015

Saudis Oil production slowed slightly in August. Reuters “Saudi Arabia’s crude oil production fell slightly by 100,000 barrels per day (bpd) in August, an industry source told Reuters on Wednesday, but still maintained historically high output levels in line with a strategy of defending market share. The world’s top oil exporter pumped 10.26 million bpd in August, while crude supplied to the market was at 10.18 million bpd, down by about 78,000 bpd from July, the industry source said. Supply to the market, both domestically and for export, may differ from production depending on the movement of oil in and out of storage. “Production is‎ based on customers’ needs. It is an indication that Saudi is trying to match the customers’ needs,” the source said. (Saudi Arabia August oil output dips slightly: industry source)

Iran puts oil on sale, in Asia, to gain market share. — Bloomberg “Iran cut pricing for all its oil grades for sale to Asia next month, according to two people with knowledge of the decision, trimming the premium on its main Light crude over the comparable Saudi blend to the narrowest since the end of 2012. National Iranian Oil Co. will sell the Light blend at a premium of 25 cents a barrel more than the regional benchmarks, according to the people, who asked not to be identified since the information is not yet public. No one answered a call to NIOC’s public relations department in Tehran on Thursday, the first day of the country’s weekend. Saudi Arabia, the world’s largest crude exporter and biggest member of OPEC, cut the premium on its main light oil grade to Asia by 30 cents a barrel to 10 cents a barrel more than the regional benchmark, it said on Sept. 4. Today’s pricing from NIOC puts Iran’s Light crude at a premium of 15 cents to the Arab Light blend from Saudi Arabia. That’s the lowest premium since it stood at 10 cents in December 2012, according to data compiled by Bloomberg. (Iran Said to Cut Pricing for All October Crude to Asia)

Saudis see no need for Oil summit, maintaining their strategy. — Reuters “Top oil exporter Saudi Arabia sees no need to hold a summit of producing countries’ heads of state if such discussions would fail to produce concrete action towards defending oil prices, sources familiar with the matter said on Thursday. The comments followed a meeting of Gulf Arab oil ministers with Qatar’s emir in Doha, at which a Venezuelan proposal for an OPEC and non-OPEC summit was discussed. Oil prices have more than halved since summer last year on an oversupplied market as well as a decision by OPEC to defend market share and discourage competing supply sources, rather than cut its output in the face of cheaper crude. Riyadh believes it is best not to interfere in the market at present, the sources told Reuters on condition of anonymity. (Saudi sees no need for oil summit, best leave market alone: sources)

The Energy Information Administration reported on Thursday, U.S. crude stocks rose last week as refinery runs and imports fell, while gasoline and distillate inventories increased — Reuters “Crude inventories rose by 2.6 million barrels to 458 million barrels in the last week, compared with analysts’ expectations for an increase of 933,000 barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 897,000 barrels to 56.41 million barrels, EIA said. The rise in crude inventories occurred even though U.S. crude imports fell last week by 396,000 barrels per day (bpd) to 6.98 million barrels. U.S. and Brent crude initially pared gains after the report, but both contracts were being lifted on Thursday by a jump in U.S. equities markets and by news that a congressional subcommittee had passed a bill to repeal the U.S. ban on oil exports. [.N] “The inventory numbers were a little more bearish than the street was looking for, with builds across the board in crude, gasoline and heating oil,” said Tariq Zahir, manager at Tyche Capital Advisors in Laurel Hollow, New York.” (U.S. crude stocks rise more than expected: EIA)

Some of U.S. Crude Produces are cutting 2016 Budgets as prices weight on their balance sheets. — Reuters “A rash of bleak commentaries from CEOs this week marks one of the earliest times in a calendar year that oil producers have laid out rough sketches for the following year’s spending. Gone, for now at least, are the high-rolling ways of an industry that as recently as last year was flush with cash. Here to stay, it seems, is constant belt-tightening, though executives still think they will be able to pump more oil. In all, North American oil companies should cut their budgets by as much as 15 percent next year, analysts at Barclays estimate. “No cost is too small for us to scrutinize,” Marathon Oil Corp Lee Tillman told the Barclays Energy Power Conference on Wednesday. “We continue to be laser-focused on reducing costs across all areas of our business.” (U.S. shale giants turn to 2016 with somber outlook)

5:33 am EDT. Oil lower in early trading, a good time to take profits, as Goldman joins the list of Banks forecasting prices to remain low thru 2016. — Reuters “Oil prices fell on Friday after Goldman Sachs cut its crude forecasts, citing global over-supply and concerns over the health of the Chinese economy, and after Saudi Arabia dismissed the idea of an oil producer summit. Joining a long list of banks cutting their price forecasts, Goldman Sachs on Friday reduced its 2015 U.S. crude oil forecast to $48.10 a barrel, down from $52. The bank lowered its 2016 forecast for U.S. crude to $45 from $57. Goldman cut its 2015 Brent price forecast to $53.70 a barrel from $58.20, and said it saw 2016 Brent prices at $49.50, down from its earlier $62 forecast. Brent for October was down $1.00 at $47.89 a barrel by 0830 GMT. U.S. crude, also known as West Texas Intermediate or WTI, was down $1.05 at $44.87 a barrel. Investors largely ignored a relatively bullish report from the International Energy Agency (IEA). The agency said a move by the world’s big oil exporters in OPEC, led by Saudi Arabia, to defend their market share by not reducing production appeared to be working. “Oil’s price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea,” the IEA said in its monthly report. (Oil falls after Goldman cuts forecasts)

3:27 pm EDT. Oil fell 2% dominated by oversupply and stagnate global growth concerns. — Reuters “Crude futures fell 2 percent or more on Friday after influential Wall Street trader Goldman Sachs cut its outlook on oil, but positive sentiment from rebounding U.S. stock prices and less drilling for oil helped the market pare losses. Goldman lowered its 2016 forecast for U.S. crude to $45 a barrel from $57 previously, and Brent to $49.50 from $62, citing oversupply and concerns over China’s economy. Germany’s Commerzbank also cut its oil outlook, joining a long list of banks that have downgraded crude price projections on supply glut concerns. “The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016,” Goldman said in a note entitled “Lower for even longer.” Citing “operational stress” as a growing downside risk, the Wall Street firm said crude could even fall to near $20 a barrel. “While not our base case, the potential for oil prices to fall to such levels … is becoming greater as storage continues to fill.” (Oil ends down about 2 percent as Goldman Sachs cuts price forecast)

9/14/2015

Saudis maybe victorious after all, new report points slowing U.S. Shale production. — Bloomberg “The narrative about U.S. shale’s resilience in the face of the Saudi decision to drive up production, prices be damned, centers on the American industry’s ability to cut costs and use innovative technology to repel the brute force onslaught. There is a kind of David versus Goliath charm to this story, but the data don’t bear it out. The IEA, the world’s most respected independent source of information about the oil market, has changed its methodology for measuring U.S. output: It now polls producers, instead of relying on data from states. And the switch has caused the agency to revise production data for the first half of 2015, showing a noticeable slowdown. The U.S. is still pumping more than it did last year, but the output is declining (Saudis Are Winning the War on Shale)

OPEC sees oil prices $42–50 thru March 2017 — Reuters” Iran has projected average oil prices at $42 to $50 per barrel in a draft budget bill for the year to March 2017, a government spokesman was quoted as saying on Monday, expecting crude to stay in the current trading range. “In consultation with the Ministry of Petroleum, three price options of 42, 45, and 50 dollars were discussed which are expected to earn 68 trillion tomans (about $22.5 billion),” oil news agency Shana quoted Mohammad-Baqer Nobakht as saying. Benchmark Brent crude has traded between $42 and $55 in the last month, and was just below $48 on Monday morning. (Iran sees crude oil price at $42-$50 in year to March 2017)

5:19 am EDT. Fundamentals and stronger Dollar concerns back in market’s sight — Reuters ” Oil prices fell on Monday as weaker-than-expected Chinese data weighed on markets, adding to concerns that declining global demand would exacerbate a surplus of crude. Traders are also waiting to see whether the U.S. central bank raises interest rates for the first time in nearly a decade later this week. Should interest rates rise, analysts expect oil to fall as a stronger dollar would undermine demand from importing countries.” (Oil prices dip on weaker China data as demand stalls)

2:06 pm EDT. Oil down 3%, fundamentals and pending Feds interest rate decision injects apprehension — Reuters “Crude oil fell more than 3 percent on Monday, dragged down by a tumble in gasoline and apprehension about whether the United States will have its first interest rate hike in nearly a decade. Gasoline, which rallied sharply in the second quarter to pull crude higher, slumped 4 percent. Traders cited weakness in nearby contracts of RBOB gasoline versus farther-dated ones on NYMEX RBc1-RBc2 as the peak U.S. summer driving season wound to a close. “I think this is surprising to many and catching them off guard as the trend of strong spreads in RBOB are over now,” said Scott Shelton, commodities specialist at ICAP in Durham, North Carolina. U.S. crude CLc1 was down 75 cents at $43.88 a barrel by 12:36 p.m. EDT (1636 GMT) after declining to as low as $43.59. Brent LCOc1, the global benchmark for crude, was off $1.58 at $46.56, versus a session low at $46.36. (Oil down 3 percent as gasoline pressures market; traders eye Fed)

9/15/2015

OPEC reduces 2016 production estimates for oil producing suppliers outside of the organization — Bloomberg “OPEC trimmed estimates for supplies from outside the group in 2016 as the slump inprices takes its toll on the U.S. shale-oil industry. The Organization of Petroleum Exporting Countries cut 2016 estimates for non-OPEC output by 110,000 barrels a day, its Vienna-based secretariat said Monday in its monthly market report. Still, the group sees non-OPEC supply expanding slightly next year, while the International Energy Agency on Friday predicted a contraction of 500,000 barrels a day, the biggest since 1992. Saudi Arabia told OPEC it curbed output in August to a six-month low. “There are signs that U.S. production has started to respond to reduced investment and activity,” OPEC said in the report. “Indeed, all eyes are on how quickly U.S. production falls.” (OPEC Trims 2016 Estimates for Rival Supplies as U.S. Oil Suffers)

Energy Information Administration survey of U.S. oil storage capacity — Reuters “U.S. commercial crude stocks are still close to their highest levels in over 80 years, but operational requirements prevent refineries filling on-site storage facilities to their maximum capacity. An increasing proportion of U.S. crude oil stocks is held in off-site tank farms, some owned or leased by refiners themselves, but many owned or leased by marketers and traders. Only 182 million barrels of storage capacity, around 28 percent, was on site at oil refineries. The rest was off site at tank farms or in pipelines, railroad tank cars, barges and oilfield tank (Operational constraints limit crude storage at U.S. refineries: Kemp)

North Dakota’s daily oil production fell less than 1 percent in July. — Reuters” The state, the No. 2 U.S. crude producer, had output of 1,201,920 barrels of oil per day (bpd) in July, down from 1,211,328 bpd in June, according to the Department of Mineral Resources, which reports on a two-month lag. The slight dip in output came despite a more than 50 percent plunge in crude prices in the past year that has eroded the oil industry’s profitability. Indeed, North Dakota’s drilling rig count has dropped alongside the price of oil, and is 12 percent below June levels. Yet advances in technology and efficiencies have helped the productivity of each drilling rig roughly double in the past year, helping the industry do more with less. Highlighting that gain, the number of producing wells in North Dakota hit 12,940 in July, an all-time high. (North Dakota oil output down only slightly in July)

Kuwait and Iran undercut Saudis prices to Asia in fight for market share — Reuters” Kuwait and Iran have cut their crude oil prices to Asia to multi-year lows against top exporter Saudi Arabia as the battle for market share among producers pits member of Organization of the Petroleum Exporting Countries (OPEC) against each other. Kuwait, one of the lowest-cost producers, cut its October price to Asia by 60 cents compared with the previous month, undercutting a reduction for a similar Saudi grade. This pulled Kuwaiti oil to its biggest discount to Saudi crude in over a decade, at 65 cents a barrel. [CRU/OSP] Last week, Iran cut the quarterly price differential for its flagship light crude against Saudi’s Arab Light to the lowest in three years. (Kuwait, Iran cut oil prices as fight for market share intensifies within OPEC)

5:14 am EDT. Oil slightly higher on supply and demand concerns as lower prices seemly negatively affecting US Shale production; in addition to slowing Asian demand weights on market. — Reuters” Oil edged higher towards $47 a barrel on Tuesday, supported by the prospect of lower U.S. inventories and production although concern about weaker Asian demand kept prices in check. While analysts expect reports this week to show no change in U.S. crude stocks overall, an estimate from market intelligence company Genscape that they fell by 1.8 million barrels at Cushing — U.S. crude’s delivery point — lent oil some support. Brent crude LCOc1 was up 26 cents at $46.63 a barrel, after declining in the previous two sessions. U.S. crude CLc1 was trading 38 cents higher at $44.38 at 0849 GMT. “Genscape is forecasting a large stock draw in Cushing,” said Olivier Jakob, analyst at Petromatrix. “The supply and demand numbers suggest that the low oil prices are starting to have an impact on U.S. crude oil production growth.” In their latest reports, the International Energy Agency and the Organization of the Petroleum Exporting Countries cut forecasts for non-OPEC and U.S. oil supply, potentially easing a supply glut next year. (Oil edges up towards $47, weaker Asian demand outlook weighs)

4:08 PM EDT. Oil ended 1% higher after a volatile day. With the long end of the Term structure pricing in higher prices expect volatility to increase making it an ideal trading environment. — Reuters “U.S. crude settled up more than 1 percent on Tuesday, buoyed by gains on Wall Street and higher gasoline prices, while Brent oil advanced less ahead of the expiry of its front-month contract, narrowing the transatlantic spread to the lowest in eight months. U.S. crude rallied almost through the day, rising 2 percent at one point on bets that weekly inventories of oil in the United States fell last week after four straight weeks of gains. The market’s euphoria briefly snapped in the afternoon on news the White House would not back a bill by rival Republicans to repeal a 40-year-old ban on U.S. crude exports. While the White House was never expected to support the bill, its decision still sent U.S. crude prices temporarily into negative territory before a late rally in gasoline brought the market back up. U.S. crude’s front-month settled up 59 cents, or 1.3 percent, at $44.59 a barrel. London-traded Brent, the global oil benchmark, settled up 26 cents at $46.63 a barrel as the October contract, which served as its front-month LCOc1, expired. In Monday’s trade, Brent lost $1.77, or almost 4 percent. (U.S. crude up on Wall Street, gasoline rally; Brent premium narrows)

9/16/2015

Is the Term structure hinting a turning point in WTI prices? — Reuters “Cautious oil market bulls are stirring, sensing higher prices for future months after a first whisper that the glut may be set to slowly shrink. The International Energy Agency (IEA) on Friday said lower prices will force non-OPEC producers including the United States to cut output by the steepest rate in over 20 years next year. This helped push the difference in price between oil for delivery in October and for delivery in one year’s time to its widest in six months, at $8.0 a barrel on Monday. “People are getting ready to press the ‘buy’ button, but the thing is we are probably just still a couple of months too early,” Saxo Bank commodities strategist Ole Hansen said. The outperformance of longer-dated crude prices seems to be more about a pickup in the future prospects for the market, than gloom over the immediate outlook. (Oil price curve may hint at higher prices at last)

Declining prices, without significant investment by producers will continually shrink the glut outlook in 2017 — Reuters “Oil companies have to invest heavily simply to offset the impact of natural decline rates on their existing fields, and even more if they want actually to increase production. The need for continued investment and drilling to maintain output as a result of the rapid decline rates on shale wells has been widely discussed. But decline rates on conventional oil fields are even more important because they account for more than 90 percent of global production. Decline rates on conventional fields will play a critical part rebalancing the oil market and determining where oil prices settle in the longer term. Decline rates will cut output by several million barrels per day each year in 2016 and 2017 unless oil producers invest to maintain production levels from existing fields and develop replacement fields. (Decline rates will ensure oil output falls in 2016: Kemp )

4:26 am EDT. Expect high volatility as market shakes its self out; slowing Asian demand, slowing US Shale production and Fed interest rate decision; keep an eye on WTI Brent spread — Reuters “Oil prices rose on Wednesday after an unexpected U.S. stockpile drawdown and higher gasoline prices, but concerns remained about a global surplus, falling Asian demand and whether the U.S. Federal Reserve would raise interest rates. Front-month U.S. West Texas Intermediate (WTI) crude futures traded up 55 cents at $45.14 per barrel at 0755 GMT. Brent was up 45 cents at $48.20 a barrel. The prospect of falling U.S. oil production as prices skim six-year lows has narrowed the gap between benchmark U.S. and Brent crude futures. The Brent-WTI spread between the two prompt months shrank on Tuesday to around $1.45 a barrel, the narrowest since January, when WTI briefly cost more than Brent. The spread was around $2.60 on Wednesday. “We believe that this could be the market’s reaction to the decline in U.S. crude production (drilling) …further exacerbated as Iranian crude could be entering the market, which puts heavy pressure on the global benchmark,” said Daniel Ang, analyst at Singapore-based Phillip Futures. (Oil rises on U.S. stockpile drawdown)

3:17 PM EDT. Oil jumped on U.S. Energy Information Administration report showing a total U.S. inventory drop of 2.1 million barrels, week ending Sept. 11. — Reuters “Oil prices jumped as much as 6 percent on Wednesday, after the largest U.S. crude drawdown in seven months at the key delivery point in Cushing, Oklahoma fed a new round of market volatility. Oil bulls were also encouraged by doubts on whether the Federal Reserve will decide to hike U.S. interest rates on Thursday after tame August inflation data. Some speculators in oil had bet on a big U.S. draw since Monday, after market intelligence firm Genscape estimated a drawdown of 1.8 million barrels in Cushing. The draw numbers were bullish beyond average analysts’ forecasts. A Reuters poll called for a total stockpile growth of 1.2 million barrels last week. Even so, the EIA also cited an unexpected build of about 3 million barrels in gasoline and distillate stocks. “The gasoline and distillates build completely negate the crude draw,” said Donald Morton, energy trader for Herbert J. Sims & Co in Fairfield, Connecticut. (Oil Surges the Most in Two Weeks After U.S. Inventories Decline)

9/17/2015

Slumping prices pushes industry to re-explore vertical wells — Reuters “Easy money, super-sized frack jobs, and desperate drillers offering deep discounts to oil producers — all three have been credited for sustaining U.S. crude output during the worst price slump in six years. Now there appears to be a new factor in the mix: old vertical wells that can quickly be drilled, injected with water or fracked for a second time to increase production at low cost. Overshadowed by the fracking boom that delivered record oil and gas volumes, vertical wells are making a comeback as investors and producers shift focus away from production growth to capital discipline in the downturn. “It makes more sense to develop vertical wells in a lower price environment because they are not growth plays but they are a very strong cash flow asset,” said Benjamin Shattuck, principal analyst at Wood Mackenzie. “They are going to give you that cash flow that you need today.” It is too soon to know how big the long-term supply impact of this trend will be, but there are tens of thousands of older U.S. wells and companies say paying more attention to them is already bringing extra barrels. (Expect U.S. oil output to slump? Better not overlook vertical wells)

4:42 AM EDT. Oil down on profit takin and Asia’s slowing demand; remains a traders market. — Reuters “Oil prices slipped below $50 a barrel on Thursday after weak Japanese data sounded alarm bells over the prospects for global growth, outweighing the bullish impact of a bigger-than-expected decline in U.S. crude oil stocks. Japan’s exports slowed for a second straight month in August in a sign China’s economic slowdown could be damaging the world’s third-biggest economy. The data follows worrying figures from other Asian economies — including South Korea and Taiwan — which are increasing anxiety over the consequences of a sharp slowdown in China. North Sea Brent crude oil was down 25 cents at $49.50 a barrel by 0830 GMT, after hitting an early high of $50.14. U.S. light crude oil was down 30 cents at $46.85 a barrel. (Oil slips as Asia data outweighs U.S. stock draw)

3:33 PM EDT. Oil falls on Fed decision, Weak Global Growth — Reuters “Global oil futures fell Thursday, resuming their slide after a brief spike following the Federal Reserve’s announcement that it would leave U.S. interest rates unchanged. Economists saw about a one-in-four chance of a rate increase. The dollar eased ahead of the announcement. A weaker U.S. currency can be supportive to dollar-denominated commodities like oil. Both U.S. crude and Brent extended losses ahead of the 2 p.m. EDT announcement. After the decision was announced, U.S. crude darted into positive territory while Brent pared losses. Within 10 minutes, both benchmarks relinquished gains. The CBOE oil volatility index fell ahead of the announcement but jumped nearly 15 percent in the minute after the decision. It traded more than 9 percent lower in the day by crude oil settlement. Many in the market shrugged off the Fed’s decision, saying traders will focus instead on other macro factors. (Oil falls in volatile trade after Fed leaves rate unchanged)

9/18/2015

OPEC predicts the price of oil to reach $80 in 2020; see prices rising in $5 increments every year until 2020 — Reuters “OPEC forecasters expect oil prices will rise by no more than $5 a barrel a year to reach $80 by 2020, with a slowing in rival non-OPEC production growth not enough to absorb the current oil glut, according to OPEC sources. The sources said the figures came from an updated mid-term strategy report discussed this week by representatives from the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, which has yet to be fully endorsed by OPEC ministers. The report forecasts that non-OPEC supply would amount to 58.2 million barrels per day by 2017, some 1 million barrels per day lower than in the previous forecast. (OPEC sees oil prices returning to $80/barrel by 2020)

U.S. Sale production slowing; seen putting floor under prices. — Reuters “U.S. crude oil production is falling sharply, helping put a floor beneath U.S. domestic crude prices and causing them to rise relative to the international marker Brent. In the face of lower prices, the U.S. oil boom has stalled and the industry is facing the sharpest setback in production for decades, excluding hurricane periods (link.reuters.com/kyj65w). According to the U.S. Energy Information Administration (EIA), U.S. crude and condensate output peaked at 9.612 million barrels per day (bpd) in April and had declined by 316,000 bpd by June. Production continued to rise in North Dakota (36,000 bpd) but in most other states and offshore areas output turned down (link.reuters.com/vuj65w). The largest declines were reported in Texas (129,000 bpd), the Gulf of Mexico (90,000 bpd), West Coast offshore (28,000), Alaska (27,000 bpd) and California (18,000 bpd). (Falling production is underpinning U.S. oil prices: Kemp)

6:12 AM EDT. Prices steady on weaker dollar post Fed decision. Let’s see if volatility remains strong or diminishes post Fed (global growth) –Reuters “Oil prices steadied on Friday on a weaker dollar after the Federal Reserve kept rates unchanged, while bearish signs persisted that the world’s biggest crude producers would keep pumping at high levels to maintain market share. The U.S. central bank decided against raising interest rates from historic lows on Thursday, saying uncertainty about global economic growth had forced its hand. The oil market had mixed reactions to the decision, with the weaker U.S. currency supporting oil by making it cheaper for non-dollar traders, but concerns over global economic weakness providing some counterbalance. “The perception of ‘ZIRP (Zero Interest Rate Policy) forever’ should provide some underlying support to the commodity complex,” said Olivier Jakob, a strategist at Petromatrix, a Swiss-based consultancy. Brent crude LCOc1 traded up 63 cents at $49.71 a barrel at 0944 GMT, after touching an intraday low of $48.60. U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $47 a barrel, up 10 cents. (Oil prices steady as dollar weakens post-Fed)

3:16 PM EDT. Oil tumbles 5% on global growth concerns post Fed decision. — Reuters “Oil prices tumbled on Friday, with U.S. crude falling 5 percent, after a selloff in Wall Street equities offset positive impact to crude from a third weekly decline in the U.S. oil rig count. A rise in the dollar, fears that OPEC oil production will not slow and reduced political tensions in the Middle East from U.S-Russia talks on Syria also weighed on oil. Oil services firm Baker Hughes’s report on the weekly U.S. oil rig count showed a drop of eight rigs this week. It was the third weekly decline in the rig count, a sign that the renewed decline in crude prices since July may be slowing some drillers from returning to the well pad in a bigger way. U.S. crude futures, already down 3 percent when the Baker Hughes report came out, pared losses just briefly on the news. “The industry is getting so much more production from new technology that a decline in working rigs doesn’t mean nearly as much as it used to,” said David Thompson at Powerhouse, a commodities broker in Washington specializing in energy. (U.S. crude tumbles 5 percent; Wall Street selloff offsets rig data)

9/21/2015

Oil production at risk as U.S. shale companies like Samson Resources Co. run out of money and are forced to slow drilling. — Bloomberg “As much as 400,000 barrels a day of oil production is at risk as U.S. shale companies like Samson Resources Co. run out of money and are forced to slow drilling. Total debt for half of the companies in a Bloomberg index of more than 60 producers has risen to a level that represents 40 percent of their enterprise value. It’s a sign of distress that shows equity values falling in the face of oil’s crash, said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $15.6 billion. (An Oklahoma of Oil at Risk as Debt Shackles U.S. Shale Drillers)

8:10 AM EDT. Prices up as Shale production fall — Reuters “Oil rose by more than 2 percent on Monday after data showed U.S. drilling slowed and a report said $1.5 trillion worth of planned production was uneconomic at current prices. Crude has halved in value over the last year as soaring global production overwhelmed slowing demand and the much lower prices have now begun to hit drilling, particularly in the United States. U.S. drillers have cut the number of rigs in operation for three straight weeks. Global benchmark Brent crude oil rose $1.19 to a high of $48.66 a barrel before easing back to trade around $48.60 by 1200 GMT. U.S. light crude oil futures were up $1.15 a barrel at $45.83.”( Oil prices up 2 percent after U.S. drilling falls

3:14 PM EDT. Oil rallied 4% on declining stockpiles and less drilling activity — Reuters “Oil prices rallied on Monday, with U.S crude surging more than 4 percent on signs of declining stockpiles, less drilling that could reduce future output and a jump in gasoline futures that boosted the overall petroleum complex. Global oil benchmark Brent gained 3 percent. Its premium over U.S. crude CL-LCO1=R narrowed to below the key psychological mark of $2 a barrel as U.S. crude’s fundamentals improved relative to Brent. Market intelligence firm Genscape estimated a draw of nearly 810,000 barrels in the week ending Sept. 15 from storage tanks at Cushing, Oklahoma, the main delivery point for U.S. crude futures, traders who have seen the data said. Cushing stocks fell nearly 2 million barrels in the week to Sept. 11, the biggest draw since February 2014, U.S. government data showed. (U.S. crude up 4 percent on lower stockpile bets; Brent spread narrows)

9/22/2015

Saudi Arabia’s crude oil exports dipped by 89,000 barrels per day (bpd) in July, — Reuters “The world’s biggest crude exporter trimmed its production by around 200,000 bpd in July pumping 10.361 million bpd, but Riyadh shows no signs of wavering on its strategy of defending market share and feeding a growth in global as well as domestic demand. The OPEC heavyweight shipped 7.276 million bpd in July down from 7.365 million bpd in June, figures published by the Joint Organisations Data Initiative (JODI) showed. Monthly export figures are provided by Riyadh and other members of the Organization of the Petroleum Exporting Countries (OPEC) to JODI, which published them on its website. Saudi Arabia burns higher crude volumes to generate power for air-conditioning during the hot summer months. It has also been feeding more crude to domestic refineries as it expands oil product exports.” (Saudi Arabia crude exports dip to 7.276 million bpd in July: JODI )

Hedge funds betting prices will stabilize, reducing short positions. — Reuters “Hedge funds continued to pare short positions in U.S. crude oil last week even as the previous short-covering rally ran out of steam. The unusual concentration of hedge fund short positions built up between June and August has been partially unwound, reducing some of the persistent selling pressure evident in the market during the third quarter.m Speculators are not yet ready to bet heavily on a rebound in prices but the bearishness that dominated the market over the summer is dissipating. Hedge funds and other money managers reduced their gross short position in the main NYMEX U.S. crude futures and options contract by 14.5 million barrels in the week ended Sept. 15 (link.reuters.com/her65w). Hedge funds have reduced their gross short position for five consecutive weeks by a total of more than 52 million barrels, according to the U.S. Commodity Futures Trading Commission. The gross short position has been cut by almost a third to 111 million barrels, down from a peak of 163 million in mid-August, though still almost double the 56 million barrels in the middle of June. (Hedge funds no longer sure oil prices will fall further)

5:12 AM EDT. Prices fall in early trading as volatility increases. — Reuters “Crude oil prices fell on Tuesday, reversing a steep rally the previous day, under pressure from uncertainty over whether global demand will be enough to erode a sky-high surplus. Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilized after losing more than half its value in a year, and the persistence of the highest global surplus in modern times. There is evidence that U.S. shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency (IEA) to issue more bullish forecasts for the market balance next year. Capital Economics analyst Thomas Pew said there has been a loss of some half a million barrels of oil per day in U.S. production in the last couple of months alone. (Oil prices dented by uncertain global outlook)

4:13 PM EDT. Markets ended mixed, Brent up marginally, U.S. crude down 2%; traders take advantage of high volatility. — Reuters “Brent settled up while U.S. crude finished down 2 percent but off its lows after a partial pipeline outage and bets of positive U.S. inventory data helped oil offset some of Tuesday’s skittish sentiment caused by weak Wall Street stocks. Traders also took in their stride early market jitters from the impending expiry of the front-month contract in U.S. crude and a near two-week high in the dollar. [USD/] Brent futures fell more than 2 percent earlier on Tuesday and U.S. crude tumbled over 3 percent as U.S. equity markets slumped to a two-week low. Gasoline futures also lost more than 3 percent before turning positive. The rebound came after news that Colonial Pipeline had shut part of its operation, including a line with a 850,000-barrels capacity to carry both gasoline and distillates from North Carolina to its New Jersey hub. Colonial said the shutdown was to investigate “odors of gasoline.” (Brent up slightly, U.S. down 2 percent; pipeline news limits losses)

9/23/2015

Energy importers in emerging markets unable to benefit from low oil prices. — Reuters “Big energy importers in emerging markets were expected to benefit from plunging oil prices, but with China’s growth slowing and their exports dwindling, only a handful have been able to capitalize on cheaper fuel. Investor disappointment is evident in a broad emerging market rout — Turkish and Indonesian stocks are down around 30 percent in dollar terms this year. “It’s a source of disappointment that we haven’t seen the full impact of lower commodity prices,” said Yacov Arnopolin, portfolio manager at Goldman Sachs Asset Management. Initial signs were more encouraging. Last December, the International Monetary Fund predicted that cheaper oil would boost global growth as much as 0.7 percentage points in 2015. (Big oil importers struggle to capitalize on cheaper fuel bills)

European airlines employ hedging strategies to take advantage of low oil prices. — Reuters “European airlines are exploiting a collapse in oil prices by hedging more of their fuel needs further into the future, but those that kept their powder dry before the rout are emerging as clear winners, industry sources say. At a time of heightened price volatility, carriers are also considering using more options contracts to access lower prices should they fall further. Many airlines, however, lack the maneuverability to benefit; before oil slumped they locked themselves into much higher costs, with some approaching $1,000 per tonne of jet fuel, roughly double current rates on the spot market. (Europe’s airlines spruce up their jet fuel hedges)

5:24 AM EDT. Expect market to remain in trade mode as high volatility persists — Reuters “Brent crude oil rose towards $50 a barrel on Wednesday as a drawdown in U.S. crude oil stocks outweighed the negative impact of weak economic manufacturing data from China. The American Petroleum Institute (API) said U.S. crude stockpiles fell 3.7 million barrels last week, with stocks at the Cushing, Oklahoma, delivery point for U.S. crude futures down almost 500,000 barrels. [API/S] Although total U.S. oil inventories are at record highs, the draw suggests a rebalancing of the biggest domestic oil market is under way as oil production slows in the face of low prices. Benchmark Brent LOCc1 was up 55 cents a barrel at $49.63 by 0420 EDT. U.S. light crude CLc1 was up 50 cents at $46.86. The U.S. industry data helped oil resist the negative impact of a sharp contraction in Chinese manufacturing. (Oil nears $50 as U.S. stock-draw balances China data)

3:38 PM EDT. As expected the market remain a traders paradise, as reflected in today’s price swings — Reuters “Global oil markets tumbled on Wednesday, with U.S. crude futures settling down 4 percent after bullish impact from lower crude inventories was offset by large gasoline builds that raised concerns about high autumn fuel supplies. Also weighing on crude were Colonial Pipeline’s efforts to fix an outage on one of its lines that had been supporting prices of gasoline, and the larger oil complex, since Tuesday. Brent, the global benchmark for oil, LCOc1 settled down $1.33, or 2.7 percent, at $47.75 a barrel. U.S. crude CLc1 slumped $1.88, or 4.1 percent, to settle at $44.48. Gasoline RBc1 finished down 2 percent after hitting two-week highs earlier in the day. Crude prices had initially rallied 2 percent, with Brent briefly peaking above $50, after the U.S. government reported a drawdown of about 2 million barrels for a second week in a row. [EIA/S] “The crude numbers were not a big surprise in any way,” said Tariq Zahir of Tyche Capital Advisors in Laurel Hollow, New York. (Oil tumbles; large gasoline build trumps U.S crude draw)

9/24/2013

OPEC reaping the spoils of their strategy, as U.S. Crude production slows. — Reuters “After almost a year of painfully low oil prices, OPEC members are beginning to believe they are winning against upstart U.S. shale producers in a short-term market share contest. Yet insiders and experts say OPEC is looking for a longer-lasting impact on other high-cost production oil field plans, many in deep oceans, with bigger time scales, even if that means a period of cheap oil prices lasting for years. Privately, OPEC’s core Gulf members say they have resigned themselves to the idea that the U.S. shale industry’s high-tech flexibility means it will respond quickly when prices start rising again, making the United States the new swing producer in world oil, the role held for so long by Saudi Arabia. “The oil surplus is slowly being drawn from the market. U.S. oil production is expected to fall to less than 9 million barrels per day by the end of this year or early next year,” said an OPEC delegate from a Gulf oil producer. (OPEC focuses on rival mega projects, lives with shale swing output)

Bankers to cut Oil Drillers credit lines. — Bloomberg “Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most. The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey by Haynes and Boone LLP, a law firm with offices in Houston, New York and other cities. Companies’ credit lines will be cut by an average of 39 percent, the survey showed. “There’s going to be a reduction to the majority of these credit lines,” said Neal Dingmann, an analyst at SunTrust Robinson Humphrey Inc. “It’ll make a lot of these companies reduce a bit more on spending.” (Oil Drillers’ Credit Lines to Shrink as Banks Revalue Assets)

4:36 AM EDT. Oil up as volatility continues to drive markets — Reuters “Oil steadied at $48 a barrel on Thursday, as investors sought bargains after a sharp fall the previous day on an unexpectedly large buildup in U.S. gasoline stocks and a tepid demand outlook. Brent crude LCOc1 climbed 27 cents to $48.02 a barrel by 0820 GMT, after ending the previous session down $1.33. U.S. West Texas Intermediate (WTI) crude CLc1 rose 35 cents to $44.83 a barrel, having slumped $1.88 on Wednesday. “It seems like there’s some technical stabilization at the $48 level after the steep sell-off,” said Bjarne Schieldrop, head of commodities research at SEB in Oslo. (Oil bounces to $48 on bargain-hunting after sharp fall)

3:31 PM EDT. Oil up 1% as the news of the day moves the market, though the fundamentals remain a concern. — Reuters “Oil prices rose as much as 1 percent on Thursday, boosted by inventory draws at the U.S. crude futures’ delivery hub although gains were capped by tumbling equity prices on Wall Street. Market intelligence firm Genscape estimated a drawdown of 625,000 barrels out of the Cushing, Oklahoma delivery point for U.S. crude in the week to Sept. 22. The Genscape estimate, coming after a stockpile drop of 462,000 barrels at Cushing reported by the U.S. Energy Information Administration (EIA) last week, drove up prices of both U.S. crude and global oil benchmark Brent.But an equity markets selloff trimmed the gains in oil, as the Standard & Poor’s 500 index.SPX for U.S. stocks fell on concerns of slowing global economic growth. [.N] (Oil up 1 percent; Cushing draw data offset by Wall Street drop)

9/25/2015

Oil unlikely to run out of storage for now thanks to unconventional storage facilities — Reuters “The world’s oil storage tanks are brimming but there is plenty more space to hand in natural salt caverns and elsewhere, said the head VTTI, a leading player in the sector. The crude price collapse has hit energy companies hard, but oil storage is booming with producers and traders renting tanks and investors snapping up assets. “There is a lot of capacity but there is also a lot of demand,” said Rob Nijst, chief executive officer of VTTI, which is half owned by the world’s largest oil trader Vitol. “Everyone wants more storage volumes at the moment.” The high volatility in oil prices has offered trading houses such as Vitol, Trafigura, Mercuria, Royal Dutch Shell and BP many opportunities to make money through storage. “The price volatility has been a good change,” said Jared Pearl, VTTI’s Chief Commercial Officer. VTTI facilities are mostly geared for refined product storage, not crude, he added. (Salt caverns to prevent oil storage shortage: VTTI)

Increasing demand for gasoline remains a bright spot for OPEC. — Reuters “OPEC’s bid to curb production of high-cost oil is taking time to produce results but the organisation is already making good progress on its other objective of stimulating fuel demand. In the first half of the year, gasoline deliveries into U.S. local markets jumped by 4.3 percent compared with the same period in 2014, according to the U.S. Energy Information Administration. The United States is the world’s largest gasoline consumer and its gasoline demand accounts for 10 percent of all crude and condensates produced worldwide. In the first six months of 2015, U.S. gasoline consumption rose at the fastest rate since 1985 — another occasion on which the real price of oil halved over 12 months and stimulated demand (link.reuters.com/xux65w). (OPEC is winning battle to stimulate gasoline demand: Kemp)

5:59 AM EDT. Market may experience some head winds as dollar strengthens, on Yellen comments — Reuters “Oil prices pared gains on Friday after the dollar rose on expectations the United States could still raise interest rates this year and after analysts from Standard & Poor’s ratings cut their oil price assumptions. Weak consumer data from Japan also weighed on price and analysts said that the slowing global economic outlook meant that oil prices would likely remain low for months to come. Globally traded Brent futures were at $48.33 per barrel at 0940 GMT (5:40 a.m. EDT), up just 16 cents from their last close and erasing earlier Friday gains. U.S. West Texas Intermediate (WTI) futures were at $45.27 a barrel, up 36 cents. (Oil prices pare gains on stronger dollar, weak Japan data)

3:10 PM EDT. Oil traded higher as the market continues in trade mode. — Reuters “Oil prices rose for the second straight day on Friday, supported by a rally on Wall Street and a lower U.S. rig count, although the decline in drilling was the smallest in four weeks and not particularly exciting to traders. Crude futures posted stronger gains for the week. Optimism in recent days about lower stockpiles at the Cushing, Oklahoma, delivery point for U.S. crude overshadowed data on inventory builds in U.S. gasoline. Still, some traders and analysts expressed doubt that oil would continue trading higher in the coming weeks due to mixed outlooks for supply and demand and for the global economy. “I’m predicting a return to the low $40 levels or even below by next month,” said Tariq Zahir, a trader in crude oil spreads at Tyche Advisors in Laurel Hollow, New York.” (Oil up after Wall Street rally, drop in U.S. rigs)

9/28/2015

Oil companies bonds continue to erode in value; not expected to get better — Reuters “NEW YORK (IFR) — The rebound in oil prices has not been enough to stop the bleeding at many U.S. energy companies, whose bonds keep weakening — and whose ability to muster fresh capital is dwindling away. Oil and bond prices are moving in opposite directions, underlining the market’s lack of confidence in a cash-strapped sector that is seeing its prospects go from bad to worse. The difficulties will start intensifying next week, when banks begin their twice-yearly review to set ceilings on how much exploration and production (E&P) companies can borrow. And with crude at US$45 per barrel — far below the US$60 minimum that underpins many E&P business models — the expected cut in borrowing bases will come as a double whammy. Revenue is down, capital market access is limited and cash is in short supply — a sticky situation for even the healthiest of firms, and one that could well prove fatal for some.(Oil, bonds go their separate ways)

“Oil roll” rises to parity, first for the year. Is it saying the glut is behind us? — Reuters “The so-called “cash roll” for October/November WTI — allowing a trader to roll a long position into the next month — traded flat Friday. That was its tightest spread since last November, when the crude market flipped into a contango, where prompt prices are lower than those for delivery in the futures. When the October futures contract expired on Tuesday, the spread to November traded at roughly -25 cents a barrel. As recently as a month ago it was more than -80 cents, reflecting expectations of a relatively deeper surplus of immediate oil supplies. The cash roll trades for the three days following the expiry of the prompt futures contract and can serve as an indication of current demand. A negative spread occurs in a contango market and encourages storage. (Prompt Cushing oil roll rises to parity, firmest this year)

5:28 am EDT. Oil down in early trading, with volatility still high the market will be in trade mode. — Reuters “Oil prices fell on Monday, paring some of last week’s 2 percent rally, despite evidence of slowing U.S. production and a fourth weekly increase in U.S. investor holdings of crude futures. High oversupply and concern about demand growth in key areas of consumption such as emerging markets have stripped 50 percent off the value of a barrel of oil over the last year and kept the price below $50 a barrel for most of the past nine weeks. The crude price is set for an 11 percent fall in September, its 11th monthly decline out of the last 15 months. September has rarely been a month of strength for the oil market. In the last 15 years, the price has racked up a gain in September on only four occasions. Most analysts have cut their forecasts for oil this year and next, but there is a feeling that the current downturn in prices may have run its course, even with the misgivings about the outlook for demand next year. (Oil prices slip as demand outlook eclipses supply falls)

3:10 PM EDT. Oil fell 3%, fueled by bearish Chinese economic data and slow global growth. — Reuters “Oil prices fell nearly 3 percent on Monday, pressured by tumbling equities on Wall Street and weak Chinese economic data, although an estimated drawdown in crude stocks at the key U.S. storage hub appeared to limit losses, traders said. Gyrations in U.S. equity prices .DJI and the dollar .DXY from bets on the timing of the first U.S. rate hike in nearly a decade have fed volatility in oil prices, which have swung up to 8 percent a day over the past month. Wall Street’s S&P 500 index .SPXwas down 2.2 percent after hitting a one-month low on bullish U.S. consumer spending data in August and bets of a rate hike by October. [.N] “Oil is on the back foot as risk aversion is on the rise once more,” said Matt Smith, director of commodity research at ClipperData, an energy markets database and consultancy in New York. “There is a distinct air of doom and gloom around.” (Oil down nearly 3 percent on Wall Street, China; Cushing draw limits loss)

9/29/2015

U.K. oil demand growing — Reuters “UK petroleum consumption is growing at some of the fastest rates for a decade, as strong economic growth and cheaper fuel prices spur increased use. Consumption of petroleum products rose by 1.6 percent in the first six months of 2015 compared with the same period a year earlier, according to the UK Department of Energy and Climate Change (DECC) (link.reuters.com/zud75w).Consumption has been growing consistently since the third quarter of 2014, coinciding with a maturing economic recovery and a sharp drop in oil prices (link.reuters.com/wud75w). (Britain’s oil demand is growing again: Kemp)

Morgan Stanley recants its overweight call on Energy stocks — Bloomberg “Now, in a display of candor that’s rare on Wall Street, chief U.S. equity strategist Adam Parker is waving the white flag. “We made a really bad call by going overweight energy at the beginning of this year,” he wrote. Morgan Stanley downgraded the sector to market weight, indicating the supply glut in oil may not improve for another year, at a minimum, and that investors will likely find a better entry point in six to nine months. (Morgan Stanley Has Given Up on Energy Stocks)

5:55 AM EDT. Oil continues its roller coaster ride, fertile trading environment, prices moving higher in early trading — Reuters “Oil prices rose on Tuesday after evidence of tightening supplies in the United States, the world’s biggest oil consumer, outweighed concerns over the health of the Chinese economy. China’s giant manufacturing sector is shrinking, economists say, as domestic demand falters, fanning concern that the economy may be slowing more sharply than feared. Asian stock markets skidded to 3–1/2-year lows and the dollar sagged, pulled down by sharp losses on Wall Street after weak Chinese data. But the outlook for the U.S. economy looks brighter and oil supply there appears to be tightening with data estimating a drawdown of over 1 million barrels last week from the Cushing, Oklahoma delivery hub for U.S. crude. Brent crude oil LCOc1 was up 45 cents at $47.79 a barrel by 0440 EDT after dropping 2.5 percent on Monday. U.S. light crude oil CLc1 was up 40 cents, at $44.83. (Oil rises as tighter U.S. market offsets Asia woes)

6:00 PM EDT. Oil rose 2% then pares gains in volatile trading. — Reuters “Oil prices rose almost 2 percent on Tuesday, but then pared gains in post-settlement trade after an industry group reported a surprisingly large weekly build in U.S. crude inventories. The American Petroleum Institute (API) said U.S. crude stockpiles rose 4.6 million barrels in the week to Sept. 25 to reach 457.8 million barrels. Analysts polled by Reuters had expected an increase of only 102,000 barrels. [API/S] [EIA/S] “It’s certainly a pretty big build for U.S. oil stocks,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. But some investors were encouraged that the API inventory figures also showed a drawdown of nearly 1.2 million barrels at the Cushing, Oklahoma delivery point for U.S. crude futures. (Oil up, then pares gains after U.S. inventory build data)

9/30/2015

U.S. Airlines fuel consumption accelerating at fastest pace since 2011. — Reuters “Fuel consumption by U.S. airlines is growing at some of the fastest rates for a decade, according to data published by the federal government. U.S. carriers consumed 1.6 billion gallons of fuel in July, up 3.4 percent from the same month a year earlier (link.reuters.com/qad75w). Fuel consumption for the first seven months of the year rose nearly 2.9 percent, the biggest increase since 2011 and before that 2005, according to the U.S. Department of Transportation. Separately, the U.S. Energy Information Administration (EIA) has reported jet fuel consumption rose 4.7 percent year-on-year in January-June (according to product-supplied statistics) or by 6.6 percent in January-July (using prime supplier data). Unlike the U.S. Department of Transportation fuel consumption data, which covers only U.S. airlines, the EIA numbers include all jet fuel consumed in the United States, including foreign carriers that refuel at U.S. airports. (U.S. jet fuel demand is rising strongly: Kemp)

A Number of oil companies retain access to credit lines, challenging expectations Banks would cut lines. — Reuters “A number of U.S. shale oil and gas companies are securing unchanged or even increased credit allotments during their semi-annual loan reviews, defying expectations that banks would slash small firms’ credit lines in response to low crude prices. According to a Reuters review of disclosures made by 19 independent U.S. shale oil and gas companies since Aug. 1, at least 11 have said their borrowing bases have been or will be maintained or increased. In contrast, just five talked about cuts. It is too early to tell if the whole sector will emerge equally largely unscathed from the reviews. Many more companies from a batch of about 60 U.S. independents typically tracked by investment banks will probably make disclosures after the usual loan reset deadline of Oct. 1. But outcomes so far suggest an expected pullback by banks may be far less severe than many in the industry have feared. (So far, less pain than feared as U.S. shale firms renew loans)

6:49 AM EDT. Oil lower on high buildup of U.S. Crude inventory, in early trading Brent prices traded in a narrower (60 cents) range given lower volume — Reuters “U.S. crude oil stockpiles rose 4.6 million barrels in the week to Sept. 25, the American Petroleum Institute (API) said, well above a modest increase of 102,000 barrels that analysts polled by Reuters had forecast. <API/S> <EIA/S> Investors awaited official weekly inventory figures from the U.S. government’s Energy Information Administration (EIA) due later on Wednesday to see if they confirmed the API data. U.S. crude, also known as West Texas Intermediate or WTI, was 10 cents lower at $45.13 a barrel by 0400 EDT, on course to end September down 11 percent. Brent crude oil was unchanged at $48.23 a barrel, heading for a near 9 percent fall this month. Brent traded in a very narrow 60-cent range on Wednesday, its narrowest since May 2014, partly reflecting low volume ahead of the week-long Chinese National Day holiday starting on Thursday. (Oil down on large U.S. crude stockpile build)

3:24 PM EDT. Markets ended mixed; Brent up on Syria, WTI down on inventory — Reuters “Oil prices ended mixed in volatile trade on Wednesday, with global benchmark Brent up on worries about Russian airstrikes in Syria and U.S. crude down after data showing a surge in domestic inventories. For the quarter, both Brent and U.S. crude were down 24 percent for their sharpest decline since the end of 2014. Oil prices were broadly boosted in early trade by concern about a hurricane threatening energy infrastructure on the U.S. East Coast. Book balancing by traders at the end of the month and the third quarter also made for choppy trade. “It’s the typical month-end, quarter-end ‘window dressing’ phenomenon,” said Tariq Zahir, fund manager and crude oil spreads trader at Tyche Capital Advisors in Laurel Hollow, New York. Warplanes from Russia carried out air strikes against Islamic State targets in Syria, feeding worries about growing war in the Middle East. (Oil mixed on U.S. crude build, Syria; down 24 percent on quarter)

10/1/2015

U.S. large-cap mutual funds that have increased their exposure to Energy companies this year are suffering heavy losses. — Reuters “The moves into shares of frackers, refiners and integrated oil conglomerates reflect a gamble that the sector will rebound after rising supply and slowing global growth triggered a nearly 60 percent slide in crude prices since the middle of 2014. But so far, the gambit has not paid off. “We are kind of holding our nose to buy them, but we see value there,” said Ernesto Ramos, who oversees about $15 billion in large-cap equity assets at BMO Asset Management. “We’ve been selling the defensive part of the portfolio exposed negatively to higher interest rates, such as consumer staples and utilities, and making room for what we see as a slow but gradual recovery in world growth.” BMO’s Large-Cap Value Fund boosted it energy exposure to 13 percent from 10 percent at the end of February after buying more shares of ExxonMobil Corp and refiner Valero Energy Corp, for example. (U.S. mutual funds that bet bigger on energy sector get burned)

Global demand on the rise; surged in the first six months of 2015. — Reuters “World oil demand surged in the first six months of 2015 compared with the same period in 2014, according to national estimates submitted to the Joint Oil Data Initiative (JODI). Petroleum demand is responding in the expected manner to a halving in the price of crude and significant declines in the price of most fuels in most consuming countries, as well as continued economic expansion in much of the world. Fifty-nine countries, accounting for 75–80 percent of global oil consumption, have submitted demand estimates for both the first half of 2014 and 2015 to JODI. Submitters include all the world’s major consumers, with the notable exceptions of Russia, Iran, Indonesia, Venezuela, Malaysia, South Africa and United Arab Emirates. Submitters reported consumption averaged 71.4 million barrels per day (bpd) in the first six months of 2015, up from 69.1 million bpd in the prior-year period, an increase of 2.3 million bpd or 3.3 percent. (Global oil demand growing at fastest pace for five years: Kemp )

5:57 AM EDT. Geopolitical risks, “Syria” providing latest trade momentum as prices move higher; also in the mix “Hurricane Joaquin” — Reuters “Oil rose above $49 a barrel on Thursday as an emerging risk premium over the situation in Syria countered further signs of an economic slowdown in Asia and rising U.S. inventories. Russia launched air strikes in Syria on Wednesday in its biggest Middle East intervention in decades. The attacks raised the specter of Washington and Moscow running air strikes in the same region, but without coordination. Brent crude LCOc1 was up $1.00 at $49.37 a barrel as of 0435 EDT and earlier reached $49.47, its highest since Sept. 23. U.S. crude CLc1 gained $1.19 to $46.28. “Russia’s military intervention in the Syrian conflict has increased the geopolitical risks, which is giving tailwind to the prices,” Carsten Fritsch, analyst at Commerzbank, said. There was also some support to prices from Hurricane Joaquin, which was gaining strength as it moved toward the Bahamas, the National Hurricane Center said, although forecasts were inconclusive on whether the storm would hit the U.S. Energy traders watch Atlantic hurricanes because they can lead to precautionary shutdowns of Gulf of Mexico oil and gas platforms or, in exceptional cases, damage energy infrastructure. (Oil rises above $49 on heightened Syria risks)

3:59 PM EDT. Oil market remains a traders paradise as high volatility bounce prices around. — Bloomberg “Oil traded near $45 a barrel in New York as equities retreated while U.S. crude production slipped the seventh time in eight weeks. West Texas Intermediate futures erased a 4.5 percent gain after the Standard & Poor’s 500 Index stumbled into the fourth quarter. Prices climbed earlier after government data on Wednesday showed U.S. crude output declined last week. Traders are following the progress of Hurricane Joaquin, which gathered strength and threatens the U.S. East Coast. WTI for November delivery slipped 35 cents to settle at $44.74 a barrel on the New York Mercantile Exchange. The contract touched $47.10 earlier, the highest intraday price since Sept. 23. The volume of all futures traded was 23 percent above the 100-day average at 2:58 p.m. Brent for November settlement fell 68 cents, or 1.4 percent, to end the session at $47.69 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $2.95 premium to WTI. (Oil Trades Near $45 as Equities Retreat, U.S. Crude Output Slips)

10/2/2015

Saudis continue to fight for Asian market share expect to cut prices — Reuters “Saudi Arabia is expected to cut the prices of crude it sells to Asia in November after the Dubai benchmark weakened last month, in a move that will help the OPEC kingpin retain its market share in the region amid a global oversupply, traders said. Prices, however, are likely to be lowered less than what is indicated by a formula, given the top oil exporter tempered gains last month despite a strong rise in the Dubai price — which is used as a benchmark to set Middle East crude prices in Asia, the traders said on Thursday. “Their prices are quite competitive so they don’t have to cut as much,” a Singapore-based trader said. Saudi Aramco typically adjusts prices based on the monthly changes in the price spread between first- and third-month physical Dubai and oil product yields for each grade. (Saudi Arabia to cut November crude prices to Asia on weak Dubai: traders)

Necessity is the mother of invention, as producers tinker with techniques to increase production, output remain 3% below 40-yr high — Bloomberg (Why America’s Oil Output Refuses to Collapse)

4:50 AM EDT. Oil trading higher ahead of job numbers, with no signs of diminishing volatility — Reuters “Oil rose on Friday, pushed higher by fears about escalating violence in Syria and on expectations that data would show economic strength in the United States, the world’s largest oil consumer. Global benchmark Brent LCOc1 gained 47 cents to $48.16 a barrel by 0324 EDT. The contract had closed the previous session down 68 cents. U.S. crude CLc1 added 74 cents at $45.48 a barrel, after settling 35 cents lower in the previous session. The oil market was factoring in a risk premium over Syria, where Russia and the United States are conducting bombing campaigns. The situation was complicated by the arrival of hundreds of Iranian troops in Syria to join a ground offensive in support of government forces, a sign the civil war is turning still more regional and global in scope. (Oil rises on U.S. economic optimism, Syria fears)

3:40 PM EDT. Oil ended up on Rig reduction, now at 5-yr low 614. The markets remains headline driven– Bloomberg “Crude rose after U.S. explorers reduced the number of rigs drilling for oil to a five-year low, signaling further drops in production. West Texas Intermediate futures rebounded after Baker Hughes Inc. said rigs targeting oil in the U.S. fell by 26 to 614 this week. Prices fell as much as 1.7 percent earlier on government data that showed the U.S. added 142,000 jobs last month, compared with a gain of 201,000 projected in a Bloomberg survey. (Oil Rebounds After U.S. Producers Reduce Rigs to Five-Year Low)

10/5/2015

MLPs (master limited partnerships) surprisingly felling the pain due to lower prices — Reuters “The crude oil slide and lower natural gas prices have caused problems for some partnerships that need to tap public markets often to finance new projects. The Federal Reserve has also signaled a rate hike this year, which may drive investors elsewhere. A yearlong slide in crude has people anticipating a bathtub-shaped recovery, where prices drop and stay low for years before rising. “The declining oil price has impacted MLPs just as much as the (exploration and production) sector,” Credit Suisse investment banker Brian McCabe told a tax conference last week where people agreed the MLP sell-off was a bit unfair. MLPs pay no taxes and pass profits through to investors. Energy companies have flocked to them because of the tax advantages, while investors like the fat dividends they pay. While distributions for most MLPs are still expected to grow, albeit more slowly, some believe a recovery may be years away”. (Energy partnerships hit new lows as oil recovery hope dims)

Investors reduce bullish bets on oil as global glut continues to grow amidst slowing WTI production — Bloomberg “The U.S. producers are the only ones doing their part to reduce the global glut,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. “Other countries, such as Russia, are pumping at full tilt. The cutbacks by shale producers here aren’t going to have much impact, especially given the slowing global economy.” WTI decreased 1.3 percent in the report week to $45.23 a barrel on the New York Mercantile Exchange. It settled at $45.54 Friday. (Oil Bulls Lose Faith in Recovery as Russia Adds to Global Glut)

5:55 AM EDT. Oil up as Russia agrees to talks with OPEC and other non-OPEC producers; highly unlikely to come to any agreements if talks materializes. — Reuters “Oil rose on Monday after Russia said it was ready to meet other producers to discuss the market, where prices have more than halved from last year’s highs due to a supply glut. A report showing a fifth weekly fall in the number of oil rigs drilling in the United States also underpinned prices. Brent LCOc1 was 50 cents higher at $48.63 a barrel by 0930 GMT after ending up 44 cents on Friday. U.S. crude CLc1 was 50 cents higher at $46.04 a barrel after settling up 80 cents. Russia, one of the world’s top three oil producers, has been unwilling to cut output to support prices and last November declined to cooperate with the Organization of the Petroleum Exporting Countries in order to defend its market share. But Moscow is now prepared to meet OPEC and non-OPEC oil producers to discuss oil markets if such a meeting is called, its energy minister said on Saturday. A separate meeting between Russian and Saudi officials was being planned for the end of October, he said.” (Oil up as Russia mulls OPEC talks, rig count drops)

4:04 PM EDT. Oil remains in trade mode up 2 % moving off of the news of the day. — Reuters “Crude oil prices settled up more than 2 percent on Monday, bolstered by a rally in U.S. gasoline and Russia’s willingness to meet other major oil producers to discuss the market. Higher stock prices on Wall Street provided further support to oil and other dollar-denominated commodities. [MKTS/GLOB] Global crude benchmark Brent settled at $49.25 a barrel, up $1.12 or 2.3 percent. U.S. oil’s benchmark West Texas Intermediate (WTI) crude rose 72 cents, or 1.6 percent, to finish at $46.26. Gasoline surged 3 percent, helping drive up prices for both crude and other refined fuels. “Fuel products are leading the way today though they also seem to be deriving their strength from the broader risk appetite contributed by the equities rally,” said Peter Donovan, broker at Liquidity Energy in New York. (Crude up over 2 percent as gasoline jumps, Russia mulls oil talks)

10/6/2015

In a move to protect or even gain market share OPEC cuts prices to Asian and U.S. markets as demand weakens. — Bloomberg “Saudi Arabia cut pricing for November oil sales to Asia and the U.S. as the world’s largest crude exporter seeks to keep its barrels competitive with rival suppliers amid sluggish demand. Saudi Arabian Oil Co. reduced its official selling price for Medium grade crude to Asia next month to a discount of $3.20 a barrel below the regional benchmark, compared with a $1.30 discount for October sales, the company said Sunday in an e-mailed statement. The discount for the Medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data compiled by Bloomberg. (Saudi Aramco Cuts Crude to Asia, U.S. Amid Weak Demand)

Shell CEO sees signs of price recovery; expects prices to stay low for some time. — Reuters “Oil markets are beginning to recover but the scale of global oversupply means prices may only rise slowly, the chief executive of Royal Dutch Shell Plc (RDSa.L) said on Tuesday. “We see the first signs of recovery in oil prices,” Ben van Beurden told an oil industry conference in London “American shale so far has been much more resilient financially and technically than many expected,” he said. “With shale oil being more resilient than we thought it will take some time for prices to recover.” (Shell CEO sees first signs of oil price recovery)

4:31 AM EDT. Prices lower on profit taking as traders ride the wave. — Reuters “Oil edged lower on Tuesday as some investors sold out of positions following a rally in the previous session that saw crude gain more than 2 percent on news that major producers may meet to counter the recent price decline. Brent crude LCOc1, the global oil benchmark, was down 20 cents at $49.05 a barrel by 0312 EDT. It rose 2.3 percent on Monday. The U.S. benchmark, West Texas Intermediate crude CLc1, was 37 cents lower at $45.89 a barrel. The contract gained 1.6 percent in the previous session. “The move is mainly down to profit-taking at this point,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. “I don’t see much direction upwards at this time. I can’t see where it should come from because there’s no change in fundamentals expected. (Oil edges lower on profit-taking after price rally)

5:33 PM EDT. Oil broke out of the trading range to end the session up $2. — Reuters “Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on technical buying and industry talk as well as U.S. government data suggesting the global supply glut could be ebbing. Global benchmark Brent crude LCOc1 rallied for a third straight day and closed above $50 a barrel the first time in a month. In post-settlement trade, it briefly jumped $3 after an industry group reported an unexpected weekly drop in U.S. crude stockpiles. (Oil jumps $2, breaking range as supply seen ebbing)

10/8/2015

Oil production Businesses are adjusting to the new price reality — Reuters “Cam Hewell runs Premium Oilfield Technologies, a small company that makes equipment and spare parts for drilling rigs from North Dakota to Texas. Like his rivals, he is trying to withstand the worst oilfield downturn in six years, but they face a vexing obstacle: cannibals. In a bid to save cash, rig owners are cannibalizing parts such as motors and drill pipe from idled rigs to fix 800 active ones in the U.S. when stuff breaks. In good times, they would buy new equipment from companies like Hewell’s or industry leader National Oilwell Varco Inc when parts fail. Now, they just pick over any of about 1,100 rigs idled by the price crash. Cannibalization is so widespread in this downturn that services companies and others say even after oil prices recover it will take six months or more to see a significant rebound in drilling and production — a timeframe that will allay fears of a quick uptick in drilling promptly sinking prices again. NOV has said so many rigs are idled that firms could cannibalize drill pipe for up to a year before placing new orders.” (Oilfield cannibals: to save cash, U.S. drillers strip idle rigs)

The current euphoria maybe short lived. Goldman sees prices falling another $10 and Oil producers are preparing for a long period of low prices before fundamentals rebalances. — Bloomberg “A year after oil sank into a bear market, the industry is still hunkering down for a long period of low prices, with Europe’s biggest producer seeing only the first glimpses of a recovery. In the past five months, U.S. production sank by 590,000 barrels a day, or more than 6 percent. The bad news: Drillers are cutting costs with a speed and brutality not seen in decades, enabling many oil producers to maintain output even as prices remain low. Goldman Sachs Group Inc. sees crude falling a further $10 a barrel as storage tanks fill up in the coming months. Royal Dutch Shell Plc is planning for a long stretch of low prices, Chief Executive Officer Ben Van Beurden said at the Oil & Money conference in London. While he sees “the first mixed signs for recovery,” the resilience of the U.S. shale industry and ample stockpiles suggest it’ll take more time to rebalance demand and supply, the CEO said.” (Oil Drillers Hunker Down for More Pain One Year Into Bear Market)

5:22 AM EDT. Oil up, trading off of a weaker Dollar though the biases remain to the downside. — Reuters “Oil prices edged up on Thursday, nudged higher by a weaker dollar, while investors temporarily overlooked an unexpectedly large rise in U.S. inventory levels that could quickly push the market back below $50 a barrel, analysts said. U.S. crude stocks rose by 3.1 million barrels to 461 million last week as refineries reduced production and idled capacity. Analysts had expected an increase of 2.2 million barrels. The oil price is set for a 7 percent gain this week, its largest weekly increase since late August, after oil industry executives warned that this year’s fall below $50 would force higher-cost producers to reduce output. “Those expectations drove prices upwards, so that’s being reassessed and it’s possible we’ll see prices dropping below $50 again,” Commerzbank analyst Carsten Fritsch said. Brent crude oil futures rose 56 cents to $51.89 a barrel by 0811 GMT, having touched a one-month high of $53.15 on Wednesday. U.S. crude futures rose 42 cents to $48.23 a barrel. (Oil edges up, but may break $50 after U.S. inventories)

3:17 PM EDT. Bulls off and running as Oil surges to its highest in three months but is it premature? — Reuters “Oil prices climbed to their highest in three months on Thursday after a closely watched oil forecaster predicted prices would climb to $75 over the next two years, adding to early gains notched after a rally in Chinese stocks worries about Syria. PIRA Energy Group, a closely watched forecaster that predicted the collapse in oil prices a year ago, said it sees crude prices at $70 per barrel by the end of 2016 and $75 a barrel in 2017. Brent crude oil futures LCOc1 closed up $1.72 at $53.05 a barrel, while U.S. crude futures CLc1 closed up $1.62 at $49.43 a barrel. (Oil surges to settle at three-month high on bullish outlook)

10/9/2015

Saudis Production output was steady in September — Reuters “Saudi Arabia kept its crude oil production steady in September, an industry source told Reuters, maintaining high output as part of a strategy to defend market share. Saudi Arabia pumped 10.225 million barrels per day (bpd) of crude oil last month, down about 60,000 bpd from August, the source said. Crude supplied to the market in September was 10.260 million bpd, up about 70,000 from a month earlier, he added.” (Saudi Sept oil production, supply steady: industry source DUBAI)

5:30 AM EDT. Oil continues its bullish run; biggest weekly gain in 6-years. Ride the upward wave while it lasts, look to take profits — Reuters “Oil extended gains on Friday and was set for its biggest weekly rise in over six years, after U.S. Federal Reserve minutes suggested there was no hurry to raise interest rates and an influential forecaster predicted a price rally. Brent crude, the global benchmark, was up 60 cents at $53.65 a barrel at 0344 EDT, on track to rise 11 percent this week alone. U.S. crude was up 77 cents at $50.20 a barrel after rising as far as $50.58, the highest level in more than two months. The U.S. central bank’s meeting minutes showed more policymakers than expected agreed to keep the first interest rate hike in a decade on hold. The news also supported equity markets on Friday, with top European stocks climbing to a one-month high. Forecaster PIRA Energy Group issued a bullish oil price prediction on Thursday, saying oil would hit $70 a barrel by the end of next year and to trade at $75 in 2017. “The Fed minutes and the PIRA price forecast are driving prices today,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. “The rally may sustain for the short term but it should run out of steam some time next week because we are in a generally oversupplied market.” (Saudi Sept oil production, supply steady: industry source DUBAI)

3:14 PM EDT. WTI closed at a 11-week high; Brent closed within $50–55 range. We’ve seen this before, global fundamental still point to a drag on prices. — Reuters “Oil prices remained little changed in choppy trade on Friday as traders flip-flopped between the negative fundamentals of persistent oversupply and support cushions from a sixth weekly decline in U.S. oil rig counts. U.S. crude CLc1 closed up 20 cents at $49.63, the highest settle since late July, while Brent crude LCOc1 ended 40 cents down at $52.65 on Friday. Despite Friday’s decline in Brent, both the North Sea crude and WTI benchmarks gained about 9 percent in the week, the biggest weekly percentage gain in the last six weeks. U.S. energy firms cut oil rigs for a sixth week in a row this week, the longest streak of weekly declines since June, data released on Friday showed, a sign low prices continued to keep drillers away from the well pad. Drillers removed nine oil rigs in the week ended Oct. 9, bringing the total rig count down to 605, oil services company Baker Hughes Inc (BHI.N) said in its closely followed report. However, some oil analysts believe that fall might not be enough to rein in the oil bears (Oil little changed after choppy trade, WTI ends at 11-week high)

10/12/2015

U.S. Rig counts down by 9 to total of 609 in production, a five year low. Expect more marginal vertical and directional rigs to be pulled in the coming weeks. — Bloomberg “America’s oil drillers have idled more than half the country’s rigs since last October as the world’s largest crude suppliers battle for market share. The crude being pumped out of U.S. shale formations helped create a global glut that’s pushed prices down by more than 50 percent since June 2014. However, new techniques that increased efficiency have prevented production from falling into a tailspin. U.S. crude output rose by 76,000 barrels a day to 9.2 million last week, the biggest gain in nearly half a year, according to Energy Information Administration data. Production reached a four-decade high of 9.61 million in June. (U.S. Drillers Idle Rigs for 6th Week as Oil Lingers Near $50)

4:27 AM EDT. Oil prices up in early trading on Kuwait’s oil minister’s comments. — Reuters “Oil prices rose on Monday after Kuwait’s oil minister said economic growth and the removal of high-cost producers would help tighten global fuel balances. Kuwait Oil Minister Ali al-Omair told Reuters the Organization of the Petroleum Exporting Countries would stick to its output policy, which has focused on building market share at the expense of higher cost non-OPEC producers. “There are indications that a lot of high-cost oil production‎ is starting to get out of the market and this will help improve prices,” Omair said. “Bullish rhetoric from OPEC is helping drive prices higher,” said Tamas Varga, market analyst at London brokerage PVM Oil Associates. “Rig count data is also supporting sentiment.” (Oil rises after Kuwait sees higher prices ahead)

