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Market Intel Archives

Crude oil imports to China rose to 9.01 million barrels per day

December 11, 2017

Recap: After a tumultuous week of trading, oil prices bounced for the second straight session after data released by China’s General Administration of Customs showed that crude oil imports to China rose to 9.01 million barrels per day, the second largest number on record. Looming strikes in Nigeria also added to the boost in prices. January WTI settled at $57.36 a barrel, up 67 cents, or 1.2%, however slipped 1.7% on the week. Brent for February delivery tacked on 1.20, or 1.9%, to settle at $63.40 a barrel, which was down 0.6% on the week.  

Thursday’s settlement above the ascending trend line on a daily bar chart for January heating oil was followed by additional strength above this line on Friday. Previous resistance provided by the 10-day moving average will now act as a level of support. This average is currently set at $1.9123. January RBOB rose 1% to $1.717 a gallon; however saw a weekly loss of about 1.4%. January heating oil added 1.7% to $1.929 a gallon, cutting its weekly loss to about 0.6%.

Fundamental News:   Custom officials in China reported Friday that Chinese crude oil imports in November reached 37.04 million tonnes, or 9.01 million b/d, the second highest monthly level on record. So far this year Chinese crude oil imports are up 12% from a year ago.

The CFTC reported this afternoon that money managers reduced their net long U.S. crude futures and options positions for the week ending December 5th by 9,135 contracts to 442,742.

Baker Hughes reported that for the week ending December 8th U.S. energy companies’ added oil drilling rigs for the third week in a row, the longest string of increases since the summer. Drillers added two rigs on the week, bringing the total count up to 751, the highest level since September. A year ago only 498 rigs were operating.

Oil Movements said in its weekly report that it sees OPEC oil shipments climbing by 430,000 b/d to 26.24 million b/d in the four week period ending December 23rd.

Philadelphia Energy Solutions reported Friday that its 85,000 b/d CDU and its 52,466 b/d VDU at its Girard Point refinery which had been offline since November 25th for planned repairs were restarted on Thursday.

Reuters reported this afternoon that Phillips 66 plans to shut down its FCC unit, as well as the alky and isomer units at its 150,000 b/d Bayway refinery on February 2nd for two months of maintenance. The work is expected to boost gasoline and diesel yields by about 4,000 b/d.

Early Market Call - as of 9:17 AM EDT

WTI - Jan $57.47 up 11 cents

RBOB - Jan $1.7185 up 19 points

HO - Jan $1.9381 up 93 points


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EIA reported larger than expected builds in U.S. inventories for gasoline and heating oil

December 08, 2017

Recap: RBOB futures performed an about-face on Thursday, after reaching a 7-week low on Wednesday. The threat of a strike in Nigeria lifted both products and oil as well, as traders scrambled to cover shorts put on after the EIA reported larger than expected builds in U.S. inventories for both gasoline and heating oil. January gasoline continues to hold above the long standing ascending trend line, but worked its way back above the 50-day moving average, which is currently set at $1.6808. Based upon this activity, we would look for January RBOB to work its way back toward resistance set at $1.7312. Support is set at $1.64.25, which is provided by the previously mentioned trend line.  

Oil prices also reversed course on short covering due to the possibility of a strike in Nigeria. Today’s correction keeps WTI within the upward channel that can be depicted on a daily spot continuation chart, which keeps the main trend to the upside. We would look for a run at $57.59, the 10-day moving average. Above this level, additional resistance is set at $58.90. To the downside, support rests at $55.38 and $54.53. 

Brent futures rose 98 cents, or 1.6 percent, to settle at $62.20 a barrel, while U.S. WTI gained 73 cents, or 1.3 percent, to settle at $56.69.

Fundamental News:  Kuwait’s Oil Minister, Essam al-Marzouq, said he expects oil markets to rebalance by the third quarter or early fourth quarter of next year. 

Qatar’s Energy Minister, Mohammed al-Sada, said oil is moving towards a fair price and the level of global stocks is declining and moving towards the level sought by OPEC.  He also said an agreement between OPEC and non-OPEC producers to reduce output to help balance the market had been successful. 

The White House said US President Donald Trump will meet with Republican senators on Thursday to discuss his commitment to the Renewable Fuel Standard.  The President and senators will discuss how to address Renewable Fuel Standard program’s impact on independent refiners.      

The Petroleum and Natural Gas Senior Staff Association of Nigeria, one of the country’s two main oil unions, threatened to launch a nationwide strike from December 18th over what it said was a mass sacking of workers that joined the union. 

Credit Suisse raised its 2018 oil price forecasts citing strong OPEC adherence to pledged output cuts, which the bank said could normalize OECD inventory levels next year.  Credit Suisse raised its 2018 Brent price forecast to $60/barrel from $53/barrel and its WTI forecast to $56/barrel from $50.50/barrel. 

Nigeria’s oil exports in January are expected to fall from a 21-month high reached in December.  Crude oil exports of 1.76 million bpd are scheduled for January on 62 cargoes, down from 1.94 million bpd in December. 

The Kurdish Regional Government resumed shipments of crude by pipeline from the Shaikan field in northern Iraq, increasing flow through the link.  Oil received at the Ceyhan terminal in Turkey from the Kurdish region increased to 300,000 bpd in the 24 hours to Monday morning and has remained at that level.  Separately, Iraqi forces and Kurdish Peshmerga fighters on Sunday started a second round of talks to resolve a conflict over control of the Kurdistan region’s border crossings. 

Iraq’s Oil Minister, Jabar al-Luaibi, said Iraq managed to increase its oil export capacity from its southern ports to 4.6 million bpd after adding a new floating terminal in the Gulf. 

Early Market Call - as of 9:17 AM EDT

WTI - Jan $57.72 up $1.03

RBOB - Jan $1.7223 up 2.23 cents

HO - Jan $1.9324 up 3.54 cents


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There was a 5.6 million barrel draw on U.S. crude oil inventories

December 07, 2017

Recap: WTI fell by almost 3% on Wednesday; despite the 5.6 million barrel draw on U.S. crude oil inventories. Prices were dragged lower by what appears to be sluggish demand for refined products. The 6.8 million barrel build in U.S. gasoline stocks made RBOB futures the hardest hit market on NYMEX. The January contract fell below its 50-day moving average for the first time since July, and continued to fall to a 7-week low of $1.6600 a gallon. A slight retracement took place prior to the close, with January RBOB settling at $1.661 a gallon, down 2.94%, the lowest settlement for spot futures since Oct. 19. Coming into tomorrow, technical traders will be eyeing $1.6598, support provided by an ascending trend line that dates back to June of 2017. A break below this line sets up for a run at the $1.5850 level. 

January heating oil settled at $1.861 a gallon, down 2.8%, January WTI fell $1.66, or 2.9%, to settle at $55.96 a barrel, its lowest settlement since Nov. 16. February Brent lost $1.64, or 2.6%, to $61.22 a barrel, its since level since Nov. 2.

Fundamental News: The arbitrage to send gasoline from Northwest Europe to the New York Harbor was described as shut on Tuesday by traders in both regions, despite US prices increasing.  However 918,808 barrels of trans-Atlantic gasoline were imported the first three days of December, an increase from no imports in November. 

According to the EIA, US ultra low sulfur diesel exports fell by 6.806 million barrels to 30.517 million barrels in September, driven by falling demand from Europe and Latin America as well as the impact to US refiners following Hurricane Harvey.  While it was the second largest monthly decline of the year, second to August, the decline from both months combined for the largest two-month decline in ULSD exports at 15.365 million barrels. 

The US Census Bureau reported that US crude exports increased to a record 1.73 million bpd in October.  It’s a record for the second consecutive month after reaching a previous high of 1.47 million bpd in September. 

Bloomberg New Energy Finance estimates that crude imports to the US Gulf Coast fell to 2.43 million bpd in the week ending December 1st.  The previous week’s estimate was 2.66 million bpd for the week ending November 24th. 

Genscape reported that crude oil inventories in the ARA region fell by 3.5 million barrels in the week ending December 1st to 52.7 million barrels. 

According to Bloomberg, an LR-2 tanker capable of hauling about 670,000 barrels of distillates, is bound for New York Harbor after loading in Yanbu, Saudi Arabia.  The US has not imported distillate from Saudi Arabia since February 2015. 

The Northwest European gasoline complex has come under pressure this week from a closed arbitrage to the US, a lack of significant West African demand and with the end of year approaching. 

Russia’s Energy Minister, Alexander Novak, said global oil prices are relatively stable and volatility is low.  He said it was too early to talk about a possible exit from the global deal to cut oil production, and the eventual withdrawal from the agreement should be gradual.

IIR reported that US oil refiners are expected to shut in 452,000 bpd of capacity in the week ending December 8th, increasing available refining capacity by 243,000 bpd from the previous week.  IIR expects offline capacity to fall to 266,000 bpd in the week ending December 15th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.20, up 24 cents

RBOB - Jan $1.6718, up 1.08 cents 

HO - Jan $1.8682, up 70 points 


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An anticipation of a draw down in U.S. crude oil inventories caused oil prices to rise

December 06, 2017

Recap: Oil prices rose on Tuesday in anticipation of a draw down in U.S. crude oil inventories, amid strong demand and OPEC lead efforts to sop up excess global supplies. January WTI gained as much as 0.78%, as it rose to a high of $57.92, while Brent for February delivery hit a high of $63.15, up 1.12%. Gains were pared ahead of the API report, with spot WTI finishing at $57.62 a barrel, up 15 cents, or 0.26% and spot Brent tacking on 41 cents, or 0.66%, to settle at $62.86 a barrel. 

January RBOB rose 1.6% at $1.718 a gallon, while heating oil for the same month ended at $1.914 a gallon, up 1.

Fundamental News: Crude oil stocks held in Cushing, Oklahoma fell by 2.4 million barrels to 55.9 million barrels in the week ending December 1st. 

The IEA’s Head of the Oil Industry and Markets Division, Neil Atkinson, said oil prices may decline in the coming months. 

Bloomberg reported that preliminary US waterborne crude imports increased by 416,900 bpd to 4.7 million bpd.  Imports to the Gulf Coast increased by 326,100 bpd to 2.7 million bpd while imports to the East Coast and West Coasts increased by 40,600 bpd and 50,200 bpd, respectively. 

According to data from cFlow, S&P Global Platt’ trade flow software, distillates flows fixed to Northwest Europe and the Mediterranean from the US Gulf Coast for December are currently around 550,000 metric tons. 

According to Bloomberg, OPEC’s output in November fell by 80,000 bpd to 32.47 million bpd.  It is the lowest level in six months, led by declines from Angola and Kuwait.  OPEC’s compliance increased by 8% on the month to 118% in November. 

The UAE’s crude oil output in November fell to about 2.9 million bpd as the country looks to increase its compliance with a global pact to cut production.  The UAE reported output of 2.95 million bpd in October.  UAE shipments of crude and condensate fell to a seven month low in November as the country joined OPEC and other producers in extending restrictions.  The UAE’s shipments fell to 2.313 million bpd in November from a revised 2.531 million bpd in October.

Indonesia’s Deputy Energy Minister, Arcandra Tahar, said the country will keep a freeze on its membership of OPEC.  Indonesia’s OPEC membership was suspended in December 2016, less than a year after it rejoined the group. 

