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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