4:44 PM EDT. Oil tumbled 5.1% on profit taking as markets take a reality check. — Reuters “Crude oil futures tumbled on Monday on profit-taking and a report of higher OPEC production, while pressure lingered on the U.S. dollar as markets priced the possibility that the Federal Reserve would not begin a tightening cycle this year. U.S. stocks edged up, led by utilities, while commodity-related stocks accounted for the bulk of the losses on the S&P 500. Federal Reserve Vice-Chairman Stanley Fischer said on Sunday that policymakers are still likely to raise interest rates this year, however, that is “an expectation, not a commitment,” and could change if the global economy pushes the U.S. economy further off course. Crude oil futures CLc1 settled 5.1 percent lower after gaining almost 9 percent last week, with Brent LCOc1 posting its largest daily drop in six weeks, down 5.3 percent. Secondary sources cited in OPEC’s monthly report said the group pumped 31.57 million barrels per day in September, up 110,000 bpd from August. (Oil slides; Fed bets keep greenback under pressure)

10/13/2015

China’s decreasing capacity of Oil on-land storage facilities, backing up tankers waiting to unload new shipments. — Bloomberg “Supertankers hauling crude to China are contending with increased waiting times to unload as some on-land storage depots reach capacity amid an oil-buying binge by the world’s most populous nation. At least 19 two-million-barrel-capacity ships — known as VLCCs — were stationed off China’s coast for two weeks or more, according to vessel-tracking data compiled by Bloomberg on Oct. 9. In normal market conditions, most would normally arrive at a port and depart within a day, according to George Los, a New York-based analyst at shipbroker Charles R. Weber Co. As delays have increased, benchmark daily earnings for the tankers jumped above $100,000 this month for the first time since the global recession. This tanker traffic jam shows just how much crude the world’s second biggest importer is buying at a time when economic growth is forecast to slow to the lowest level in 25 years. China’s purchases have jumped almost 10 percent this year from 2014, and could help keep prices from crashing to levels envisioned by banks such as Goldman Sachs Group Inc., which has said $20 a barrel oil is possible.” (China’s Supertanker Traffic Jam Propels Global Shipping Rates)

4:31 AM EDT. Oil up in early trading as global fundaments weigh on prices; though the market remains a haven for traders. — Reuters “Crude oil futures edged up on light bargain hunting on Tuesday, after U.S. and Brent crude tumbled in the previous session to post their biggest daily percentage declines since the start of September. Oil prices sank on Monday after a report that OPEC continued to boost production. A hefty drop in Chinese imports last month and expectations of higher crude stockplies in the United States helped limit any recovery. Global benchmark Brent crude had gained 44 cents to $50.30 a barrel by 0715 GMT, after dropping $2.79 in the previous session to $49.86. U.S. crude for November rose 47 cents to $47.57 a barrel after settling down $2.53 at $47.10. “We think that prices are likely to remain capped to the upside for the remainder of this quarter in line with our forecast due to weakening product demand, burgeoning crude and product stocks, and limited supply adjustments,” Barclays said. (Oil up on bargain-hunting, but gains capped by stockpile forecast)

3:46 PM EDT. WTI fell to a one week low; Brent fell 1.2%, weighted down by global fundamentals — Bloomberg “WTI for November delivery fell 44 cents to settle at $46.66 a barrel on the New York Mercantile Exchange. It’s the lowest close since Oct. 5. Futures climbed as much as 2.8 percent to $48.43 during the session. The volume of all futures traded was 36 percent above the 100-day average at 2:50 p.m. Brent for November settlement slipped 62 cents, or 1.2 percent, to $49.24 a barrel on the London-based ICE Futures Europe exchange. European benchmark crude closed at a $2.58 premium to WTI. “We’re just chopping around here,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “I don’t see how we can get a significant rally.” (Oil Slips to One-Week Low as U.S. Crude Stockpiles Seen Rising)

10/14/2015

The International Energy Agency see’s global glut persisting thru 2016. — Reuters “A global oil supply glut will persist through 2016 as demand growth slows from a five-year high and key OPEC producers maintain near-record output, the International Energy Agency said on Tuesday, even as low prices curb supply outside OPEC. The IEA, which advises industrialized countries on energy policy, said in a monthly report that world oil demand will rise by 1.21 million barrels per day (bpd) in 2016, down 150,000 bpd from last month’s forecast. “A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels — should international sanctions be eased — are likely to keep the market oversupplied through 2016,” the Paris-based IEA said. (Oil glut to persist as global growth demand slows: IEA)

China’s oil imports increased in September boosting inventory and refinery activity — Bloomberg “China’s crude imports rose in September from a three-month low as the world’s second-largest consumer sought bargain barrels for its reserves and refiners boosted processing. Overseas purchases rose to 27.95 million metric tons last month from 26.59 million in August, according to preliminary data released by the Beijing-based General Administration of Customs on Tuesday. That’s equivalent to 6.83 million barrels a day, up 8.6 percent from the previous month, Bloomberg calculations show. (China Crude Imports Rebound as Refiners Seek Oil Bargains)

U.S. Energy Information Administration forecast U.S Shale output to fall by record amounts In November — Reuters “ U.S. shale production is expected to fall the most on record in November, extending a nationwide output decline into its seventh consecutive month, according to a forecast on Tuesday from the U.S. Energy Information Administration. Total output is set to fall by more than 93,000 barrels per day (bpd) to 5.12 million bpd, according to the EIA’s monthly drilling productivity report. That’s the largest monthly cut forecast since data was available in 2007. Oil production from the Eagle Ford play in South Texas was expected to fall 71,000 bpd to 1.37 million bpd. Bakken oil output in North Dakota was expected to slide 23,000 bpd to 1.16 million bpd. Oil production from the Permian Basin of West Texas, which continues to buck the trend, was projected to rise 21,000 bpd to 2.03 million bpd. New well oil production per rig remained unchanged for the Bakken and Eagle Ford. It rose 2 bpd in the Permian, data show.” (U.S. shale oil output to fall by most on record in November: EIA)

5:06 AM EDT. Oil prices down for a third day on global fundaments — Reuters “Oil eased further below $50 a barrel on Wednesday, falling for a third day, on concern a supply glut will persist and demand slow down as economic growth moderates in No. 2 consumer China. Chinese growth for the third quarter is expected to fall below 7 percent for the first time since the global financial crisis. The International Energy Agency (IEA) said on Tuesday the oil market would remain oversupplied in 2016. Brent crude was down 5 cents at $49.19 a barrel as of 0824 GMT. Brent fell to $42.23 on Aug. 24, the lowest since March 2009. U.S. crude was up 1 cent at $46.67. “Prices should remain low,” said Daniel Ang, an investment analyst at Phillip Futures. “We are still in oversupply.”(Oil eases further below $50 on oversupply, China concern)

5:11 PM EDT. Oil ended lower, down 7% for the week, on over supply and demand concerns. — Bloomberg “Oil edged lower on projections that U.S. crude stockpiles increased last week, while disappointing Chinese economic data bolstered the case for lower demand. West Texas Intermediate futures fell a third day. Declines accelerated after the market settled when the American Petroleum Institute was said to report that crude supplies surged last week. U.S. stockpiles probably rose for a third week as refineries reduced operating rates, a Bloomberg survey showed before an Energy Information Administration report Thursday. Chinese manufacturer prices slumped and U.S. September retail sales rose less than forecast. (Oil Closes at One-Week Low Amid Projected U.S. Crude Supply Gain)

10/15/2015

China buying record amounts of Crude for refineries and stockpiling inventory. Reuters “As China closes in on the United States as the world’s biggest crude oil importer, demand from private refiners and stockpiling of cheap oil is expected to keep imports at record levels after a wobble in the third quarter. Despite slower growth in recent months — crude imports rose just 1.3 percent in September on a year earlier — buying for October-November delivery has picked up strongly, traders and analysts say. The purchases will ease concerns of a sharp slowdown in Chinese buying and support prices in coming months, analysts said. The increased buying has shown up in tanker movements and freight rates, said Energy Aspects analyst Virendra Chauhan, and analysts are upgrading earlier forecasts for second half growth. “Despite a slowing Chinese economy, crude imports remain robust on the back of accelerated stockpiling activities into operating and commercial storage,” said Wendy Yong, analyst at oil consultancy FGE.” (

Energy deal activities seen picking up with about 400 opportunities worth $200 Billion up for grabs. — Bloomberg “More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc. There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean. Low prices have slashed profits and as of the second quarter aboutone-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show. “Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.” (Oil Slide Means `Almost Everything’ for Sale as Deals Accelerate)

Global producers increased their production adding to the global glut in the first nine months of 2015. — Reuters “The world’s big oil exporters pumped more than half a billion barrels more crude than needed in the first nine months of this year, industry data gathered by Reuters and major energy market forecasters show. The Organization of the Petroleum Exporting Countries pumped an average of 31.20 million barrels of oil per day (bpd) between January and September, Reuters estimates show, more than 2 million bpd higher than demand for their oil. That is a total of more than 550 million barrels of crude, all of which needs to be stored somewhere. Core OPEC countries, led by Saudi Arabia, decided almost a year ago to concentrate on building market share rather than defending oil prices, and the result has been a huge oversupply that has pushed the market to six-year lows. (Oil glut up by half a billion barrels in 2015)

5:21 AM EDT. Oil lower in early trading, Brent below $50, WTI still above $45 global fundamentals remain the concern. — Reuters “Oil slipped more, nearing $49 per barrel on Thursday, staying weak after a jump in U.S. stockpiles shown in industry data the day before. Brent LCOc1 eased 6 cents to $49.09 a barrel by 0753 GMT. On Wednesday it hit a low of $48.71, the weakest since Oct. 5.U.S. crude CLc1 fell 42 cents to $46.22 a barrel after settling down 2 cents at $46.64. Data from industry group the American Petroleum Institute showed U.S. crude stocks rose by 9.4 million barrels in the week to Oct. 9 to 465.96 million, versus analyst forecasts for a 2.8 million barrels build. [API/S] “So here is the set up: In December the Fed will hike rates and OPEC will not cut output. In Q1 of 2016, global oil inventories rise further and oil prices will drop,” Bjarne Schieldrop chief commodity analyst at SEB in Oslo told the Reuters Global Oil forum. (Oil slips more to brush $49 on inventory rise)

3:37 PM EDT. U.S. crude stocks surged by 7.6 million barrels last week pushing prices lower — Marketwatch “Oil futures finished at their lowest level in nearly two weeks on Thursday after U.S. government data showed a hefty weekly increase in crude stockpiles on the back of a further slowdown in refinery activity. Traders appeared reluctant to pull prices down much further after losses over the past three sessions, as data also revealed a fall in weekly domestic oil production and the market awaits Friday’s weekly count on the number of active U.S. rigs drilling for oil. November West Texas Intermediate crude CLX5, +1.12% settled at $46.38 a barrel, down 26 cents, or 0.6%, on the New York Mercantile Exchange. Prices haven’t settled at a level that low since Oct. 5, but they managed to pare much of their earlier losses, which took prices to lows under $45.30 in the wake of the supply data. November Brent crude LCOX5, -0.92% on London’s ICE Futures exchange fell 44 cents, or 0.9%, to $48.71 a barrel on the contract’s expiration day. December became the front-month contract LCOZ5, +0.89% It settled up 4 cents at $49.73 a barrel. (Oil settles at a nearly two-week low)

10/16/2015

Three trends seen redefining the Energy landscape. — Bloomberg “Michael Liebreich, the founder of Bloomberg New Energy Finance, set out the trends upending the global energy markets and ushering in what he termed an “age of plenty.” He said: 1. Cheap fossil fuels are here to stay because production costs are tumbling. 2. Intermittent renewables will dominate electricity supply by 2040, with huge challenges for grid managers. 3. Electricity demand is flattening out, losing its link with economic growth. (These Three Trends Have Radically Redefined the Energy Market)

