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Refined Products

Recap: In a knee jerk reaction to Wednesday's unexpected 754,000 barrel decrease in U.S. crude oil inventories, March WTI briefly traded above $29 a barrel, only to fall to a new session low, as the realization of a global supply overhang sank in. In a short covering run-up, the spot contract rose as much as 4.6 percent before paring gains to settle at $27.45, down 49 cents. Brent gained 5.2 percent to trade at a high of $31.90, then pared gains to settle at $30.84, up 52 cents.  Since the beginning of this year, March WTI has lost 28 percent, while April Brent has lost 20 percent.  

March gasoline rose 4.36 cents, to settle at 94.25 cents a gallon. March heating oil settled unchanged to settle at 97.49 cents a gallon.  

Fundamental News: The EIA reported that US crude stocks at Cushing, Oklahoma, reached a new record last week after rising 523,000 barrels to 64.7 million barrels.  It reported that US weekly commercial crude imports fell to 7.1 million bpd from 8.3 million bpd.  Most of the decline was due to lower US Gulf Coast crude imports.

In its monthly report, OPEC indicated that supply will exceed demand by 720,000 bpd in 2016, up from 530,000 bpd estimated in the previous report.  OPEC cut its forecast for world economic growth in 2016 to 3.2% from 3.4% and said low oil prices were hurting the economy.  OPEC now forecast supply from non-member producers will fall by 700,000 bpd in 2016, led by the US.  It reported that OPEC produced 32.33 million bpd in January, up 130,000 bpd from December.  OPEC left its 2016 global oil demand growth forecast little changed, predicting demand would increase by 1.25 million bpd, down from 1.54 million bpd in 2015. 

Iran's Acting Deputy Oil Minister, Masoud Hashemian Esfahani, said the country cannot cut crude oil production because it needs to regain market share and return to pre-sanctions output levels.  On Tuesday, Iran's Oil Minister, Bijan Zanganeh, said Iran was ready to negotiate with Saudi Arabia over the current conditions in the global oil markets. 

The head of Russia's Rosneft, Igor Sechin, proposed that major oil producing countries cut output by 1 million bpd in order to support declining oil prices.  He said that the current oversupply in the market was due to over production by OPEC members.  He did not say whether Russia was ready to cut production.  He also stated that he sees Iran's output rising to 5-6 million bpd by 2020-2025. 

Saudi Arabia's King Salman plans to visit Russia in mid-March. 

BP's Chief Executive Officer, Bob Dudley, remains bearish on oil prices for the first half of the year.  However he added that supply and demand will balance in the second half of the year.  

India's Oil Minister, Dharmendra Pradhan, is seeking crude imports from the UAE on favorable terms.  India is currently importing 16.11 million tons/year of oil from the UAE.  India is expected to raise its oil imports from the UAE in 2016/17 by 2.5 million tons.  It is seeking ADNOC's participation in strategic reserves at southern Indian state Karnataka.

Spain's Repsol is not ruling the restart of Libya's Sharara oil field this year but continued uncertainties over political and security problems in the country make it difficult to predict when flows will resume.  The field was contributing close to 300,000 bpd of Libya's total production in 2014 when it was shut after a security incident. 

China's oil demand in 2016 is expected to slow to 2-3% this year due to weakening industrial and construction activity. 

IIR reported that US oil refiners are expected to shut in 760,000 bpd of capacity in the week ending February 12th, increasing refining capacity by 378,000 bpd in the previous week.  IIR expects offline capacity to fall to 477,000 bpd in the week ending February 19th

Early Market Call - as of 9:00 AM EDT

WTI - Mar $26.72, down 73 cents

RBOB - Mar $.9219, down 2.06 cents

HO - Mar $.9646, down 1.03 cents 

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Natural Gas

Wednesday, February 10th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.055, roughly four cents below Tuesday’s closing price of $2.098.  Losing ground overnight once again, warmer temperature in the extended forecast and an expected lower than average storage withdrawal for tomorrow may have kept a lid on prices moving higher.  Despite a brief ascent to the intraday high of $2.065 by 9:30AM, prices withdrew throughout the morning to reach the intraday low of $2.017 two hours later.  Trading along either side of the $2.025 mark into the early afternoon, March then mounted a steady ascent to finish out the day, closing lower on Wednesday at $2.046.

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 77 BCF withdrawal from storage for the week ended February 5th.  This compares to a 160 BCF withdrawal at this time last year and a five-year average withdrawal amount of 168 BCF.

This morning in Globex, WTI Crude was down 80 cents; Natural Gas was up two cents; Heating Oil was down one cent; and, Gasoline was down one cent.

Cash prices were higher in New York and New England.

Natural Gas Glossary

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