Goldman Sachs forecast that oil prices will retain their strength, at least through 2018.  It raised its forecast for WTI and Brent to $57.50/barrel and $62/barrel, respectively, saying OPEC and its allies showed a stronger commitment than expected to extending their output cuts.  It expects positive total returns of 9% from crude over the next 12 months.  Goldman Sachs, however, said that by 2019, it believes the response of shale and other producers to higher prices will incentivize OPEC and Russia to pare back their now greater spare capacity, leaving risks to prices skewed to the downside. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.85, down 76 cents

RBOB - Jan $1.7000, down 1.85 cents

HO - Jan $1.8936, down 2.01 cents


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Oil prices fell for the first time in 3 sessions

December 05, 2017

Recap: Oil prices fell for the first time in 3 sessions, as the capacity for U.S. drillers increased, overshadowing OPEC lead efforts to decrease supply overhangs. The rise in U.S. production prompted traders into taking profits. Despite the sell-off, prices remain close to 2 year highs. The recent spike in prices has helped to push speculators open interest to record highs. February Brent fell $1.28, or 2.01%, to settle at $62.45 a barrel, while WTI for January delivery slipped 89 cents, or 1.53%, to settle at $57.47 a barrel.

January RBOB lost 2.8% to $1.6922 a gallon, while January heating oil fell 2.4% to $1.8945 a gallon.

Fundamental News: Saudi Arabia’s Energy Minister, Khalid al-Falih, said OPEC is expected to maintain its current policy of output cuts in the second half of 2018, but added that oil producers have plenty of supply with which to respond to any sudden disruption.  He said OPEC will not flood the market.  He said no significant oil inventory draws are expected in the next four months.  He was speaking after meeting with US Energy Secretary, Rick Perry, who stated that OPEC would make its own decisions and that he was comfortable the US could work within those parameters. 

According to a Reuters survey, OPEC’s oil output fell in November by 300,000 bpd to 32.48 million bpd, its lowest level since May.  OPEC’s adherence to pledged supply cuts increased to 112% from October’s 92%.  The largest decline in output in November of 100,000 bpd, came from Angola where exports fell to a 13-month low.  The second largest came from Iraq.  Saudi Arabia cut its output by 30,000 bpd. 

Three of the largest independent US drillers said they are in no hurry to add rigs after OPEC and Russia agreed to extend their output cut deal.  According to Pioneer Natural Resource, Parsley Energy and Newfield Exploration, the emphasis will be on maintaining spending discipline and generating profits to return to investors. 

Citi stated that an increase in non-OPEC supply will meet almost all incremental demand by the end of 2018, leaving little room for a return to higher production by OPEC and Russia.  This may hurt prices into the second half of next year and 2019. 

Brazil’s oil regulator, ANP, said the country’s oil production in Brazil fell by 0.9% to 2.627 million bpd while its natural gas production increased 0.5% to 115 million cubic meters/day. 

Genel Energy Plc announced that the TT-29W well at the Taq Taq field has been completed.  It said the well’s production started from the Lower Shiranish reservoir at a rate of 3,200 bpd of dry oil.  Gross production from the Taq Taq field is currently 15,100 bpd.   

UBS raised its 2018 Brent price forecast to $60/barrel from $55/barrel.  The bank expects OECD inventories to fall to five-year averages in the third quarter when an informal tapering of cuts will begin.  The bank also increased its fourth quarter Brent forecast to $60/barrel from $54/barrel and its WTI forecast to $54/barrel from $51/barrel. 

IIR reported that US oil refiners are expected to shut in 401,000 bpd of capacity in the week ending December 8th, increasing available refining capacity by 294,000 bpd from the previous week.  IIR expects offline capacity to fall to 204,000 bpd in the week ending December 15th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.36, down 11 cents

RBOB - Jan $1.7095, up 1.77 cents

HO -Jan $1.8976, up 33 points


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OPEC and non-OPEC producers on Thursday agreed to extend their production cuts by a further nine months until the end of 2018

December 04, 2017

Recap: The crude market on Friday retraced some of its previous losses after the market posted an inside trading day on Thursday.  The market was supported after OPEC and non-OPEC producers on Thursday agreed to extend their production cuts by a further nine months until the end of 2018.  The market posted a low of $57.29 on the opening and bounced off that level as it rallied sharply higher to $58.88 by mid-morning.  The oil market, which failed to test its previous highs, gave up some of its gains ahead of the close as it traded back towards the $58 level.  The market pared its gains with a decline in US stock markets after former national security adviser, Michael Flynn, pleaded guilty to lying to the FBI.  The January WTI contract settled up 96 cents at $58.36, while the February Brent contract settled up $1.10 at $63.73.  Meanwhile, the heating oil market settled up 4.37 cents at $1.9413 while the RB market settled up 1.16 cents at $1.7416.

Fundamental News: Baker Hughes reported that the number of rigs searching for oil increased by 2 to 749 in the week ending December 1st. 

The head of Russia’s Lukoil, Vagit Alekperov, said the oil market will not overheat as it did during a price rally in the last decade as global demand is rising fast and an alliance between OPEC and non-OPEC producers is working well.  He said he expects global oil demand to increase by 1.8 million bpd next year.  In addition, the supply of crude from producers who are not participating in production cuts is estimated to increase by 800,000 bpd next year.  He stated that OPEC and non-OPEC producers will increase production if oil prices rally.  He added that oil prices should be between $60 and $65/barrel to avoid mistakes with the market overheating.   

Barclays reported that the OPEC/non-OPEC production cut extension may increase US output by another 1 million bpd before the end of 2018 with a clear upside risk if current oil prices persist. 

Goldman Sachs stated that while OPEC and its allies did not finalize details on how they would wind down their output cuts, they pledged to be agile and responsive and review their progress on shrinking inventories at a meeting in June.  It said this indicates a reduced risk of both unexpected increases in supply as well as excess draws in stocks. 

Oil Movements reported that OPEC shipments increased by 130,000 bpd to 25.96 million bpd in the four week period ending November 18th.  Middle East shipments, including from non-OPEC nations Oman and Yemen, will increase by 170,000 bpd to 16.8 million bpd. 

IIR reported that US oil refiners are expected to shut in 658,000 bpd of capacity in the week ending December 1st, increasing available refining capacity by 70,000 bpd from the previous week.  IIR expects offline capacity to fall to 345,000 bpd in the week ending December 8th and 204,000 bpd in the week ending December 15th. 

Bloomberg reported that global refinery outages reached 1.88 million bpd in the week ending November 30th.  It is down from 2.16 million bpd the previous week.  Russia’s offline refining capacity was unchanged at 266,000 bpd as of Wednesday. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.69, down 67 cents

RBOB - Jan $1.7097, down 3.21 cents

HO -Jan $1.9080, down 3.34 cents


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OPEC members decided to extend their agreement to cut back on output

December 01, 2017

Recap: Oil prices hovered close to unchanged for most of the session, after posting overnight gains as OPEC members and other major producers agreed to extend their agreement to cut back on output. Bulls were kept at bay by Wednesday’s inventory report, which indicated continued growth in U.S. production. With U.S. production working to keep a lid on WTI, its discount to Brent widened by 49 cents on Thursday. January WTI settled at $57.40 a barrel, up 10 cents, or 0.2%, while Brent for January delivery tacked on 46 cents, or 0.7%, to settle at $63.57 a barrel. December RBOB fell 0.1% to $1.728 a gallon, with the contract falling about 0.2% for the month. December heating oil was down 1.5% to $1.893 a gallon, for a monthly gain of about 0.7%.

Fundamental News: On Thursday, OPEC and non-OPEC producers led by Russia agreed to extend oil production cuts by nine months until the end of 2018.  An OPEC delegate said OPEC also agreed to review the output agreement at its meeting on June 21st.  However, OPEC did not discuss an exit plan for the oil output cuts.  OPEC delegates stated that both Nigeria and Libya have been asked to cap their oil output at 2017 highs, with both nations agreeing to keep their output below 2017 highs.  Both countries have been previously exempt from the cuts due to unrest and lower than normal production.  Oman’s Oil Minister said Nigeria has agreed to cap its output at 1.8 million bpd.  Saudi Arabia’s Oil Minister, Khalid al-Falih, said OPEC will be agile given variables such as US shale oil output.  He expects inventories to fall to desired targets in the second half of 2018.  He added that the 2018 outlook for oil is extremely bullish.  Russia’s Energy Minister said the oil producers can adjust their agreements in June if the market situation changes.       

Petrologistics reported that OPEC and Russian crude oil exports increased in 2017 despite producers agreeing to cut their production starting in January 2017.  OPEC exported 24.24 million bpd on average in 2017 by October, compared with 23.91 million bpd between October 2015 and September 2016. 

The EIA reported that US oil production increased by 290,000 bpd to 9.48 million bpd in September.  US crude production for August was revised down by 12,000 bpd to 9.19 million bpd.  North Dakota’s oil production increased by 15,000 bpd in September, Texas’ production increased by 193,000 bpd on the month and production offshore in the Gulf of Mexico fell by 15,000 bpd on the month.  US total oil demand in September fell by 0.9% or 176,000 bpd on the year to 19.581 million bpd.  Its gasoline demand in September fell by 1.6% or 155,000 bpd on the year to 9.329 million bpd while its distillate demand increased by 0.3% or 10,000 bpd on the year to 3.922 million bpd. 

The US EPA will require fuel companies to blend 19.29 billion gallons of renewable fuels into the country’s fuel supply in 2018, up slightly from 19.28 billion gallons required for 2017.  That will include 15 billion gallons of conventional biofuels, such as corn-based ethanol, in line with 2017, and 4.29 billion gallons of so-called advanced biofuels, up from 4.28 billion in 2017.  For 2019, the EPA set a volume target for biodiesel at 2.1 billion gallons, unchanged from 2018. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp storage hub in the week ending November 30th fell by 4.44% on the week and by 8.13% on the year to 882,000 tons.  Gasoil stocks increased by 5.48% on the week but fell by 26.45% on the year to 2.06 million tons while fuel oil stocks fell by 8.77% on the week but increased by 53.12% on the year to 957,000 tons. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $58.29, up 89 cents

RBOB - Jan $1.7430, up 1.32 cents

HO -Jan $1.9291, up 3.12 cents


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Oil prices slipped for the third straight session

November 30, 2017

Recap: Oil prices slipped for the third straight session, while Russia contemplates extending existing production cuts, as such a move could cause U.S. shale producers to ramp up output. Trading was volatile, as traders reacted to contradictory statements from oil ministers tied to the Nov. 30th OPEC lead meeting of major global producers. For the first time in a week, WTI traded below $57 a barrel, and Brent dipped below $62 a barrel, as traders set their strategies for the aforementioned meeting. Losses were pared in pre-settlement trading and ahead of the meeting. January WTI fell 69 cents, or 1.19%, to settle at $57.30 a barrel, while January Brent slipped 50 cents, or 0.79%, to settle at $63.11 a barrel.

December gasoline fell by 2.3% to $1.731 a gallon. December heating oil ended down 1.5% at $1.922 a gallon. The December contract expires at Thursday’s settlement.

Fundamental News:  OPEC and its 10 non-OPEC allies appear to be debating between the two options for extending its 1.8 million bpd production cut agreement past its March expiry, as they prepare to meet on Thursday.  Kuwait’s Interim Oil Minister, Essam al-Marzouq, said they have not agreed on the time frame yet.  He said the Joint Ministerial Monitoring Committee is recommending a 9-month cut extension.  Saudi Arabia’s Energy Minister, Khalid al-Falih, who has been pushing for a nine-month extension of the cuts through the end of 2018, acknowledged that the producer coalition had yet to reach consensus on how soon the overhang of oil in storage will fall to normal levels.  He told the monitoring meeting on Wednesday that cuts needed to be extended as the rebalancing of oil markets was not yet complete.  Meanwhile, Russia’s Energy Minister, Alexander Novak, after meeting with his Saudi counterpart, believes the supply cut deal will be extended and added that all options are on the table.  He said there is consensus within the monitoring committee on extending oil cuts. 

