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Refined Products

Recap: WTI posted a weekly loss of more than 8% on Friday, pressured by ongoing worries about a global glut of supplies, a lack of significant production cuts and some strength in the U.S. dollar on the heels of the U.S. jobs report. March WTI fell 83 cents, or 2.6 percent, to settle at $30.89. April Brent settled at $34.06 down 40 cents, or 1.2 percent on the day and down 5 percent on the week.

For the first time since late 2008, RBOB futures closed under $1 a gallon. Analysts attributed the drop to a purge of winter blends. March futures fell 3.6 cents or 3.5 percent to settle at 99.27 cents. This is a drop of more than 12 percent on the week. March heating oil slipped 2.2 cents, or 2 percent to settle at $1.059 a gallon, down 1.8 percent on the week.

Fundamental News: According to Wood Mackenzie, only 0.1% of global production has been curtailed following a year of low oil prices.  The analysis suggests that oil prices will need to fall further or remain low for a lot longer to meaningfully reduce global production.  Its analysis estimates the amount directly impacted by low prices at 100,000 bpd out of the 96.1 million bpd of oil produced worldwide.  It also estimates that 3.4 million bpd or less than 4% of global oil supply is unprofitable at prices below $35/barrel.  It cautioned against expecting further closures, because many producers will continue to take the loss in the hope of a rebound in prices. 

The unprecedented increase in surplus crude oil supplies in Cushing, Oklahoma is beginning to cause logistical problems for companies moving crude between thousands of steel tanks in the storage hub.  Enterprise Products Partners has told at least some counterparties that it is experiencing delays in delivering crude from its tanks.  According to the EIA, crude oil stocks in Cushing have increased to a record 64.2 million barrels as of last week. 

Oil trader, Pierre Andurand, is betting that crude prices have already reached a low and will rebound to $70/barrel by late 2017 before moving even higher.  He said oil prices are expected to trade between $30 and $40/barrel until the summer, before increasing up to $55/barrel by year end on worldwide production declines. 

IIR reported that US oil refiners were expected to shut in 998,000 bpd of capacity in the week ending February 5th, increasing refining capacity by 174,000 bpd from the previous week.  IIR expects offline capacity to fall to 666,000 bpd in the week ending February 12th and 502,000 bpd in the subsequent week.

Baker Hughes reported that the number of rigs searching for oil was down 31 at 467 in the week ending February 5th. Earlier, Baker Hughes reported that the US rig count for January was 654, down 60 from 714 in December.  Total worldwide rig count for January was 1,891, down 1,418 from 3,309 counted in January 2015. 

The US Labor Department said nonfarm payrolls increased by a seasonally adjusted 151,000 in January.  It reported that the unemployment rate fell slightly to 4.9% last month.  Revisions showed employers added 2,000 fewer jobs in November and December than previously estimated. 

Phillips 66 confirmed Friday that planned maintenance is currently underway at its Bayway, New Jersey refinery.

Early Market Call - as of 9:30 AM EDT

WTI - Mar $30.54 Down 36 cents

RBOB - Mar $0.9879 Down 78 points

HO - Mar $$1.0772 Up 1.82 cents

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Natural Gas

Friday, February 5th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.043, seven cents above Thursday’s closing price of $1.973.  As forecasts turned colder overnight, prices rose with the expectations of increased demand.  Sliding to the intraday low of $2.026 by 9:20AM, the contract recovered to the $2.04 level twenty minutes later and proceeded to build upon this mark for the next two hours. Slipping below $2.030 shortly after 12:00PM, March then posted a steady climb through the afternoon to reach the intraday high of $2.073 by 1:50PM, closing higher on Friday at $2.063.

This morning in Globex, WTI Crude was down 92 cents; Natural Gas was up eight cents; Heating Oil was down one cent; and, Gasoline was down two cents.

Cash prices were higher in New York and New England.

Natural Gas Glossary

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