Price changes for Thursday, July 2, 2020

Hi to all,

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

*Heating and stove oil to drop 1.8 cents a litre.

*Diesel showing a drop of 2 cents a litre, and...

*Gasoline to drop by 3.5 cents a litre.

Market highlights

Covid-19 announces its presence

For those south of the border who thought it was safe to open the economy again, we have news for you.

     Covid-19 wasn’t going away.

     Numbers of cases of the disease started to increase again in areas such as Arizona, California and Florida at a time when they thought it was safe to open a short time ago.

     Early openings have helped to spread the disease, and doubts about increasing demand of fuels riding on those hopes soon were dashed with both oil and refined commodities beating a retreat that might not stop if Anthony Fauci is right.

    Fauci, the US’s top doc and Covid-19 handler, projects as many as 100,000 extra cases of Covid-19 to wave over the US if measures to stop the disease soon aren’t taken in at least 32 US states.

    The possibility of a demand crash, at least in the US, will temper any gains made with oil. European Union countries have gained some semblance of control over the disease, so that might temper any drop in oil.

US inventories

The Energy Information Administration’s latest read on inventories is out, showing a gain in crude inventories of 1.4 million barrels.

      Gasoline stocks were down by 1.7 million and distillates up by 249 thousand barrels.

      Refiner capacity was reported up to 74.6 percent of capacity, a slight increase from the week previous.

      US domestic production was reported at 11 million barrels a day, an increase of 500 thousand barrels, and 1.1 million barrels lower than for the same timeframe last year.

Start watching your electricity bill

It will hit sometime this month...

     Last year, when I questioned Nalcor’s oil price estimates for electrical generation of $106 a barrel Canadian, I never did get an answer and suggested that it would be way off and that Nalcor should revisit the increase to electrical consumers based on the well-off estimates.

     I was proven right.

     The present government saw fit to have Nalcor revisit those numbers, lowering oil prices for electrical generation down to average $51 a barrel instead. The balance will be returned to consumers in the form of a one-time rebate in July/August.

    The amount everyone receives back as a credit will be based on overall electrical consumption.

    Again, being July, I am again looking forward to find out what Nalcor’s estimates for the price of oil for electrical generation will be in their “application” to the Public Utilities Board, but I will again question the estimates they come up with.

    Present day prices are hanging around $55 a barrel Canadian.

That’s it for this week!

Regards,

George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, June 25th, 2020

Hi to all,



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



*Heating and stove oil to increase by 3 cents a litre.

*Diesel fuel shows a 3.3 cent a litre increase, and...

*Gasoline shows an increase of 4.9 cents a litre.



Market highlights



OPEC+ cuts start to bite

OPEC is finally getting serious about production cuts with member compliance reaching 88 percent during the month of May. That’s a stark change in the data that showed most member nations were doing much less on compliance.

      The latest numbers will be used to inform OPEC’s Joint Ministerial Monitoring Committee which now oversees OPEC members and their compliance at their next meeting July 15^th to gauge how much more to cut from production, if anything.



Canada getting hit hard

Over 1.1 million barrels of crude output has been shut in since the collapse in crude prices according to Oilprice.com. The story says Canada’s output of 3.5 million barrels a day in 2019 has taken a hit mainly from train exports in Alberta where crude oil shipments have dropped from 450 thousand barrels a day to just a shade over 150 thousand per day.

    The hard shutdown is also responsible for capacity issues in the pipeline export system with there being “plenty of room” for the export of crude oil to southern or western markets.



US inventory data

US crude oil inventories were recorded up marginally by 1.2 million barrels over the past week, while gasoline inventories were down on increased demand by 1.7 million barrels.

     Distillates were also down, but by 1.4 million barrels.

     Refiner capacity was measured at 73.8 percent.

     US domestic out put took another downwards hit, losing another 600,000 barrels a day of production to sit at 10.5 million barrels a day from the January high of 13.5 million barrels.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, June 18th, 2020

Hi to all,



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



*Heating and stove oil to increase by 6/10ths of a cent/litre

*Diesel to increase by 7/10ths of a cent/Litre, and...

*Gasoline to drop by 1.2 cents a litre.



Market highlights



Oil rises

Oil prices faltered, sputtered and then recovered losses over this past week as a second feared wave of Covid-19 was seen to start as cases in Florida and Arizona appeared to rapidly increase two weeks after the start of the US Memorial Day weekend.

     Oil then began a rise later in this session as China was seen to be building strategic reserves over the last five months as they were successful in acquiring cheap oil to the tune of 440 million barrels, helping to support prices.

     China is not only hoping to put some oil away in reserve, but they are hoping with the rise in prices to release some from the reserve and take advantage of selling at a higher price.

      With cautious optimism however, as previous numbers were believed to be a signal of increasing industrial recovery.



Strategic oil reserve? In Canada?

     Years ago, there was heavy talk of the United States expanding its strategic reserve of oil, that is oil in storage, to help protect the supply of oil in the event of any kind of national emergency.

     The plan was to use Bell Island’s old mines for such a purpose quickly fell through as the United States wouldn’t have any part of its reserve outside the country.

     But why doesn’t Canada have one-but for a different purpose?

     While not a new idea, the problems of having a world storage issue along with an over-production problem, has led to the collapse in the price of oil. However, if Canada set up a reserve, it could buy oil at the low price, then release it again as oil prices recovered, thus helping oil companies weather any downturn in price, or at least, help avoid one.

      While the reserve, or the storage, would help offset falling prices, it has a strong ability to support oil, and thus , preserve the state of any royalties the provinces would see from their resources. As far as I know, besides the “on land” tank farm, we don’t have that capability like the US or china, the US with close to 800 million in their reserve and China with a capacity of 684 million barrels.



US rig counts stabilizing?

While US domestic production has been dropping since the start of the pandemic, from 13.4 million barrels to 11.2 million, rig counts have also dropped from 984 rigs to Friday’s 279 rigs, a drop of just 6 rigs.

     The week previous saw a drop of 17 rigs down to 284.

     Worth watching, and with oil prices showing some small signs of recovery, is the US shale industry getting set for a possible turnaround as prices rise?



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

Price changes for Thursday, June 11th, 2020

Hi to all,



First off, I have no media availability tomorrow morning. Sorry!



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



*Heating and stove oils show an increase of 3.6 cents a litre.

*Diesel fuel shows an increase of 4.6 cents a litre, and...

*Gasoline shows an increase of 4.7 cents a litre.



Market highlights



OPEC+ extends cut agreement

OPEC and non-OPEC producers like Russia reached an agreement to extend cuts past the June deadline, adding another month to the cuts agreement reached a short two months ago.

      But there remains a problem of oversupply remaining in the markets that some are speculating is still a billion barrels over world needs. OPEC and non-OPEC cuts at close to 10 million barrels a day can only account for 300 million in June month, and oil prices rising slightly have drillers in US shale regions thinking it may be time to return to the oil patch.

      US drillers may not have been taken out of the markets as much as OPEC had thought

      While oil prices increased after the agreement was reached, they didn’t hit levels that some thought would signal a significant impact on oil inventories.

       And while a US jobs report showed some optimism of increased economic activity, there’s still the spectre of Covid-19 hanging over the markets.



First real tropical storm in the Gulf takes some production offline

Tropical storm Cristobal hit the coast of Louisiana on Sunday bringing heavy rain and some flooding.

     The storm also took about 660,000 barrels a day of production offline, bringing in a temporary rise in oil prices due to the short-term disruption.



US EIA inventories

The latest report from the Energy Information Administration shows that crude supplies dropped by 2.1 million barrels as US domestic production also dropped to 11.2 million barrels a day.

     Refiner capacity was recorded at 71.8 percent.

     Gasoline inventories increased by 2.8 million barrels and distillates were up sharply by 9.9 million barrels as some distillate users like airlines remain on the ground.

     Meanwhile the Baker Hughes rig count was down another 17 rigs to 284 from 984 rigs at the same timeframe for last year.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil  

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 22^nd, 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