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Refined Products

Recap: Oil markets reversed its see-sawing to the downside Wednesday on yet another massive crude oil stock increase. The EIA released its weekly DOE Inventory Report for the week ended January 23, 2015 and revealed an 8.9 Million barrel (MMb) build in crude oil stocks on estimates for less than half that at 3.85 MMbs. The NYMEX (WTI) Crude contract had already turned negative Tuesday evening after a similar massive crude stock build was reported by the American Petroleum Institute (12.7 MMbs). NYMEX (WTI) Crude moved solidly lower, down $1.78 to $44.45, below the $45.00 handle, and revived the bearish oversupply narrative Wednesday. U.S. crude stocks have seen the largest two-week increase in 30 years, bringing total U.S. crude inventory levels to 406.7 MMbs, a high point not seen in 84 years! Crude oil stocks in the U.S. storage hub in Cushing, Oklahoma, increased 2.1 MMbs to 38.9 MMbs. Not that long ago, we were monitoring levels below 20 MMbs which the oil complex views as bullish. However, with Cushing levels having doubled since the fall (thanks to the recent opening of Enbridge's Flanagan South 600,000 bpd pipeline connecting North Dakota Bakken and western Canadian crude to Flanagan, Illinois to the Cushing storage hub), a slew of oil analysts made bearish comments like this one from Andy Lebow, senior vice president for energy at Jefferies LLC:. "There is nothing positive ... You have a glass that's already full or about full, and the liquids just keep coming." (Dow Jones 1-28-15) And as refiners go into seasonal maintenance, Tim Evans of Citi Futures said, "It's premature to look for a bottom." (Dow Jones 1-28-15) 

The rest of the complex moved lower by the end of the trading session, despite a large 3.9 MMb decline in distillate stocks (on estimates of a 1.5 MMb decline) and a gasoline stock decline of 2.6 MMbs (on estimates of a .5 MMb increase) NYMEX ULSD (HO) traded in a narrow 3-cent range, ultimately falling back through the $1.65 handle to $1.6318, down 3.10 cents. NYMEX RBOB (Gasoline) was up for most of the trading only to reverse into negative territory on the tails of falling crude prices to settle at $1.3450, down 51 points. ICE Brent lost less than WTI and settled down $1.13 to $48.47 as the Brent-WTI spread widened to $4.02. Statements released after the two-day  Federal Open Market Committee (FOMC) meeting yesterday revealed that "based on its current assessment the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. (FOMC 1-28-15) So it looks like they are staying the course, with the dollar increasing, helping downward pressure on oil commodities. 

Currently,  oil prices are rebounding a bit this morning: NYMEX ULSD is up 73 points to $1.6391, NYMEX RBOB is up 1.62 cents to $1.3612, NYMEX Crude is up 28 cents to $44.73, and ICE Brent is up 44 cents to $48.91. Norbert Rucker, head of commodity research at Julius Baer, "said that as drilling in the U.S. shale oil industry has been 'dropping like a stone' since December and there is usually a four-month lag between this affecting production growth, a flattening of U.S. output should be expected soon. This would drive a rebound in prices ..." (Dow Jones 1-29-15) 

Recap PADD 1 (East Coast): DOE Distillate Inventories:   The DOE Inventory Report for the week ended January 23, 2015 showed that PADD 1 distillate stocks decreased only .21 MMbs of the total national decline of 3.9 MMbs. PADD 1 distillate inventories are 26.8% higher than last year's rock-bottom inventory stock levels and 14.5% below the 5-year average.  The bulk of distillates were drained from the Gulf Coast (PADD 3). East Coast refiners increased their operable utilization 8.4 percentage points back to 85.2% while the national rate moved back up 2.5 percentage points to 88%.  At 7.06 MMbs, PADD 1A (New England) is 50.3% higher than last year's low level (polar vortex) of 4.7 MMbs, and has narrowed to 4.5% below the 5-year average. PADD 1B (Central including NY) was virtually unchanged week over week at 18.95 MMbs, representing a 20.7% increase over last year's stocks but 22% lower than the 5-year average. PADD 1C (Lower) distillate stocks lost the most at .318 MMbs to 11.4 MMbs representing a 25.1% increase over last year and 5.7% lower than the 5-year average.
Click here to view today's Refined Products MarketWatch.

Natural Gas

On Wednesday, January 28th– the settlement day for February Natural Gas Futures contracts – February opened at $2.888, more than nine cents below Tuesday’s closing price.  Edging up to the $2.90 mark after the open, the contract slipped and traded beneath the $2.87 mark for much of the second half of the nine o’clock hour.  From there prices trended up modestly, and reclaimed their opening levels before the noon weather report.  With the updated forecasts calling for unseasonably cold early weeks of February, the contract spiked to the intraday high of $2.918 at noon, but then rushed down to the $2.84 level before the end of the one o’clock hour.  Seesawing to its expiration, the contract swung to the intraday low of $2.828 at 2:00PM, but managed to burst back up to settle at $2.866 on Wednesday.  

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 105 BCF withdrawal from storage for the week ended January 23rd.  This compares to a 219 BCF withdrawal at this time last year and a five-year average withdrawal amount of 168 BCF.

This morning in Globex, WTI Crude was up 28 cents; Natural Gas was up almost two cents; and, Heating Oil and Gasoline were up slightly.

New England and static in New York cash prices were mostly lower in both regions.


Natural Gas Glossary

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