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Tuesday, March 31, 2020

Price changes for Thursday, April 2, 2020


Hi to all,



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



*Heating and stove oil to increase by 4/10ths of a cent a litre.

*Diesel fuel to increase by 5/10ths of a cent per litre, and...

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



Caution here: As winter blending is a combination of jet fuel and #2 in heating and Diesel fuels, there is a strong likelihood that heating and diesel will drop as a result of falling jet fuel prices.



Carbon taxes may also come into effect for gasoline, turning it 1.5 cents a litre up this week.



Market highlights



Saudi Arabia and Russia still at it

Both Russia and Saudi Arabia are still pumping oil as fast as they can ramp up production as the world turns eyes to faltering economies in the face of the Corona virus outbreak.

     With world economies slowing, it is estimated that world demand has dropped by 10 million barrels as of the second week of March, much to the chagrin of two nations who refuse to believe there’s a problem.

      Estimates by IHS Markit suggest that the demand destruction could amount to almost 20 million barrels a day, well down from the peak of 98 million barrels a day projected for this year.



Saudi’s set to produce more

According to OilPrice.com, the Saudi’s are preparing to ramp up exports by another 600,000 barrels a day starting May 1st in an attempt to flood the markets and recapture market share.

      Production will also be set to increase by 250,000 barrels a day by then with Saudi Arabia reaching 10.6 million barrels a day in production.



Refiners shuttering in production

North Atlantic Refining isn’t the only refinery forced to idle.

     With gasoline margins in negative territory and jet fuel demand down 70 percent, major companies are shuttering refineries, or throttling back production close to 60 percent south of the border.

     Valero Energy, Marathon and Philips are all reducing production and throughput rates as gasoline is manufactured for less than the price of a barrel of oil with gasoline demand down a clear 50 percent.



Jet fuel prices continue to sink

As reported by the International Air Transport Association weekly report, jet fuel demand for North America sunk to a historic low as demand fell 59.2 percent versus the same time last year, and jet fuels sold for 26 cents a litre.

     World demand fell by close to 62 percent worldwide versus the same time last year.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, March 24, 2020

Price changes for Thursday, March 26th, 2020


Hi to all,



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



*Heating and stove oils to drop by 1.8 cents a litre.

*Diesel to drop by 1.5 cents a litre, and...

*Gasoline to drop by *10.1 cents a litre



*Again, I can’t attest to the accuracy in the gasoline number, but it did trade that low before...Two occasions...1986 and again in August 1998. As low as 15.7 cents a litre in  Monday trading.



Market highlights



Demand destruction complete

Again this week, a sign that gasoline has finally met complete destruction as people are home and no gas is being consumed.

     With the world facing the Covid-19 virus fight, a fight for our very lives, markets turned upside down with cars parked and refineries with product with absolutely nowhere to go.

     Since February 25th, the last time we saw prices increase, I have witnessed gasoline spot prices drop an astronomical 57 cents a litre to 17 cents a litre on the markets as of business day ending Tuesday.

      That’s forty cents plus taxes.



Refiners about to pay the price

As demand dies for most petroleum products, refiners are soon going to start to feel the pinch with predicted shutdowns of US refiner capacity in the works.

     Estimates in the US are accounting for a 30 percent drop in refiner capacity as demand wanes for most products, gasoline particularly as people get shut in with the shutdown of the US economy. Demand for gasoline could see a drop of 50 percent south of the border.

     And while refiners are dropping capacity, they still worry over getting rid of supplies now on hand. Some support remains for distillates as heating oil and diesel remain with some demand, but jet fuels fall into disfavour as flights remain grounded.

     Word has it that North Atlantic Refining has already laid off some people as refiners try to find ways to survive the downturn that has the potential to close some facilities along the US Northeast seaboard and the Gulf of Mexico.

      March 2, 2020 shortly before the collapse, US EIA figures showed Americans burned a record high 9.5 million barrels a day

      “It will cost you more for the plastic container than for the gas you put in it”.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, March 17, 2020

Price changes for Thursday, March 19th, 2020


Hi to all,



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



*Heating and stove oils to drop by 2.8 cents a litre.

*Diesel to drop by three cents a litre, and...

*Gasoline to drop by six cents a litre.



Market highlights



OPEC and Russia go head to head

There’s no sign of Russia or OPEC backing down from their promises to flood the markets with crude, and it looks like flooding the market may have been intended all along.

     New figures on OPEC production for the moth of February show that Saudi Arabia may have been already gearing up for greasy combat with other producers as the lead OPEC member produced 36,000 barrels a day more than intended.

     Not unusual to see a member overdo it, Saudi Arabia was always the member who policed the others into maintaining production levels and stuck to its own quotas quite rigidly since signing the initial production cut agreement in January 2015.



Tankers wanted: now at a premium

Word has it that tanker rates are rising amid signs that the Saudi-Russia oil war has begun.

     Shipping rates have increased over six hundred percent as mainly Saudi sellers are using every tanker and sending them off to markets in Asia and Europe at the rate of over two million barrels a day in an attempt to grab market share from Russia by flooding the markets with cheap product.

      Saudi Arabia announced last week that it would sell oil at discounted rates to preferred customers.



Jet fuel demand weakens

While the COVID-19 virus takes hold and people head home to isolation, strong signs of how much impact the virus and economic meltdown is having are becoming readily apparent.

     The International Air Transport Authority is reporting a larger than normal drop in the important motive fuel in weekly, monthly and year to year data.

