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Tuesday, April 28, 2015

Price changes for Thursday, April 30, 2015

Hello to all,

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

Heating and stove oils to increase by 11/100ths of a cent.
Diesel fuel to increase by 6/10ths of a cent, and...
Gasoline shows an added 2.5 cents a litre at the pumps.


Gasoline inventories continue to experience some slight drops as the run-up to the US summer driving season approaches. The traditional start of the season begins on the US Memorial Day holiday, our Victoria Day weekend. As of last week, gasoline inventories were recorded down another 2.1 million barrels.

Overall crude oil inventories out of the US last week showed another build of 5.3 million barrels.
Russia will meet OPEC members ahead of OPEC's regularly scheduled meeting in mid-June to discuss a possible cut to overall OPEC production. No doubt, the Russians would like to see a cut instituted as it would possibly raise Brent crude prices, which have been taking a pounding all this year. Present OPEC production numbers show their group producing just over 30 million barrels a day.

I'm watching rig counts as of late.
With all the news of the industry parking drill-rigs in recent months, it seems the decline in operational rigs is starting to slow. Last week saw a slight decline of 22 rigs in the US with one rig down in Canada. Any halt in decline of rigs is probably a sign that they may be starting to think about coming back online as crude prices have been seen to increase over the past ten days or so.

That's it for this week!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA 

Tuesday, April 21, 2015

Price changes for Thursday, April 23, 2015

Hi to all,

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

Heating and stove oils add 2.47 cents a litre.
Diesel adds 2.9 cents a litre, and...
Gasoline shows upwards by 3.1 cents a litre.

Refined product prices were driven upwards this week as a result of, not just the increase in crude oil prices, but also by the fact that last week saw only a modest build in overall US inventories.

Gasoline demand also shows signs of picking up in the face of higher refinery capacity coming back online. With capacity up, and numbers showing a draw against gasoline inventories, it was seen as "natural" that speculators would take advantage.

But how long can the markets follow the snow job of rising world crude supplies that still shows a glut in supply? Saudi Arabia produces a near record of an added 650,000 barrels per day in March month, well ahead of what was the norm. To add to the false reading from the markets, news this morning that storage capacity continues to be taken up in the markets. With another 158 million barrels in floating storage, it makes one wonder how long speculators can go before the truth in the markets is realised.

To add to the Saudi storage concerns and the building of false demand picture worldwide, you can also add another factor that no one is talking about...Yet!

With oil rising, it's only a matter of time before smaller producers start playing with the thought of getting back into the market of selling and pumping crude oil. With US domestic production now reaching a record 9.3 million barrels a day, almost 13% more than the same time period last year, speculators surely can see that this latest round of crude oil increases may be very well short-lived.

Regards to all, and if you have a thought, be sure to leave a comment!

George Murphy
Twitter @GeorgeMurphyMHA

Monday, April 20, 2015

What I'm watching in the oil markets, and what you should too.(Part one)

People are often asking me where I think oil prices are going, and what factors I'm watching out in the markets. I guess sometimes some want to build evidence on where oil prices are going because of a vested interest, or they're simply concerned with provincial finances.

...and right they should be on the last point...

It's obvious that right from "day one", we made the mistake of simply relying on revenues gained from the sales of crude oil off our shores. It's easy to say we got lazy over economy building because we had lots of cash in the coffers. This year will prove our folly over over our dependence on the price of oil, rather than the "traditional way" of building a sustainable economy.

Even easier to say that all was misdirected in the past and that not enough was invested in our future here. Either point has validity and each point may itself be wrong.

Either way, "dependence" on oil money has gotten us into some troubles with really no one answer on how to get ourselves out of the situation we now find ourselves in. If we are to get out of the situation, we're still going to have to depend on the growth of our oil sector to do it. That, my friends, is not an easy sell, although it is a sale that can be made...IF prices remain where they are today.

Let me explain:

Factor 1
A lot has been said of the effect that smaller oil companies have made on US domestic production. Some may argue with validity that "small oil" can't keep it's head out of the water without prices being higher. With the parking of drilling rigs, it seems that their case may have some valid evidence to back the fact that $55 US would be a "boil over" point to where frackers may explore and produce to overall US domestic production again, and with Brent oil prices now starting to push $63 US a barrel and West Texas Intermediate producing sales at $50 US, we may again be on the edge of seeing smaller producers re-entering the markets. Important factor to watch is the US rig count. Published pretty much on a weekly basis, watching this number start to show stability will probably coincide with oil prices that will also do the same.

Any increase in the overall rig count will, in all likelihood, start to show another drop in WTI prices, thus dragging down Brent prices again.

Factor 2:
US demand: First, for gasoline may increase the value of some oil, but in all likelihood affect gasoline spot prices first. While refiners are making a fortune right now with oil at present levels, those profits in this sector start to diminish with increasing crude oil acquisition costs. Either way, with prices somewhat lower, any company that is fully immersed in the oil industry, from the initial search to the final product, becomes a winner under the present market conditions. I don't believe that "Big Oil" even wants to see prices high, if they can make it financially further down the food chain! Summarily, demand for both gasoline and distillate products remains tepid at best, and that's not going to be a real motivator to bring prices up.

Factor 3:
Conservation efforts/Consumer outcry: While arguments for global warming persist with a lot of evidence to back it up, even more disconcerting for increasing oil prices has been conservation efforts. Don't ever doubt that consumer outcry has also been a positive motivating factor in the efforts behind conservation and protection of the environment as well! The simple fact is that, not so long ago, consumers were upset with higher oil and gasoline prices, and that spurred on efforts of government to answer back for their constituents. Consumers wanted relief and protection from higher energy costs that influenced decision-making. has had a huge effect on world consumption of oil products, and will continue to do so in the future. Witness higher automotive mileage claims and home retrofit programs worldwide, and locally, look no further to the supposed reasoning and the justifications around the Muskrat Falls hydro-electricity project.

In part two, I'll have more factors that I use in everyday life to balance my reasonings behind energy costs, and what I watch to determine further direction in oil prices. If you have any comments, feel free to drop me a line!

I will be back tomorrow night with the final numbers for this week's price adjustments!

Regards for now!

George Murphy
Twitter @GeorgeMurphyMHA


Tuesday, April 14, 2015

Price changes for Thursday, April 16, 2015

Hi to all,
 
Here's what I have for this week's price changes:

Heating and stove oils show an added 2.21 cents a litre.
Diesel shows up by 1.6 cents a litre, and...
Gasoline shows a very modest drop of 8/10ths of a cent.


While oil prices started off this week at a modest $55.16 a US barrel (Brent), prices gradually started an increase after the US Energy Information Administration stated that we should start to see a drop in production coming from some of the US fracking fields where oil drilling rigs have been "parked" since prices retreated from historic highs. The EIA is predicting a drop of 57,000 barrels a day in May month as a result of a halt in further production because of higher prices.

Don't look for a surprise spike in prices, unless something extraordinary happens though. If prices do increase, look for rigs to go back to work and bring prices lower again.

Surprisingly, against all this, there are still strong signs and, indeed questions that need further research as to how come oil prices haven't retreated further based on other evidence out there. Over the last week, for example, crude oil in floating storage (in tankers being used for such) has risen dramatically to count at 152 million barrels. That's an added 20 million barrels of crude oil stored away over the last three weeks. As well, the prospects of Saudi Arabia increasing production this summer to a record 11 million barrels a day has yet to hit the markets.

Needless to say, if I was trading in the markets, I would be worried over the two notes here. The prospect of Saudi Arabia waving the production stick should really be enough to keep Brent prices lower again for the coming future. That prospect on the futures markets still shows little growth in crude prices. Numbers show a mere $63 US a barrel in the middle of 2016 and $68 US a barrel for the full year of 2017.

Might as well get used to lower oil for a while...

That's it for now!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Tuesday, April 07, 2015

Price changes for Thursday, April 9, 2015

Hi to all,

I hope Easter was good for everyone and that for some it was a time of rest. At my place, between the twins, it was "chocolate madness"...

Either way, here's what I have for this week's price changes:

Heating and stove oils show a slight drop of 7/10ths of a cent a litre.
Diesel drops by 9/10ths of a cent, and...
Gasoline shows up by 1.8 cents a litre.


No doubt about it, but speculators know the start of the summer driving season is on the way, and that right now is about their only hope of scraping together any kind of a profit on their fare. April month has always been the month where we have historically seen that run-up to the US Memorial Day weekend (our May 24) that marks the start of the heavy demand gas guzzling season.

Or, at least that's what investors are hoping for!

The Canadian dollar increased slightly on news of rising oil. Earlier in this session saw skeptics balk at talk of the lifting of sanctions in Iran that would lift world crude stocks up by another one million barrels a day. They think that it will take some time to bring Iranian crude back to the markets, as the sanction agreement talks about removing sanctions as Iran conforms to the agreement, rather than immediate. The deal comes into full effect by June 30th.

Talk in the markets also reflected on Saudi Arabia increasing prices to its Asian customers, probably in a move over concerns of war costs as the drama in Yemen continues to unfold, and not because of any shortage in product availability. The Saudi's have to be careful about losing market share to other sources of oil out there. At this point, they really can't afford to lose any, now that they have a war of their very own!

"Man's inhumanity to man..."

That's it for this week!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA 

Price changes for Thursday, April 9, 2015

Hi to all,

I hope Easter was good for everyone and that for some it was a time of rest. At my place, between the twins, it was "chocolate madness"...

Either way, here's what I have for this week's price changes:

Heating and stove oils show a slight drop of 7/10ths of a cent a litre.
Diesel drops by 9/10ths of a cent, and...
Gasoline shows up by 1.8 cents a litre.


No doubt about it, but speculators know the start of the summer driving season is on the way, and that right now is about their only hope of scraping together any kind of a profit on their fare. April month has always been the month where we have historically seen that run-up to the US Memorial Day weekend (our May 24) that marks the start of the heavy demand gas guzzling season.

Or, at least that's what investors are hoping for!

The Canadian dollar increased slightly on news of rising oil. Earlier in this session saw skeptics balk at talk of the lifting of sanctions in Iran that would lift world crude stocks up by another one million barrels a day. They think that it will take some time to bring Iranian crude back to the markets, as the sanction agreement talks about removing sanctions as Iran conforms to the agreement, rather than immediate. The deal comes into full effect by June 30th.

Talk in the markets also reflected on Saudi Arabia increasing prices to its Asian customers, probably in a move over concerns of war costs as the drama in Yemen continues to unfold, and not because of any shortage in product availability. The Saudi's have to be careful about losing market share to other sources of oil out there. At this point, they really can't afford to lose any, now that they have a war of their very own!

"Man's inhumanity to man..."

That's it for this week!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA