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Thursday, September 29, 2016

Oil prices to rise?...Don't bet on it!

OPEC is happy...For now.

But I really don't know why they should be.

For the first time since 2008, OPEC cut production.

While the meetings in Algiers finished up yesterday with a lacklustre arrangement for fellow OPEC members to institute a "long needed" cut to production, what will it mean to the oil markets?

In an unstable world still ever dependent on oil, people can be quick to forget why oil prices have stayed low for so long, and why OPEC is hoping beyond hope that their fellow members will be happy with instituting a million barrel a day cut.

Not all OPEC members are happy with cutting.

Two OPEC member countries, namely Libya and Nigeria have to be upset with a quota that has them wondering why they have to put up with part of this million barrel a day cut in the first place. Both countries are trying to recover from instability and revolution and the last thing they possibly need is a cut to production that would hinder any recovery to their torn economies.

Nigeria, previous producers of almost 2.7 million barrels of light, sweet oil per day, is being asked to shoulder cuts while still recovering from a low output of close to 1.5 million barrels.

Libya, producers of almost 1.5 million barrels a day prior to their post-Ghadafi revolution, have only managed to scrape up a 300,000 barrels a day output and are hoping to return to full operation in the coming months.

This not the only sign that things may not go well on the oil front...

In recent months, in spite of lower oil prices, the US domestic oil industry has shown itself to be resilient in the face of low oil prices. A quick look at the numbers of rigs returning to the field is a sure sign that, if oil prices do indeed rise, their return to the fracking fields in the US Eagle Ford, Marcellus and Bakken fields are a sure bet.

Don't count out the response of US domestic response to fill in the role of a hole created by an OPEC "knee-jerk" response to lower oil prices.

Keep in mind also that any OPEC-instituted cut in production has never worked when it comes to the final read on output. OPEC has a history of over-producing and under-reporting oil production figures, so there's no reason to expect them to change dirty habits.

The markets should know this...

They're just not saying so yet...


Gone are the halcyon days when OPEC used to institute a cut and the markets saw a meteoric rise in oil. Most times saw sharp, sudden increases to oil that were sustained and helped support oil to where it hit record heights.

That was before the days of the frack and the advent of "democratic oil". Now everyone has it, if they have a shale resource and everyone can respond to fill that oil hole.

OPEC knows this, but they forgot this very important fact.

OPEC did succeed in two things yesterday: OPEC managed to put out the sure signs that they lost the fight for market share and the fight to retain control of the price of oil.

Investor beware!


Twitter @GeorgeMurphyOil

Tuesday, September 20, 2016

Price changes for Thursday, September 22, 2016

Here's what I have for this Thursday's price changes:

*Heating and stove oil to drop by a half penny....
*Diesel fuel to drop by 6/10ths of a cent, and...
*Gasoline to increase by 2.7 cents a litre.

Market highlights

Pressure on refined gasoline
A break in the important Colonial pipeline that brings gasoline from the US southeast refining area to the US Mideast regions has been causing spikes in prices in most regions east of the Mississippi and Ontario and east as well.
     Because of the supply disruption, prices for gasoline also showed a marked increase as shortages in the US southeast for refined gasoline increased the value of gasoline from other regions unaffected by the supply disruption.
     It's not going to last however, as prices are already starting to moderate as a pipeline fix-a temporary one at least- is due to come into operation at almost any minute that should bring supplies back online.
     Look for prices to retreat again next week on the news.

Oil producers to meet next week
Mark down September 28th as a day to watch oil on your calendar as Saudi Arabia and other OPEC and non-OPEC producers meet to discuss any possibility of invoking a freeze on further oil production meant to stabilize and increase oil prices.
     Already, the president of Algeria is stating that they need to see at least a million barrel cut in present production in order to help stop the latest fall in prices.

I'll keep it at that this week


George Murphy
Twitter @GeorgeMurphyOil

Tuesday, September 13, 2016

Price changes for Thursday, September 15, 2016

Good evening,

Here's what I have for this week's price changes:

*Heating oil shows an increase of 1.5 cents a litre....
*Diesel fuel shows an increase of 1.2 cents a litre, and...
*Gasoline shows an added 2.4 cents a litre.

Market highlights

US Inventory report impacts prices
Last Wednesday's US EIA inventory report certainly was a model for how speculators can jump all over the tiniest of facts.
      The inventory report from last week gave everyone a good read on how much the markets can be influenced once some "certainty" is weighed against the truth.
      Last Tuesday, the last day of the regulatory session, industry reports were released to the markets stating that US inventories were impacted according to the industry report, in a negative way. Numbers for oil were well down. But the markets the next morning didn't exactly run away out of control on their news.
      Enter Wednesday noon when the US EIA inventory read came out for the week before.
      Facts are facts, and in the face of a drop in both gasoline and crude oil inventories, oil shot up a good $2 plus over the next few hours and stayed there for the rest of the day.
      Refined commodity prices also showed a rapid increase right behind oil.
      But expect a retreat in prices starting into this week's market trading that should impact consumer prices set for next Wednesday.
     While Hurricane Hermine shut down most imports into the Gulf of Mexico last week that turned oil prices up, then the opposite will be true for tomorrow's report. That one should show a massive build in inventories, those same barrels that didn't make it to shore the previous week that put the screws to prices for us this week.
     The numbers may be up this week, but they're not likely to last as the reality of an over-supplkied world full of oil once again takes hold of the oil markets.
     The numbers may be up this week, but they're not likely to last as the reality of an over-supplied world full of oil once again takes hold of the oil markets.

That's it for this week!


George Murphy
Twitter @GeorgeMurphyOil

Tuesday, September 06, 2016

Price changes for Thursday, September 8, 2016

Hi to all,

Looks like the retreat in prices I predicted a couple of weeks back is starting to kick in. Here's what I have for this week's price changes:

*Heating and stove oil shows a drop of 3.2 cents a litre....
*Diesel fuel shows a drop of 3.5 cents a litre, and...
*Gasoline shows a drop of 4.1 cents a litre.

Market highlights

Saudi's meet with Russia on freeze prospects
Saudi Arabia, OPEC's largest producer of oil, met in a separate meeting this week with non-OPEC producer, Russia on the prospects of instituting any freeze in oil production.
     While the markets are spotty on any support of a freeze, it seems that any freeze in production will end up on the floor as the sceptics don't see either country, or OPEC, to stick with self-imposed limits.
     Oil prices struggled to gain any ground this week on the news.

US inventory data tells a story
Last week's inventory data out of the US Energy Information Administration has some things of note this week.
     First off, but not too unexpected, was the fact that oil showed a gain in inventories that helped start a drop in prices. Inventories of oil were up 2.3 million barrels. Part of that build may very well have been helped by additional supplies from Alberta and Nigeria, most recently back in the markets from their supply disruptions.
     Secondly, distillate inventories were up again well ahead of the fall and winter season. All good to see ahead of consumption time.
While refinery capacity was also down, reflective of the changing demand season for gasoline and distillates, I have seen a retreat in gasoline simply as the result of a drop in gasoline demand at the end of the summer driving season.
     Look for the focus of the markets to switch to attention towards the distillate markets from now until spring 2017.

That's your report this week!

George Murphy
Twitter @GeorgeMurphyOil

Tuesday, August 30, 2016

Price changes for Thursday, September 1, 2016

Hi to all,

Here's what I have for this week's price changes. I'll apologize in advance for the lack of any market news. There simply wasn't any time for market analysis this week.

*Heating and stove oils will increase by 3/10ths of a cent a litre.
*Diesel prices to drop by 1/10th of a cent, and...
*Gasoline prices to increase by 8/10ths of a cent.


Twitter @GeorgeMurphyOil

Tuesday, August 23, 2016

Price changes for Thursday, August 25, 2016

Hi to all,

As predicted, there's not much change in the numbers.

All are up.

Here's what I have for this week's price changes:
*Heating and stove oils to increase by 3.9 cents a litre.
*Diesel fuel to increase by 3.8 cents a litre, and...
*Gasoline shows an added 4.8 cents a litre at the pumps.

Market highlights

Iran to join talks in Algeria
*In a surprise to the markets today, Iran is said to have written a letter to fellow OPEC members letting them know that they will join talks with other OPEC and non-OPEC members in the possibility of instituting a production freeze.
     World oil producers are still trying to deal with an excess of supply in the markets, and it is widely believed that a freeze in worldwide oil production will help alleviate the present drop in prices.
The news today help take oil prices out of negative territory and oil ended with a gain on the day.

Oil inventories lower
Last week's inventory news out of the US was for some a surprise as buth oil and gas supplies took a dip last week all against market expectations.
    Gasoline inventories took a drop of 2.7 million barrels in last week's report with oil also down by 2.6 million barrels.

I'll leave it at that for this week.

Regards to all,

George Murphy
Twitter @GeorgeMurphyOil

That was the release I sent out a little while ago...

The news out of Iran today was a little surprising, I will admit.

In case you missed it, the Iranians are now talking about attending the "freeze" meeting set for Algeria in late September...

Curious though is the effect of making an announcement like that today a full month ahead of the scheduled meeting. Perhaps the Iranians now know what kind of influence the now hold in the markets, but even more curious knowing that they have been taking on the Saudi's at their own game with discounting to their favorite Asian customers almost a side-act.

Be that as it may, Iraq still enters a new realm in the markets with their announcement the other day that they have reached an export deal with the Kurds in the north where exports have been shut in from the Kirkuk fields. With oil down yesterday on the immediate addition of upwards of 200,000 barrels a day in output, it was no surprise to see Iran respond with their own "influence" shot to gain back some attention again.

But keep looking south, but not just south...

With rising oil, US rig counts have again increased for the tenth week out of eleven measured. The fact that oil is still supported close to $50 Brent and $48 WTI, tells me to expect another week of a double-digit increase in rig counts in the next week or two. Resiliency is showing itself in the US and may turn out to be the factor that shuts down any increase (or prospects of) in the price of a barrel of oil.



Tuesday, August 16, 2016

Price changes for Thursday, August 18, 2016

Hi to all,

Here’s what I have for this week’s price changes:

*Heating and stove oils show an added 3.2 cents a litre.

*Diesel shows an increase of 2.7 cents a litre, and...

*Gasoline shows just a 1/10th of a cent a litre increase.

Market highlights

As oil prices rise, affects can be seen and are all the focus of the update this week...

With OPEC talking about taking another extraordinary measure to freeze production, speculators are betting that, this time, the move to impact on the abundance of oil in the markets will work this time.

    *OPEC will meet in Algeria on September 28th to discuss the possibility of a production freeze. Other non-OPEC producers like Russia, have shown an interest in cutting back or freezing production in an effort to support oil prices and increase revenues.

    *Oil prices have increased a rough 12 percentage points since the last price setting, an increase of $5.65 over the last week as a result.

     *The Canadian dollar has increased in value against the US greenback, rising close to three cents from $1.30.6 cents to today’s noon rate of $1.28.6 as oil prices have increased.

     *What is obvious by the numbers this week is a market focus on distillate fuels that have shown a major increase this week, and numbers that are also pointing towards a potential  increase again for next week ahead o the fall season.

      *With attention now off the gasoline selling season in the US, gasoline numbers are showing a barely visible increase at the pumps this week. You can see where refiners have been losing in the game this past summer with gasoline spot prices remaining relatively steady against the increase in oil prices this week.

I’ll leave it at that for this week!


George Murphy

Twitter @GeorgeMurphyOil