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MarketWatch

Refined Products
3.1.2017

Recap:  Oil prices continue to be caught up in the tug of war between OPEC output cuts and rising U.S. production, with Tuesday's activity falling on pressure from expected increases in U.S. crude oil inventories. Brent succumbed to greater pressure than WTI, with April futures falling 34 cents, or 0.61%, to settle at $55.59 a barrel. April WTI settled at $54.01, down 4 cents, or 0.07%.

It appears market participants are rethinking short term market conditions, as is evident in calendar spreads. These spreads, which had been working their way out of contango, have begun to shift lower. The December 17/December 18 WTI spread, which had been trading at -$2.00 in November, worked its way up to $1.09 backwardation. It is now trading at 58 cents. This is a sign that optimism for increasing demand is waning.

The expiring March RBOB settled at $1.512 a gallon, down 2.1 cents, or 1.4%, which was down 0.9% for the month. March heating oil fell 1.9 cents, or 1.2%, to $1.621 a gallon, though prices ended the month about 0.6% higher.

Fundamental News:  Bloomberg reported that crude oil stocks held in Cushing, Oklahoma increased by 200,000 barrels in the week ending February 24th to 63.24 million barrels.

Iran's Oil Minister, Bijan Namdar Zanganeh, said it is too early to talk about renewing the oil output cut deal in the second half of the year.  He said OPEC members' compliance with the agreement to cut output was generally acceptable in January.

Reuters reported that OPEC cut its oil output for a second month in February to 29.87 million bpd.  OPEC members cut output by 1.098 million bpd of the pledged 1.164 million bpd, equating to 94% compliance. 

JBC Energy reported that OPEC's output increased by 55,000 bpd to 32.345 million bpd in February.  Saudi Arabia's output increased by 50,000 bpd to 9.8 million bpd.  Compliance among the ten members bound by the cuts increased from 88% to 89%.

The White House said there is no executive order on ethanol.  Earlier on Tuesday, the head of the Renewable Fuels Association, Bob Dinneen, said he was informed by President Donald Trump's administration that it would order a change to the Renewable Fuel Standard, lifting the responsibility for fuel blending from refiners to position holders at the terminals. 

A senior official from Iraq's semi-autonomous region of Kurdistan, Ashti Hawrami, said Iraq has cut exports of Kirkuk crude to better meet its supply reduction obligations with OPEC and deliver fuel for local needs.  He said that in recent weeks Iraq has taken 40,000-50,000 bpd of its Kirkuk oil share to a local refinery instead of exporting it. 

The EIA reported that US crude oil production in December fell by 91,000 bpd to 8.783 million bpd from a revised level of 8.874 million bpd in November.  US crude oil exports in December fell by 442,000 bpdcompared with 597,000 bpd in November while total refined oil product exports increased to 3.188 million bpd in December from 3.022 million bpd in November. 

About 900,000 metric tons of distillates, mostly ULSD, have arrived in Northwest Europe and the Mediterranean so far in February, about the same level as January.

Bloomberg reported that preliminary US waterborne crude imports fell by 788,300 bpd to 3.94 million bpd in the week ending February 23rd. 

Russia cut its oil production by about 124,000 bpd in February 1-27 compared with October.


Early Market Call - as of 9:00 AM EDT

WTI - Apr $54.29, up 28 cents

RBOB - Apr $1.7195, down 98 points

HO - Apr $1.6577, up 1.78 cents 


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Natural Gas
3.1.2017

Tuesday, February 28th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.708, more than a penny above Monday’s closing price of $2.693.  Spurred on by low prices, the contract launched from the intraday low of $2.701 early on and rose into the morning.  Peaking at the intraday high of $2.788 at 10:40AM, prices stabilized near the $2.76 level ahead of midday.  Trading sideways for the majority of the afternoon, April closed higher on Tuesday at $2.774.

This morning in Globex, WTI Crude was up 19 cents; Natural Gas was up four cents; Heating Oil was up one cent; and, Gasoline was down one cent.  Additionally, cash prices were lower in both New York and New England.

Natural Gas Glossary

                                                                                                       
For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to natgas@spragueenergy.com or call 1-855-466-2842.

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