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 19^th

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 19^th 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  

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 1^st, 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   

Price changes for Thursday, April 16th, 2020

Hi to all,



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



*Heating and stove oils to drop by 1.5 cents a litre.

*Diesel to drop by 2.3 cents a litre, and...

*Gasoline shows an increase by one cent a litre.



Market highlights



Record cut between OPEC+

Starting May 1^st, OPEC and non-OPEC producers will institute a production cut that amounts to close to 13. 4 million barrels a day, but even that may not be enough.

     In a last minute negotiation that lasted until Monday, OPEC and non-OPEC producers signed on to a history making round of cuts in an attempt to reign in the falling price of oil.

     Since the start of a price war between Russia and Saudi Arabia  few weeks back, oil spilled onto an already weighed down oil market and a world economy weighed down with a war on Covid-19 and a world economy shutting down.

     No side was willing to back down.

     With the “sudden realisation that the fight wasn’t going anywhere, the Saudi’s reluctantly returned to the table in an effort to stop falling prices, and to call an end to a losing proposition.

     With OPEC taking up 9.7 million barrels, other non-OPEC producers like Canada, Norway and the U.S were expected to take on the rest of a 13.4 million barrel per day cut in production.



Deal in trouble already?

News out of Asian markets supposedly are saying that Saudi Arabia has continued to discount oil to its preferred Asian customers again, all ahead of the cuts due to be implemented.

     According to oilprice.com, the deal includes a further discount to May purchases for Asian customers of up to an additional $4.20 a barrel discount that could potentially kill the production cut agreement that doesn’t even have the ink dry yet.

     Brent oil prices immediately dropped to $30 US a barrel just before the end of trading.



US inventories skyrocket

In a sign of dropping demand and open spigots, the US EIA inventory report from last week again showed a massive build in stocks with oil increasing by 15.2 million barrels.

    Gasoline gained 10.5 million barrels while distillate stocks increased 476,000 barrels.

     Refiner capacity was reported at 75.6%, a sign that refiners are reducing refining capacity and getting close to shutting down.

     Late Tuesday, the American Petroleum Institute reported another massive build in crude stocks, with their numbers showing an increase of 13.1 million barrels on top of last week’s report of an increase of 12 million barrels.

     The next EIA inventory repot is Wednesday, April 15th that is also expected to show another massive inventory build.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, April 9th, 2020

Hi to all,

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

*Heating and stove oil to drop by 3/10ths of a cent a litre.

*Diesel to drop by 1.1 cents a litre, and...

*Gasoline to increase by 3.5 cents a litre.

A phone call for the ages...

For what may be the first time ever, nations outside of OPEC are going to be asked to join in on a world effort to support the oil industry by instituting their own production cuts.

     In a phone call/teleconference, Canada will be asked to institute it’s own round of cuts in a three month effort to stem the bleeding to the industry and help support oil prices in the face of the Covid-19 pandemic.

     The disease has cause da shutdown of the world economy and, according to estimates a drop in demand of 20 million barrels a day, unheard of in my memory.

     World demand was topping 98 million barrels a day before the crisis and economic slowdown.

      The US, Norway, Canada, Britain and Brazil are among the countries asked to take part of what could be a production cut amounting to 10 million barrels with OPEC taking the other 10 million barrel cut.

Trump not happy?

Mind you, with the OPEC nations now looking for a cut by non-OPEC nations, they also want to include the US, which itself has become a powerhouse with shale production. But don’t expect the US to jump in willingly to cut.

     When asked the other day whether the US will introduce a cut, Trump said the industry is already shutting down with lower prices. The cuts were coming, but not on his terms.

     Trump went off the deep end calling for tariffs on Saudi crude just to support his own industry, rather than see the US make meaningful cuts.

US EIA inventories

Better later than never as they say, but the latest EIA inventories are showing a steep increase in crude supplies as demand dies south of the border.

     US crude supplies gained 13.5 million barrels as gasoline showed slipping demand, adding 7.5 million barrels added to stocks.

     Distillate inventories showed a drop of 2.2 million barrels as tractor trailers and trains still ran and heating oil remained up in demand.

    Refiner capacity was shown to have dropped considerably, measuring in at 82.3 percent.

That’s It for this week!

Regards, and go wash your hands!

George Murphy

Twitter @GeorgeMurphyOil