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Refined Products

Recap:  Oil futures posted sharp gains on Friday, trading higher for the second straight week, as traders await the outcome of the upcoming OPEC meeting. July WTI gained as much as 2.3%, rising above $50 a barrel for the first time since May 1, working its way toward the $51 mark to peak the session at $50.80. Gains were pared, with this soon to be spot month settling at $50.33, up 98 cents, or 1.99%. July Brent shot up 2%, reaching a high of $53.74 a barrel, slipped slightly to settle at $53.61 a barrel, up $1.10, or 2.09%. 

RBOB rose 2.7% to $1.650 a gallon, while June heating oil added 2.5% to $1.583 a gallon.

Fundamental News:  Baker Hughes reported that US oil drillers added 8 rigs in the week ending May 19th, bringing the total count to 720, the most since April 2015.

OPEC sources stated that an OPEC panel reviewing scenarios for the group’s meeting next week is looking at options of deepening and extending a deal to reduce crude output.  A source said a deeper cut in output was an option depending on estimated growth in supply from non-OPEC producers, mainly US shale oil companies, among other scenarios.

According to a Bloomberg survey, OPEC will extend its output cut agreement, even as increasing US output threatens the group’s goal of depleting excess supply.  Analysts polled stated that OPEC and non-OPEC producers will extend their cuts for at least six months when they meet on May 25th. 

After OPEC’s production cuts took effect in January, oil traders started depleting millions of barrels of crude from storage tanks.  However, many of those storage tanks are filling back up or draining at a slower than expected pace.  The stalled drawdowns shed light on the broader challenge facing OPEC as it struggles to steer the industry out of a downturn caused by oversupply, amid increasing US shale production, high inventories and prices remaining in the low-$50s/barrel range.  The market has not strengthened enough to drain many major storage facilities around the world.  Estimated inventories in industrialized countries totaled 3.025 billion barrels at the end of March, about 300 million barrels above the five-year average, according to the IEA.  Preliminary April data indicated stocks would increase further.   

The API said spring started with US drivers consuming a record amount of gasoline.  US gasoline consumption in April increased 0.6% on the year to 9.27 million bpd.  Total fuel deliveries increased by 1.7% to the highest April total since 2008. 

According to the EIA, US gasoline demand has been weaker than expected this year, but a growing economy and low pump prices have the energy industry expecting record demand again this summer driving season.  The EIA reported that gasoline demand in the first two months of 2017 was down 2.1% on the year.  Motorists are expected to hit US roads at rates not seen in a decade.  The AAA projected that 34.6 million people will drive 50 miles or more from home during the end-of-month holiday period, the most since 2005 when 37.3 million motorists hit the roads. 

Nigeria’s Petroleum and Natural Gas Senior Staff Association of Nigeria labor union called for the shutdown of all Exxon Mobil Corp facilities in the Niger Delta.  The call followed the breakdown of talks with the company over sackings and was part of a strike that began last week. 

Early Market Call - as of 9:00 AM EDT

WTI - June $50.72, up 37 cents

RBOB - June $1.6583, up 52 points

HO - June $1.5990, up 1.6 cents

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Natural Gas

Friday, May 19th, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.224, four cents above Thursday’s closing price of $3.182.  Recording the intraday low of $3.217 as trader’s sought direction through 9:30AM, prices then stepped higher to trade along $3.260 thirty minutes later.  Fluctuating mildly along this mark for the majority of the day, marking the intraday high of $3.270 at 12:40PM, June closed higher on Friday at $3.256, as above-normal temperatures will subside for much of the country in the coming week.

This morning in Globex, WTI Crude was up 55 cents; Natural Gas was up six cents; Heating Oil was up two cents; and, Gasoline was up one cent.  Additionally, cash prices were lower in New York and New England.

Natural Gas Glossary

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