Russia losing European market share to The Saudis. — Reuters “From global majors such as Shell and Total to more modest Polish energy firms, oil refiners in Europe are cutting their longstanding use of Russian crude in favor of Saudi grades as the world’s top exporters fight for market share. Russia has for years been muscling in on Asian markets where Saudi Arabia was once the unchallenged dominant supplier. But now Riyadh is retaliating in Moscow’s backyard of Europe with aggressive price discounting. This has nothing to do with Western sanctions imposed on Russia over Ukraine, which apply to energy industry equipment but not to oil or gas itself. Instead it is a commercial battle for customers as both exporters ramp up their output despite weak world oil prices. This is likely to complicate further a dialogue between Moscow and the OPEC exporters’ group on tackling the global oil glut, with joint production cuts already looking elusive. (Saudi Arabia targets Russia in battle for European oil market)

U.S. Crude jumped by 7.6 million barrels last week. — Reuters “U.S. crude stocks surged by 7.6 million barrels last week, the largest build since April, while gasoline and distillate inventories fell, data from the Energy Information Administration (EIA) showed on Thursday. Crude inventories rose by 7.6 million barrels to 468.56 million barrels last week, compared with analysts’ expectations for an increase of 2.8 million barrels. The rise posted by the EIA was not as large as the 9.4 million-barrel jump reported on Tuesday by industry group American Petroleum Institute (API). [API/S] The API pegged total U.S. crude stockpiles at 465.96 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.125 million barrels, EIA said. U.S. crude imports rose last week by 247,000 barrels per day (bpd), EIA data showed. Crude stocks in the Gulf Coast region gained 3.032 million barrels to 242.971 million, their second highest level since EIA started tracking it in 1990. Only the East Coast posted a drop in crude inventories, slipping 297,000 barrels to 15.193 million. (U.S. crude oil stocks jump by 7.6 million barrels, most since April: EIA)

6:04 AM EDT. Oil steady as traders close-out short positions (take profits); Brent back over $50, WTI over $45 — Reuters “Oil prices steadied on Friday, snapping a week-long decline as investors closed positions at the end of a volatile week that saw prices slide nearly 10 percent on renewed signs a global supply glut was here to stay. Brent’s new front-month December contract LCOc1 was up 44 cents at $50.17 a barrel at 0950 GMT. November Brent expired at $48.71 a barrel on Thursday, down 44 cents day on day. U.S. crude’s front-month November contract CLc1 traded 60 cents higher, or 1.1 percent, at $46.98 a barrel. “Investors holding short positions have already started to take profit ahead of the weekend after four days of decline,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. (Oil up on low U.S. rig count; prices down sharply on week)

3:31 PM EDT. Oil ended the day up but fell ~5% for the week. — MarketWatch “The situation remains quite difficult, and oversupply and imbalances are becoming severely systemic, terribly intricate and difficult to resolve,” said Richard Hastings, macro strategist at Seaport Global Securities. . “A return to any type of oil market equilibrium looks increasingly evasive at this point.”November West Texas Intermediate crude CLX5, +1.90% settled at $47.26 a barrel, up 88 cents, or 1.9%, on the New York Mercantile Exchange. It settled at a nearly two-week low on Thursday and saw a loss of roughly 4.8% on the week. December Brent crude LCOZ5, +1.47%on London’s ICE Futures exchange rose 73 cents, or 1.5%, to $50.46 a barrel, with prices down more than 4% for the week. (Oil gains, but ends with a nearly 5% weekly loss)

10/19/2015

U.S. energy companies cut oil rigs last week for a seventh week in a row, the longest streak since June — Reuters “Drillers removed 10 oil rigs in the week ended Oct. 16, bringing the total rig count down to 595, the least since July 2010. Over the prior six weeks, drillers had cut 70 rigs, oil services company Baker Hughes Inc said in its closely followed report. That total was less than half the 1,590 oil rigs in the prior year. Since hitting an all-time high of 1,609 in October last year, weekly rig count reductions have averaged about 20. While the total U.S. oil and gas rigs fell to another 13-year low, natural gas rigs were up three to 192. With that increase, gas rigs were just over the lowest level in at least 28 years, according to Baker Hughes data going back to 1987. (U.S. oil drillers cut rigs for seventh week: Baker Hughes)

Saudi Arabia is storing record amounts of crude to maintain market share while cutting shipments. — Bloomberg “Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative on Sunday. Exports dropped to 7 million barrels a day from 7.28 million. “The fall in Saudi crude exports reflects the market reality,” Mohammed Ramady, an independent London-based analyst, said by phone. “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.” (Saudi Crude Stockpiles at Record High Amid Quest to Keep Share)

5:05 AM EDT. Global fundamentals a concern as prices slip lower in early trading — Reuters “Oil prices fell on Monday on concerns about the pace of economic growth in China, the world’s largest energy consumer, and signs that global oversupply is curbing Saudi crude exports. China’s economy grew at the slowest pace in six years in the third quarter, according to official data released on Monday, making it more and more likely Beijing will cut interest rates to stoke activity. Brent for December delivery LCOc1 was down 38 cents at $50.08 a barrel at 0807 GMT. U.S. crude for November delivery CLc1 traded down 35 cents at $46.91 a barrel, extending last week’s steepest losses in eight weeks. “Chinese GDP data and the rise in the Saudi stockpile due to falling crude oil exports are weighing on prices,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. (Oil prices slip on Chinese demand concerns, weak Saudi exports)

4:04 PM EDT. Oil fell on fundamental concerns. — Reuters “Crude oil fell about 4 percent on Monday after a tumble in gasoline futures added pressure to a market slumping on slower growth in China and signs that Iranian oil will return to the market soon following implementation of its nuclear deal. The front-month in Brent, the global crude benchmark, settled down $1.85, or 3.7 percent, at $48.61 a barrel. U.S. crude’s front-month settled down $1.37, or 3 percent, at $45.89, in lighter volume trades ahead of Tuesday’s expiry for November CLX5 as the spot contract. Gasoline RBc1 tumbled 5 percent on worries U.S. refinery utilization could pick up with declining maintenance work. Ultra-low sulfur diesel HOc1 fell nearly 3 percent” (Oil down about 4 percent; gasoline drop adds to China, Iran worries)

10/20/2015

Iran lobbying OPRC to raise prices, $70–80 — Bloomberg “OPEC member states should cut crude output to boost prices to a range of $70 to $80 a barrel, Iran’s Oil Minister Bijan Namdar Zanganeh said, even as his country prepares to ramp up production in the aftermath of economic sanctions. “No one is happy” with prices at current levels, Zanganeh told reporters in Tehran. “OPEC should decide to manage the market by reducing the level of production.” Zanganeh said he doesn’t expect the producer group to decide to scale back output when its ministers meet next in December.(Iran Urges OPEC to Cut Oil Output to Raise Prices to $70-$80)

Hedge Funds cutting back their short positions as market begin to show signs of rebalancing. However the market is still grappling with global oversupply and slow growth issues — Reuters “Hedge funds have unwound most of the record short position they established in U.S. crude futures and options between June and August amid signs that the oil market is rebalancing. Hedge funds and other money managers had cut their gross short position in the main NYMEX WTI futures and options contract to 90 million barrels by Oct 13 (reut.rs/1LxSDoK). Reported shorts had been reduced from 108 million barrels the previous week and a peak of 163 million barrels in early August, according to the U.S. Commodity Futures Trading Commission. Fifty-seven hedge funds were still running (Hedge funds trim oil shorts as market starts to rebalance: Kemp)

5:55 AM EDT. Oil up as traders take profits, covering their short positions. — Reuters “Oil prices steadied on Tuesday as traders covered short positions after a week of falls, but gains were capped by worries about oversupply and the health of the global economy. Brent crude dropped $1.85 a barrel, or 3.7 percent, on Monday and was unchanged at $48.61 by 0810 on Tuesday. U.S. light crude was up 20 cents at $46.09 after closing down $1.37, or 3 percent. The November contract expires on Tuesday. “This is the usual pattern,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. “Oil prices rebound after a big fall and that is what we have seen today.” “We are now near the bottom of the recent range, which is not surprising, given the bearish sentiment and focus on global oversupply,” Fritsch added. (Oil steadies but focus still on oversupply)

3:08 PM EDT. Oil ended mixed, market awaits inventory numbers later today. — MarketWatch “November West Texas Intermediate crude CLX5, -0.11% fell 34 cents, or 0.7%, to settle at $45.55 a barrel on the New York Mercantile Exchange. December crude CLZ5, -0.76% which became the front-month contract at the settlement, ended a penny higher at $46.29 a barrel. December Brent crudeLCOZ5, -0.19% on London’s ICE Futures exchange tacked on 10 cents, or 0.2%, to $48.71 a barrel. Prices saw a “minor technical correction to Monday’s drop, with book squaring” ahead of the November WTI contract expiration and uncertainty over the U.S. inventory data for the week ended Oct. 16, said Tim Evans, energy analyst at Citi Futures. (Oil ends mixed with U.S. supply data on tap)

10/21/2015

Vitol sees oil struggling to break above $60 by end of 2016. — Reuters “Vitol, the world’s largest oil trader, believes the crude price will struggle to trade above $60 a barrel next year, as the effects of slowing global demand growth could be compounded by a return of Iranian and maybe even Libyan barrels. The price of oil has halved over the last 12 months, mainly as a result of unprecedented levels of production from some major exporting countries, but also as demand from China and other commodity consumers, such as Brazil and Russia, slackened. Ian Taylor, the chief executive of Vitol, said his company forecast global oil demand growth in 2016 to reach around 1.35 million barrels per day (bpd), slowing from this year’s strong expected growth of 1.7 million bpd. (Vitol sees oil struggling to break above $60-per-barrel by end-2016)

OPEC members under-cutting each other to gain market share in Asia- Bloomberg “When it comes to deciding how much to charge Asian oil buyers,OPEC members are showing little regard for tradition. Suppliers from the Organization of Petroleum Exporting Countries have long moved in lockstep, raising or lowering prices in tandem. Now, Kuwait is undercutting Saudi Arabia by the most on record and Iraq is also selling its oil more cheaply than the group’s biggest member. Qatar is pricing cargoes at the biggest discount in 27 months to competing crude from the U.A.E.’s Abu Dhabi.”(OPEC Brings Oil Price War Home in Pursuit of Asia’s Cash)

3:03 AM EDT. Oil prices fall, in early trading, on the American Petroleum Institute report, showing U.S. commercial crude stocks climbed by a larger than expected (7.1 million barrels to 473 million barrel) last week. — Reuters “Oil prices fell on Wednesday after data from an industry group showed a larger-than-expected build in U.S. crude inventories last week, fanning worries over global oversupply, even as a slightly weaker dollar provided some support. Brent crude for December delivery had fallen 30 cents to $48.41 a barrel by 0645 GMT after settling up 10 cents in the previous session. U.S. crude for December delivery dropped 44 cents at $45.85 a barrel after settling up one cent at $46.29. The November contract, which expired on Tuesday, finished down 34 cents at $45.55 per barrel. “Concerns over the potential for a further build (in U.S. crude stocks) in official data (were driving prices lower)”, said Michael McCarthy, chief market strategist at Sydney’s CMC Markets. (Oil falls after industry report shows surge in U.S. crude stocks)

2:56 PM EDT. Oil ended near 3-week low on oversupply report — MarketWatch “Oil futures settled at their lowest level in nearly three weeks on Wednesday after U.S. government data revealed a jump in weekly crude supplies, just as some of the world’s top crude producers met in Vienna to discuss ways to support prices. December West Texas Intermediate crudeCLZ5, -2.42% fell $1.09, or 2.4%, to settle at $45.20 a barrel on the New York Mercantile Exchange. That was the lowest settlement for a most-active contract since Oct. 1. Brent crude LCOZ5, -1.77%declined by 86 cents, or 1.8%, to $47.85 a barrel on London’s ICE Futures exchange.” (Oil drops to a nearly 3-week low as crude supplies jump)