According to sources, OPEC will debate an oil production cap for Nigeria at 1.8 million bpd and Libya at 1 million bpd as part of a planned nine-month extension to the OPEC and non-OPEC output cut agreement.  Meanwhile, reports suggest that an OPEC delegate noted that the Gulf Cooperation Council agree that a nine-month extension to the output policy agreement is needed. 

The EIA reported that crude inventories in Cushing, Oklahoma fell by 2.9 million barrels to 58.3 million barrels last week, its largest weekly draw since September 2009. 

Several tankers carrying diesel was heading for the NY Harbor trading hub on Wednesday following a sharp decline in East Coast stocks and winter’s approach.  The New York-bound cargoes include at least two 38,000 ton tankers from Brazil.  Tankers heading to New York also include a 60,000 ton tanker, which loaded its cargo from a 2 million ton tanker anchored off West Africa after loading in Asia last month.  Another 60,000 ton cargo is also heading to New York from Nigeria.  A third long-range tanker is en route from Saudi Arabia.  Some traders said the cargoes could be rerouted before landing in New York Harbor. 

Early Market Call - as of 9:00 AM EDT

WTI - Dec  $57.65, up 35 cents

RBOB - Dec $1.7442, up 1.36 cents

HO -Dec $1.9342, up 1.18 cents


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Traders are waiting to hear if OPEC and other major producers will vote to extend output cuts

November 29, 2017

Recap: WTI continued its decline below $58 a barrel as traders await word as to whether or not OPEC and other major producers will vote to extend output cuts. After trading at or slightly above unchanged, neither WTI nor Brent was able to muster enough strength for a follow through to the upside. January WTI fell 12 cents, or 0.21%, to settle at $57.99 a barrel, while January Brent settled at $63.61 a barrel, down 23 cents, or 0.36%.December RBOB fell 1% to $1.772 a gallon and December heating oil added 0.2% to $1.951 a gallon.

Fundamental News:  Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 2 million barrels to 59.2 million barrels in the week ending November 24th.  Separately, PIRA Energy estimated that oil stocks in Cushing fell by 2.7 million barrels last week.   

OPEC is heading for tougher than expected policy talks this week as Saudi Arabia pushes to extend oil output cuts by nine months while Russia is hesitating on the cuts’ duration due to concerns that the market could overheat.  A joint OPEC and non-OPEC technical committee recommended extending the deal until the end of next year, with an option to review the deal in June.   

Goldman Sachs stated that the outcome of the meeting was uncertain as Brent prices have risen above $63/barrel.  It stated that it views risks to oil prices as skewed to the downside this week, as current prices, time spreads and positioning already reflect a high probability of a nine month extension.  Meanwhile, Citigroup’s head of commodity research, Ed Morse, said the world’s largest exporters of crude must agree to extend their existing agreement on cutting output to the end of next year in order to avoid a sell-off in the price of oil.  It stated that OPEC may, however, defer an oil output cut decision until the first quarter of 2018.  Societe Generale expects OPEC to maintain its current production targets steady through 2018. 

The UAE’s Energy Minister, Suhail bin Mohammed al-Mazroui, said a meeting of global oil producers in Vienna this week to discuss extending output cuts will not be easy.  However, he added that he was personally optimistic that producers would reach an agreement that served the market.  He said several options for extending the output cuts would be discussed. 

Iraq is in favor of OPEC’s oil output cut extension, with officials stating that they will go with whatever OPEC consensus is. 

TransCanada’s 590,000 bpd Keystone crude oil pipeline resumed operations on Tuesday but the company has no timetable on when US regulators will allow it to return to full capacity.  The pipeline, linking Canada’s oil sands to US refineries, was shut down nearly two weeks ago after a 5,000 barrel leak in South Dakota on November 16th. 

TransCanada Corp’s chief executive, Russ Girling, said the company’s talks with shippers for its Keystone XL pipeline have been encouraging in the last weeks, and the company expects to eventually rally enough commercial support.  The company is expected to make a final investment decision on the $8 billion Alberta-Nebraska pipeline by December. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $57.80, down 22 cents

RBOB - Dec $1.7686, down 43 points

HO - Dec $1.9426, down 83 points


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Keystone Pipeline was forced to close on Friday but will reopen this week

November 28, 2017

Recap: Oil prices were lower on Monday, with WTI getting hit harder than Brent. News that the Keystone Pipeline, which was forced to close on Friday, would reopen this week, put additional pressure on WTI. The disparity in the pressure between both blends forced a widening of the discount of WTI to Brent. This spread, which settled at -$4.91 on Friday, ended the Friday’s session at -$5.73. Doubt about an extension of the OPEC lead production-cut deal added to the pressure. January WTI fell 84 cents, or 1.47%, to settle at $58.11 a barrel, while January Brent slipped 2 cents, or 0.03%, to settle at $63.84 a barrel.

December RBOB finished up less than 0.1% at $1.789 a gallon and December heating oil fell 0.3% to $1.948 a gallon.

Fundamental News: TransCanada Corp’s Keystone Pipeline leaked substantially more oil, and more often, in the US than indicated in risk assessments the company provided to regulators before the project began operating in 2010.  The existing Keystone system from Hardisty, Alberta to the Texas Coast has had three significant leaks in the US since it began operations in 2010, including a 5,000 barrel spill this month in South Dakota and two others, each about 400 barrels in South Dakota in 2016 and North Dakota in 2011. 

Separately, TransCanada Corp said the Keystone Pipeline is expected to resume crude oil deliveries on Tuesday, November 28th.  The pipeline repair and restart plans have been reviewed by PHMSA with no objections.  As part of reviewed plans, TransCanada will operate pipeline at a reduced pressure starting on Tuesday, November 28th. 

OPEC’s Secretary General, Mohammad Barkindo, said the current market conditions, the returning level of confidence and optimism in the industry are all evidence of the outcome of the group’s efforts.  He said OECD commercial oil inventories have steadily fallen to stand 140 million barrels above the five-year average in October. 

Saudi Arabia has yet to convince Russia to commit to extending the OPEC/non-OPEC production cut agreement through the end of 2018, ahead of Thursday’s meeting in Vienna.  Russia’s Energy Minister, Alexander Novak, has stated that he would prefer to wait until closer to the deal’s March expiry to announce any decisions.  He has stated that he supports continuing the cuts but has repeatedly declined to say for how long exactly. 

OPEC sources stated that oil markets will rebalance after June 2018 at the earliest, signaling the need to extend existing production cuts well into next year.  The conclusion from OPEC’s national representatives and the group’s secretariat came after a meeting on Thursday and Friday. 

Iran is pushing to retain customers for its oil in Asia, hoping that price reductions will increase the appeal of its crude compared with other Middle Eastern supply even as the potential threat of further US sanctions on the country looms.  The National Iranian Oil Co has in the last few weeks offered spot cargoes, ranging from light to heavy grades, to its term buyers in Asia, after setting December prices at the lowest in years against comparable Saudi grades. 

IIR reported that US oil refiners are expected to shut down 508,000 bpd of capacity in the week ending December 1st, increasing available refining capacity by 188,000 bpd from the previous week.  IIR expects offline capacity to fall to 229,000 bpd in the week ending December 8th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan  $57.85 down 25 cents

RBOB - Dec $1.7801 down 92 points

HO -Dec $1.8464 down 14 points


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