     Weekly data is showing that the industry is slowing at a rapid pace with demand for product down 23.8 percent over the last week, 39.7 percent from last month and an astronomical 47.8 percent from the same time last year.

     That’s just North American travel. The rest of the world averages close to the same.

     Prices have averaged 37 cents a litre over the last week. With no one flying, expect these prices to drop further.

     Word I am getting is that jet fuel stocks are filled to the rim with nowhere else to put refined inventories, including at North Atlantic Refining in Placentia Bay, NL.

     Space is running out in the face of collapsing demand everywhere, another sign that shows the world was very close to a glut situation before the crude oil price war started.





That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, March 10, 2020

Price changes for Thursday, March 12, 2020


Hi to all,



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



*Heating and stove oil to drop by 4.6 cents a litre.

*Diesel fuel to drop by 4.6 cents a litre, and...

*Gasoline shows a drop of 3.5 cents a litre.



My averages still indicate further drops for next week already in the pipeline as spot prices for gasoline remain 6.5 cents less than the price change for this week, and 3.5 cents down from the average for heating and diesel fuels. We haven’t hit bottom yet in Newfoundland and Labrador. There’s plenty of space for retailers to drop prices further from the regulated maximum.



Market highlights

OPEC-Russia oil price war

The news is dominated by a Russia and OPEC oil price war and both sides are ready to pump more.

     Or should that read Saudi Arabia and Russia?

     Both countries are supposedly at odds after talks broke off on further cuts to production on Saturday, and Saudi Arabia said it would drop all production limits. With OPEC now backed into a corner, it is Saudi Arabia mounting back to full production, with the Saudi’s with the most production capacity to let loose by.

     Saudi Arabia is already producing 9.5 million barrels a day with capacity that it can ramp up to hit 12.5 million barrels a day of production as early as three months from now.

     The Russians are able to harness 300,000 barrels in an instant with another 200,000 barrels worth of capacity to spare. They're presently pumping 11.3 million barrels a day according to my last data.

     The losers in all this may be the resilience of small producers in the US shale industry who are dealing with higher production costs.



Corona virus still hitting hard

The Corvid-19 virus is taking its toll of refined demand and demand for crude oil itself is now at a bargain, prompting some to buy and store at low prices, if not consume it.

     But consumption has dropped worldwide with a noticeable drop in some distillates, like kerosene, which being close to jet fuel, is readily apparent as the airline industry is taking a hit as a result of the Corona virus.

     Prices for the refined product lost close to 32 percent compared to the same timeframe for last year according to the IATA (International Air Transport Association) and down 18 percent over the last month since the Corona breakout.



US EIA inventories

The latest report from the Energy Information Administration still shows low refiner capacity as refiners are slow to come back online from spring maintenance programs, and what’s the rush?

     Refineries operated at 86.9 percent of capacity as crude oil gained 800 thousand barrels of stock.

     Gasoline inventories took a dip as 4.3 million barrels were taken from inventory and 4 million barrels dropped from distillate stocks.

     US domestic production was pegged at 13.1 million barrels per day with still no sign of affects of Corona.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Tuesday, March 03, 2020

Price changes for Thursday, March 5th, 2020


Hi to all,



Here’s what I have for this week’s price changes, but with a warning: AS MARKETS HAVE BEEN EXTREMELY VOLATILE, I CAN’T ATTEST TO THEIR ACCURACY.



*Heating and stove oils show a drop of 5.6 cents a litre.

*Diesel fuel shows a drop of 5.8 cents a litre, and...

*Gasoline shows a drop of 7.1 cents a litre.



Market highlights



Corona virus doubts play hard in the markets

Markets showed extreme volatility over the regulatory period with wild swings through the week, working spot prices from extreme lows, only to show signs of price recovery as markets recovered again.

     The extreme volatility has played into everything from spot prices for refined commodities to everyday reliables like gold.

     Markets for refined product are showing that there is a projected drop in demand with the onset of Corona that has become a factor now in pricing. Two weeks ago, there was some question as to how Corona would affect prices, especially knowing that demand would slip there. While I predicted a drop in prices, it took some time to take hold. And oil and refined products aren’t out of the woods yet as world economic worries also hit the markets hard as a result of Corona concerns.



China demand slips again

While demand for refined products remains down about 35 percent, overall Chinese oil demand has dropped by 3.5 million barrels a day, a drop of 15 percent that has to go somewhere. While Chinese demand falters, that crude has to somewhere, and that’s also part of the problem.

     However, that doesn’t necessarily mean that China is not buying oil while Corona reigns. Word is that they have been buying at bargain prices in the hope of a turn-around as they move away from the Corona virus several months down the road. Demand may be down, but they’re still buying-for now.



OPEC+ responds?

OPEC and other oil producing nation will meet again March 5 and 6th to discuss the potential of production cuts. Russia is said to be thinking it over, but Vladimir Putin is on record as stating that “Russia is happy with prices at present levels.”

     That puts OPEC into a corner if Russia holds back as OPEC could face the potential of upwards of a million barrel per day cut to try and support prices with Russia’s help.

     And while they discuss cuts, OPEC has to realise that it may be in a no win situation as Corona virus cuts demand to everything from manufacturing to travel and shipping and could pound markets for months. While they struggle with that, they also face the prospect of a build in world supplies of crude, a two-fold issue.

     Prospects of a cut ran through the markets the past few days that initially helped support oil prices, giving oil and refined commodities a modest boost. 600,000 barrels a day seems to be the number that has been kicking around the markets the last couple of days.



Due this week:

OPEC meets March 5-6th

US EIA inventories: Wednesday noon



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil