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Tuesday, June 02, 2020

Price changes for Thursday, June 4th, 2020


Hi to all,



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



*Heating and stove oil to drop by 2/10ths of a cent per litre.

*Diesel fuel to drop by 3/10ths of a cent per litre, and...

*Gasoline to drop by 4/10ths of a cent per litre.



Market highlights



OPEC meets again Thursday

OPEC will have a special meeting to further discuss a longer timeframe for production cuts Implimented just about a month ago.

     Oil prices had been increasing as a result of the cuts and a return of some demand as economies get back to work.

     However, the latest survey seems to indicate that OPEC has failed to meet it’s own production cuts only meeting about 70 percent of the agreed-upon 9.7 million barrel a day total production cut.

     According to Oilprice.com, Nigeria and Iraq are both seen as being two OPEC members who failed to meet the goal with Iraq meeting just under 40 percent of the ask of that country.

     Russia, in the meantime, is looking at an end to production cuts at the end of June, in stark disagreement with Saudi Arabia who are looking to extend the production cut agreement.



US EIA inventories

The latest inventory report from the Energy Information Administration is out, a day later because of the US Memorial Day holiday.

     Crude supplies increased by 7.9 million barrels, while gasoline showed a modest drop of 700,000 barrels.

     Distillate inventories were up by 5.5 million barrels.

     Refiner capacity was up this week to 71.3 percent, while US domestic production was recorded at 11.4 million barrels a day, down another 100,000 barrels.

     Refined gasoline supplied to the US markets was recorded at 7.25 million barrels against 9.39 million barrels a day for the same time period last year, down close to 2.1 million barrels.



   **Oddly, while oil stocks have been dropping in Cushing, Oklahoma, giving some support for WTI prices, has anyone noticed that stocks in PADD’s 3, 4 and 5 have been increasing in the last few weeks? It’s my contention that they have been diverting inventory rather than seeing a more pronounced drop in production.



Canadian dollar rises

Anytime we see a rise in the Canadian dollar against the US greenback, some effect is had against fuel spot prices. This week is no different as the sharp rise in the dollar has resulted in consumers seeing a drop in prices while actual spot prices for refined product have also risen right along with them.

     Since May 22nd, the Canadian dollar has gained a full nickel saving consumers a rough 4 to five cent a litre increase across the board for refined products.



Rig counts down further

US drilling rigs in the field were down another 17 rigs according to last week’s Baker Hughes rig count, and down 683 rigs from the same timeframe last year.

     While rigs exploring and drilling may be down, that doesn’t mean that production of oil has dropped at the same rate as indicated by the numbers of rigs offline.

      Key US domestic production figures need to be watched closely as does the rig count as some producers may return to the field as oil prices rise again.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, May 26, 2020

Price changes for Thursday, May 28th, 2020


Hi to all,



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



*Heating and stove oil to increase by 2.1 cents a litre.

*Diesel fuel to increase by 1.9 cents a litre, and...

*Gasoline to increase by 2.8 cents a litre.



Market highlights



Oil rises on economy

Oil prices continued to increase this week on an optimistic outlook that the economy in the US will bounce back.

     Demand for gasoline also increased along with other refined commodities, as the traditional start to the summer driving season is now underway, increasing spot prices another 2.8 cents over the last week.

     It’s usually just after this session every year that we see a slow retreat in refined prices, at least until the first major storm hits from hurricane season, usually at the end of July.

     Of course, complicating all this remains the prospect of Covid-19 that still remains a factor in demand.



US rig counts drop again

How telling is the shutdown of oil production?

     If the US rig count is any indication, according to Baker Hughes, another 21 rigs were offline over the last week, bringing the overall rig count down to 237 operating rigs south of the border. To put that number in context, this time last year saw 983 rigs in the field.



US inventories down again

US crude oil inventories were recorded down again this week as 5 million barrels was drawn from overall oil stocks.

     Gasoline inventories added 2.8 million barrels, while distillate added 3.8 million barrels.

      US refiner capacity was recorded at 69.4 percent.

      US domestic output was recorded at 11.5 million barrels a day, 1.8 million barrels lower than peak production in February.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, May 19, 2020

Price changes for Thursday, May 19, 2020


Hi to all,



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



*Heating and stove oil to increase by 3.2 cents a litre.

* Diesel fuel to increase by 2.9 cents a litre, and...

*Gasoline to increase by 2.4 cents a litre.



Market highlights



Chinese demand almost back?

Word from China tonight where demand for oil has just about returned to pre-pandemic levels.

     China imported close to 9.8 million barrels a day last month just as the pandemic alerts were being lifted in chief manufacturing areas like Wuhan.

     In the meantime, China had put 13.1 million barrels a day through refineries to meet demand in April, just over what they did for the same time-period last year.

     China consumed 13.7 million barrels a day in December, 2019.



US EIA inventory data

The latest crude oil inventory data is out, and the EIA is reporting a very slight draw on crude oil inventories, down by 700,000 barrels the last week.

     Gasoline inventories dropped 3.5 million barrels, while distillates increased 3.5 million.

     Refiner capacity was reported at 67.9 percent.

     US domestic production was down to 11.6 million, down another 300,000 as lower oil shut down rigs and spigots were turned off at oil fields.



How long this recovery?

Interesting question, and I’d be a millionaire if I had that one figured out, but here’s where I would start.

     With oil prices rising, the question has to be asked is how fast can the US domestic number increase with oil prices on the rise.

      No secret that the US has dozens of small producers who ventured and probably weathered the drop in oil-at least to this point. With oil rising, there’s a strong likelihood that some of these small producers will quickly re-enter the production fields again in an attempt to recoup some losses, and perhaps put more crude back into the system.

      It will be worth watching the rig count this week and next for the signs that producers are venturing back into the oil patch.

      That brings with it another complication: While OPEC and non-OPEC nations may have agreed to production cuts, then how likely is it, when producers go back, that OPEC would likely stick to their end of the cuts?

     It’s my guess we won’t have long to wait.



That’s it for this week.



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, May 12, 2020

Price changes for Thursday. May 14th, 2020


Hi to all,



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



*Heating and stove oils to increase by 2.1 cents a litre.

*Diesel fuel to increase by 3 cents a litre, and...

*Gasoline to increase by 5.4 cents a litre.



Market highlights



Saudis to cut production further

In the face of rising austerity measures in the Middle East country, and the need for more revenue to meet its budget requirements, Saudi Arabia is promising to cut back production even further by another one million barrels a day by June.

      That would bring Saudi production down to 7.5 million barrels a day, a level not seen by them since 2002.

      The leading OPEC producer has already agreed to cuts along with it’s partners by 9.7 million barrels a day.



Rig counts take a beating

Baker Hughes rotary rig count is well down again this week as the shutdown of oil production and exploration South of the Border continues.

     They report that only 270 rigs remain at work in the US, down sharply from 624 rigs that were operating as late as mid-March 2020.

     The speed of the shutdown is a little indicative of the panic caused to small majors who now face an uncertain future with oil prices remaining below profitable levels.

     However, there were some signs that a few small operators may be getting ready to return to production as prices have seemed to stabilise at a break-even point for some.



Chinese demand increasing?

Chinese imports of oil have increased the past couple of weeks by 9.8 million barrels a day, that may be a signal to either rising demand in China, or bargain basement buying of cheap product.

     With Covid-19 cases reported to be lower in China, except in today’s news, it may be a case of an anticipated increase in Chinese demand as people go back to work with the economy there re-opening. It remains to be seen for how long however, as the news recently reported another outbreak of the disease, and a mass testing of over 11 million people in Wuhan is underway with another breakout of the disease.

     Looks like the world may experience the same thing elsewhere if China is a model case, and oil demand will fluctuate right along with it. 

    In the meantime, any return to normalcy isn't going to happen for some time if Covid-19 has anything to do with it. The run-up is overblown with the surge in cases that are happening, not just in China with today's announcement, but in the future because of a "too early" return of workers back to an unprepared economy.
   If the economy doesn't come back, neither will oil.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, May 05, 2020

Price changes for Thursday, May 7th, 2020


Hi to all,



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



*Heating and stove oil to increase by 4.7 cents a litre.

*Diesel to increase by 5.1 cents a litre, and...

*Gasoline to increase by 5.5 cents a litre.



Market highlights



Demand...

Markets rebounded this week as speculators continue to hope that economies will start to open again and consumer demand picks up right along with it, reversing the losses of the week before when oil went negative for the first time in history.

      With European countries opening up shop, and the US joining them-at least in some states-demand is expected to rise, but for how long?

      Any breaking cases as a result of the early opening of the economy may very well set it back to a new starting point, all with oil prices paying the price...again.



World oil production shut down?

Worldwide, optimism over the economy returning has added to oil’s fortunes, but it’s some data on oil that is shut in that is awakening speculators.

      Refinery runs south of the border are down a good 20 percent plus, drilling rigs are down sharply and production is also off worldwide with the hope that OPEC will also stick to their end of cuts.

      Estimates now show close to 20 million barrels a day in oil production has been cut while Covid-19 rages worldwide.

      Data still needs to be seen to confirm that OPEC is cutting their own production by an agreed-upon cut of 9.7 million barrels a day by May 1st however.



US inventory data

The latest data from the Energy Information Administration continues to show crude oil inventories increasing with crude adding nine million barrels of supply.

     Gasoline dropped 3.7 million barrels while distillates added 5.1 million barrels.

     Refineries operated at 69.6 percent of capacity on the week.

     US domestic production dropped to 12.1 million barrels a day as drillers continues to turn off the taps.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, April 28, 2020

Price changes for Thursday, April 30th, 2020


Hi to all,



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



*Heating and stove oil to drop by 9.6 cents a litre.

*Diesel shows a drop of 10.4 cents a litre, and...

*Gasoline shows a drop of 1.4 cents a litre.



Market highlights



Oil storage running out... for Brent?

It’s called “borrowed time”...

And oil is running out of it fast.

     With West Texas Intermediate seeing into the negative last week due to ongoing storage concerns, there’ still huge concerns for storage worldwide as Brent is now running into its issues, according to Goldman Sachs.

     Predictions are being made by them that say world floating storage may run out as soon as the middle of May causing a shock to oil prices like has never been seen. They say that OPEC cuts simply aren’t going to be enough as all OPEC countries struggle to bring production down by 9.7 million barrels in time for May 1st, the time an agreement reached with non-OPEC members agreed upon just less than two weeks ago.

     Goldman Sachs predicts the inventory issue is due simply to oversupply and a failure to cut production more than what was done. And to aggravate things, they simply kept pumping and putting it all into floating storage, where tankers are used for oil storage because land-based tanks are full.

     Initial cuts were rumoured to be 15 million barrels with OPEC surrendering to a lower number. Goldman Sachs says 18 million in cuts should have been made.

     My data on the drop in demand versus product supplied showed 20 million in cuts-minimum- was needed just to support prices.



Date to watch: May 19th

If oil prices fail to get support in the coming weeks due to production cuts, look for this date to be the next signal towards bottoming oil prices.

     May 19th is the day of the expiry of the June futures contract, and also the time of the month that may signal filling storage for not just Brent, but West Texas Intermediate prices.

     Yes, all over again. Days of negative pricing could be just a little bit closer than what we think they are.



US inventories weigh

The latest EIA inventory report is out, and it’s not good news for the support of oil prices.

     US crude inventories added 15 million barrels, while gasoline inventories added a million barrels.

     Distillates added 7.9 million barrels.

     Refiner capacity was reported at 67.6 percent, a sign of slowing refineries as they throttle back with lower demand.

     The American Petroleum Institute, an industry-led organisation,  has already reported an inventory build of 9.9 million barrels.

      The EIA’s next inventory report happens tomorrow at noon Newfoundland time.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, April 21, 2020

Price changes for Thursday, April 23rd, 2020


Hi to all,



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



*Heating and stove oil to drop by 4.1 cents a litre.

*Diesel shows a drop of 2.6 cents a litre, and...

*Gasoline shows a drop of 3/10ths of a cent a litre.



Excuse the volatility in the numbers that may be there. It’s been a hell of a week!



Market highlights



Oil loses its shirt

In a strange turn of events, for the first time in tracking of oil prices went into negative territory yesterday as sellers had no takers for WTI crude and buyers simply didn’t buy.

     Oil was hung up at a crossroads as inventories at the central selling hub of Cushing, Oklahoma went to overflowing, and inventories simply had no place to go with demand down in the wake of Covid-19.

     As disasters go on record as potentially damaging to economies, this storm is one for the record books, and it may not be over for a while.

     While WTI posted a slight gain to finish Tuesday with a slight gain above zero, June futures started the trading day lower, and headed the same direction as May futures did earlier this week.

      Brent may be different.

      With no central chokepoint, Brent is less susceptible to a point where inventories are priced, yet is still susceptible to lower prices based on the fact that there simply isn’t enough storage out there to soak up what’s already been sold over the past few weeks. And that itself is a problem.

       With no storage left by May 1st, Brent is being stored in supertankers: the very vehicle used in it’s delivery to customers who may need it, complicating an already over-burdened delivery network.

      The Saudi-Russian oil price war may have turned Brent prices lower to a point of no return, where the laws of diminishing returns may be enough to squash the price further.

      And with a world waiting to heal before it goes back to work, it gives time for yet more crude to spill into a world that just isn’t ready to consume it for some time to come yet, regardless of how much OPEC and OPEC+ decided to cut from production last week.



US inventories

If there’s any indication of how much oil is backing up in the system south of the border, last weeks inventory report may be enough of a signal.

     US crude oil inventories gained 19.2 million barrels while gasoline stocks also increased 4.9 million barrels.

     Distillate stocks rose by 6.3 million barrels.

     US refiners operated at 69.1 percent of capacity.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil