Enter the Dragon

           The latest US Energy Information Administration's inventory data is very telling on where the market stands and how traders are having trouble trying to justify any increase in oil prices for the foreseeable future.

            Consider the last three weeks of inventory data released by the EIA. For the past three weeks, data tells us that, in spite of recent drops in refiner capacity and utilization, crude inventories have been showing pretty robust builds in what some even say are in the face of dropping US domestic production.

            Well, the oil is coming from somewhere, isn't it?...

             US domestic production still hasn't shown a solid drop in production and output since the last figures we saw in December. Current production rests somewhere in the 9.2 million barrel per day range. No doubt, some small-time producers are having some troubles, but it's my belief that these same small-time producers have no choice but to pump to pay off their investors. They simply can't shut down...

             It's best for them to risk bankruptcy than to shut down and risk losing any hope of gaining back investors if oil prices rebound. Keep pumping and hoping...

             Elsewhere, Saudi Arabia chatter is that they're in talks with Russia over the possibility of production cuts that may only be a pipe dream. The truth is for the Saudi's is that they simply can't cut back production without losing market-share to neighbouring Iran, who some time ago, promised to get back their market-share lost to the Saudi's when sanctions were first placed on them years ago. Their "re-entry" into the oil markets has the Saudi's on notice that there will be a price war. 

             Secondly, with the prospect of Iran pumping more, why would the Russians risk losing their own market-share to the Iranians?

             Reality bites...

             Three weeks in a row now, the EIA has reported more than 20.8 million extra barrels of crude oil into the US markets. Space to store it is beginning to disappear at a prodigious rate and consumers simply aren't burning gasoline like they used to. With inventory builds ranging 16.5 million barrels ahead of the build-up to the summer driving season, why would I risk putting money into a so-called "bottom" to oil prices?

             Finally, enter the dragon called China. With weakening manufacturing data, low demand growth and an overall faltering economy, where again is the impetus for oil? Prices are low worldwide, but no one is buying.

             God help the markets if China decides to stop their investment and top-up of their strategic reserve! You can look for an immediate availability of 500,000 barrels a day if they stop their program of building it. The ramifications of that could be felt soon enough! But is this the response we're waiting for from China? Are they the factor we're all waiting for to see what a fair world price of oil should be...or could be?

             Is our own economy waiting for China alone?

             So, what do we look for? Any hope of rising oil?

             The market hope rests in one fact, a point that Saudi Arabia may have been forcing on us in the first place: Why pump in the west if you don't have to? Strategic drilling and the forced shut-down of projects and exploration may be the only hope, as fleeting as they may be, that world production itself gets a hit merely on affordability of projects already started but not as yet producing.

              The new dragon in the markets may simply be found in the wheat and corn husk fields ranging between the Dakota's and the Texas Oklahoma panhandles. Simple ability to respond to any crisis, or downfall in world production could be as easy as turning the spigot Stateside.

              Even then, that response can be short-lived!

Regards,

George

Twitter: @GeorgeMurphyOil  

            

 

Price changes for Thursday, January 28, 2016

Hi to all,

First off, thanks for your patience as I have not posted here in some time due to computer issues. I needed a solid upgrade, let's put it at that!

Either way, now that I am free and unencumbered, I intend to post here a little more often than previous as changes to the oil markets occur. You can count on hearing from me a little more as we go through this downturn and changes to the oil markets!

If I bore you, then unsubscribe!...lol

Here’s what I have for this Thursday’s price changes. Keep in mind that due to the winter blend of fuels, heating and Diesel numbers may be off slightly.

*Heating and stove oils show an added 18/100ths of a cent up.

*Diesel fuel shows an added 7/10ths of a cent upwards, and...

*Gasoline shows an increase of 5/10ths upwards.

Market highlights

*The Canadian dollar is starting to gain some ground against its US counterpart, reaching $1.4062 against $1.4589 at the start of this pricing session. In spite of the rise in fuel prices on the New York mercantile exchange this week, those increases have been mitigated by the rise in the Canadian dollar. Heating oil increased a rough nine cents a US gallon this last week on the exchange, while diesel gained a dime a gallon and gasoline increased six cents on average this past week on rising oil.

*All eyes are now on Iran for the first data that may show exactly how much oil the OPEC member will be pumping into the markets now that sanctions have been formally lifted. Iran will immediately respond by adding 500,000 barrels to output, gradually increasing to an added million on top of present output by the end of this year. Look for a “play” as Iran counters lost market share to competitor Saudi Arabia.

That’s it for this week!

Regards,

George Murphy

Twitter @GeorgeMurphyOil

Price changes for Thursday, December 10, 2015

Hi to all,

Here's what I have for price changes for this week, keeping in mind the winter blending formula that may throw off accuracy for heating and Diesel fuel pricing.

*Heating oil shows a drop of 1.8 cents a litre.
*Stove oil shows a drop of 1.8 cents a litre as well.
*Diesel shows a drop of 2.5 cents a litre, and...
*Gasoline shows a drop of 4.8 cents a litre.

Market highlights

*OPEC still won't Institute any kind of a production cut, in spite of the protests of a few members who would like to see. Some support to oil prices. Revenues have certainly taken a beating! But at the latest meeting in Vienna this past Friday, it was decided by members to Sally forth and keep production levels up. With the promise of added production, Oil prices dropped with refined commodity prices following.

*Is OPEC now chasing down the non-OPEC producers? Countries like Russia, Mexico, Norway, and yes, Canada, continue to produce crude oil from fields that have been pumping for years now. None of the companies, or the countries in question, want to lose revenues, nor can they be seen to fall to the whims of OPEC when they want to see other countries reign in production. OPEC would like to see non-OPEC nations join in with production cuts.

Can't happen...

With OPEC getting that "no" answer, first from Russia, OPEC will now start to make the run after these countries. If you can't get them to "participate" in cuts, I believe OPEC is starting to go after their bottom line to force them into an untenable operating position. That being the case, and with Iran about to enter the markets, Oil prices could drop further.  And with new Iranian crude to the markets chiefly for the European markets, Brent prices could be tagged first.

*The Canadian dollar continues to show weakness against the US greenback with the Canuck buck losing another two cents against the neighbouring currency.

I'll leave it at that for now. If you want, drop me a line!

Regards,

George
Twitter @GeorgeMurphyOil

Price changes for Thursday, November 26, 2015

 Hi to all,

Here's what I have for this week's price changes, keeping in mind winter fuel blending that may affect numbers for heating oil and Diesel fuels.

 

Heating oil shows a drop of 1.9 cents a litre.

Stove oils also point down 1.9 cents a litre.

Diesel shows a drop of a penny, and...

Gasoline shows an increase of 1.4 cents a litre.

 

Consumers may get hit next week

 

"While some prices show upwards movement, it may really be next week that we may see a substantial hit at the pumps because of today's Middle East action, and even then, it's really a test of a different market." That's according to George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

 

"While distillate fuels are pointing down, all this week showed speculators pouring money into gasoline because that's the only place that is showing any signs of demand placed on it. The actions in Turkey today showed that, while there's plenty of crude oil out there, any Middle East action could be mitigated by other sources that can play into the markets. There's a huge oversupply out there, combined with the ability for the US domestic market to respond to any potential problems. We have a different market reality out there. I expected today's incident to play out in the markets heavier than it did.

 

"Today showed no 'huge' increase in oil, although it did rise another $1.20 US on the up-tick in the Middle East. It was an up-tick in refined commodities that is rearing its head. Gasoline spots rose another two cents a litre on Turkey speculation, and if it holds for the rest of this business week, we could see consumers get dinged a few more pennies next week as a result. We'll have to let the markets play out to confirm that."

 

-30-

 

For more information, contact;

 

George Murphy

Twitter @GeorgeMurphyOil

Price changes for Thursday, November 19, 2015

Hi to all,

Here's what I have for this week's price changes. Again, keep in mind that heating oil and diesel fuels are affected by the winter blending of fuels and may be off somewhat with the addition of jet fuel to the mix:

Heating oil shows a drop of 3.6 cents a litre.
Stove oil shows a drop of 3.6 cents as well.
Diesel fuel shows a drop of 3.3 cents a litre, and...
Gasoline points down 4.7 cents  a litre.

Consumers to see a drop to all fuel prices this week

 

Consumers will see substantial drops to all fuel prices this week as inventory data shows continued strong builds of oil inventories and weak demand for refined commodities like heating oil and gasoline. That's the word from George Murphy, group researcher for the Consumer Group for Fair Gas Prices.

 

"Numbers over the last week, especially since the Energy Information Administration released the latest inventory data on Wednesday, have been pointing down, and it doesn't appear that the numbers are going to get any better for those seeking higher prices," Murphy said. When you see some refineries coming back online from winter maintenance, and those refiners holding back on putting some stocks through for refining, you know there's going to be blow-back, in this case for the consumer. It appears that this is what happened over the last week, and that trend just might continue.

 

"Markets are also showing signs of a possible price war between some OPEC members that has been brewing since Iran signed on to a deal that will result in the lifting of sanctions this December. Previously, it was known that Iran would notify member nations of OPEC when it was ready to come back to higher production, but buried deep in the news was a quote from Iran stating 'The drop in prices won't be a concern for us. It will be a concern for those who replaced Iran'. I take that as meaning there's going to be payback for member nations and producers who stepped in to take up the oil deficit when sanctions were first placed on Iran years ago. Fellow OPEC members are on notice now. It's going to be worth watching how OPEC handles the situation of Iran's extra production of oil that chiefly goes to European customers. Brent prices may fall lower as a result.

 

"It's going to make a lot of speculators wonder again just where the bottom for oil prices really is. Here's hoping that consumers can see a positive benefit to that."

 

(30)

 

For more information, contact;

 

George Murphy

Twitter @GeorgeMurphyOil

Price changes for Thursday, November 12, 2015

Here's what I have for this week's price changes, keeping in mind that winter blending affects the outcome of numbers for heating oil and diesel fuel because of the addition of jet fuel to their various mixes.

Heating oil shows no change in price.
Stove oil also shows no change in price.
Diesel fuel shows a drop of 3/10ths of a cent a litre, and...
Gasoline shows an increase of 7/10ths of a cent a litre.

Some prices to remain steady this week: Murphy

 

Consumers won't see much in the way of price changes this week as the markets remained relatively steady in trading. That's according to George Murphy, group researcher for the Consumer Group for Fair Gas Prices. As a matter of fact, for some fuels, there won't be any changes.

 

"While West Texas Intermediate saw some retreat in its barrel price, and Brent prices followed WTI down, refined commodity prices remained overall steady as well for the most part, with the exception being a very moderate increase to gasoline spot prices. New York mercantile pricing showed gasoline rising from an average 49.6 cents a litre to 50.3 cents a litre over the last week. This means a slight upwards adjustment maybe seen for gasoline prices to consumers by a slim margin of 7/10ths of a cent based on that activity", Murphy said.

 

"Refineries ran at close to 89 percentage points, a modest increase, but shows refineries are coming back online from winter maintenance schedules. Close on 660,000 barrels a day production remains offline due to that. While there was an addition to crude oil inventories last week, a draw from US gasoline inventories is a sign indicative of lower inputs to refineries as a way to support prices to consumers at the pump. That's a finger pointing at the industry controlling how much gasoline is actually coming into inventories. Why produce a product if no one is buying?

 

"While the International Energy Agency has put the word out on a possible recovery in oil prices, I don't see anywhere in their prediction the fact of how responsive US oil producers can come back online and actually keep that supposed recovery from actually happening. Important to note here is that factor. Far beyond anyone's expectations, the US reached a high of 9.6 million barrels a day almost overnight by oil industry standards. They keep forgetting that producers will respond quite readily to any increase in oil prices to attempt to gain their lost market-share back. I still think it's going to be a while beyond 2020 before we see steady oil at $80 US. Almost 4700 wells ready-made to produce oil stateside is saying so."

 

(30)

 

For more information, contact;

 

George Murphy

Twitter @GeorgeMurphyOil

Price changes for Thursday, November 5th, 2015

Good evening!

Final numbers are in and they still show more of an increase than yesterday's alert, so please forward to all your friends!

Here's what I have for this week's price changes, keeping in mind the winter heating and diesel fuel blends that may show off a little on accuracy!

Heating oil shows an increase of 1.4 cents a litre.
Stove oil also shows an increase of 1.4 cents.
Diesel fuel shows an increase of 2.3 cents a litre, and...
Gasoline shows an added 3.3 cents a litre.

Rise in crude oil pushes up prices for consumers and refined products

 

"There's good news in rising crude oil prices for some out there, but consumers aren't going to enjoy an upwards adjustment to prices for the refined products this week when the PUB releases the numbers Wednesday at midnight!" That's according to George Murphy, group researcher for the Consumer Group for Fair Gas Prices.

"Over the past week, I've seen a rough $4 US increase to both West Texas Intermediate and Brent crudes that I track. What's upsetting here is that refined commodity prices have risen sharply along with them, showing consumers will be getting hit along the way," Murphy said. "Consumers will notice the increased price of gasoline and Diesel fuels this week.

Market news
"The news from the markets doesn't seem to show any justification for the increase in refined products. Refineries are coming back online, with the latest figures showing a mere 800K barrels of refining capacity now offline with winter maintenance. With almost a million barrels per day back online, you should see at least that much gasoline being added to inventories. Demand still remains down, and speculators are betting on an increase in crude oil products when the Energy Information Administration releases the latest data 12 noon, Newfoundland time.

OPEC itself shows no signs of cutting back with the member nations producing 32.2 million barrels a day in October. Russian production also increased last month to 10.8 million barrels a day. There's no sign of a drop in worldwide production, so why are crude oil prices rising? Iran is also set to add more to the markets with the country making a formal announcement December 4th, that they will be making a boost in production. Some are saying that Iran will add an immediate 700,000 barrels to the daily market from their present 2.7 million in October, with at least 40 million barrels in what is known as "floating storage".

Refining shows best profit in years
News from the markets also is showing why it is good to be a refiner these days, and may reflect on how well our own North Atlantic refinery may be performing. Latest figure I have works out to a profit of a rough $16 Canadian a barrel. That's about $1.68 million per day out of Placentia Bay, based on the latest figures I was able to acquire from the southern US refiner. But let there be no mistake why a truly integrated oil company is making money now, as well as refiners: Crude acquisition costs are well down with the crash in oil, and it's there that they've been making some good dollars!

(30)

For more information, contact;

George
Twitter @GeorgeMurphyMHA

Price changes for Thursday, October 29th, 2015

Hi to all,

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

Heating oils to increase by 6/10ths of a cent a litre.
Stove oil adds 6/10ths of a cent a litre.
Diesel fuel adds 5/10ths of a cent, and...
Gasoline adds an additional 6/10ths of a cent a litre.

Consumers to see a slight increase to all fuels this week

 

St. John's, NL, October 27, 2015- Consumers in Newfoundland and Labrador can expect to see a rarity in the markets this week when the Public Utilities Board moves to adjust prices this coming Thursday, according to George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

 

"While commodity prices have remained relatively steady this past seven days, it's the price of oil that has been slipping, and that has dragged down the Canadian dollar, an important factor in figuring out Canadian commodity prices," Murphy said." We've lost two and half cents against the US greenback since the 20th of the month, and that means a rough two cents taken from consumers. We should be looking at a drop in prices, if the dollar stayed the same as last week's paring with the US dollar".

 

"In the meantime, lower oil isn't crimping on oil company profits. British Petroleum is the latest to step forth and report a $1.8 billion dollar profit over the last quarter, and that's a good $600 million more than what was expected. I expect other integrated companies to report good numbers in the coming days. Anyone with refining capacity is doing well, and this shows it. It's not just about pumping oil. It's all about the finished product as well.

 

"I'm looking at this week's Energy Information Administration's inventory data tomorrow to get a read on the future of the gasoline and distillate markets. I'm betting on, not only a build in inventories of oil, but of gasoline as well, as refiners seem to be coming back online from winter maintenance schedules. Refinery outages were reported at 1.8 million barrels last week, but data is now showing 1.1 million barrels of processing remains offline. I'm betting on more gasoline to be added, and perhaps another run down in prices later in the day."

 

(30)

 

For more information, please contact;

 

George Murphy

Twitter @GeorgeMurphyMHA

Price changes for Thursday, October 22, 2015

Hello to all,

Here's what I have for Thursday price changes:

Heating oil to drop by 3.1 cents a litre*.
Stove oils to drop by the same 3.1 cents a litre.
Diesel to drop by 3.2 cents a litre*, and...
Gasoline to drop by 3.8 cents  a litre.

*Note that both heating oil and Diesel fuel are subject to the winter blending now, so these numbers can just be used as a guide and not the actual that may occur!

Consumers to get another break at the pumps this week 

"Consumers can expect to see another break at the pumps when the Public Utilities Board moves to adjust prices this Wednesday midnight", according to George Murphy, group researcher and co-founder of the Consumer Group for Fair Gas Prices. "Continued builds of gasoline inventory in spite of refinery outages due to winter maintenance have led to some good builds in inventories of gasoline. With the consumers of North America driving a little less than in summertime, it has started to reflect and impact prices substantially, and, this week too as predicted."

Final market numbers last week began to show that there was a substantial break for consumers about to hit, and I put the "warning" out of an impending drop in prices for this week that is coming to fruition. That prediction showed three cents across the board, and the final numbers were pretty close to that," Murphy said.

"I'm still seeing some heavy production out of OPEC and non-OPEC producers which continues to compound and lower oil prices. Floating storage figures still show a substantial amount of crude oil with nowhere to go, almost 164 million barrels in tankers, waiting for the call to sail.

"Again, with a possible end to winter refinery maintenance and turnover about to end, the return of refineries back to production has a possibility yet of impacting gasoline and other refined commodities down further. With 1.7 million in daily refining capacity offline right now, you can imagine the impact on the markets when they start adding again to inventories.

Most stations selling gasoline are already below a dollar a litre, and can be expected to sell a little lower as we get later in the week. The trend of prices looks steady for now, but once refining capacity kicks back in, should start to fall again".

********

For more information, please contact:

 

George Murphy

Group researcher

Consumer Group for Fair Gas Prices

Twitter @GeorgeMurphyMHA

Price changes for Thursday, October 15, 2015

Hi to all,

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

Heating oil shows a drop of just 3/10ths of a cent a litre.
Stove oil shows down by the same 3/10ths of a cent.
Diesel fuel shows a drop of 2/10thsof a cent a litre, and...
Gasoline shows a drop of 7/10ths of a cent.

 

*The real news may come next week on further drops in gasoline, diesel and heating oil prices as spot pricing has retreated somewhat the last two days. So far, gasoline shows a drop of three cents playing through on lower oil and a stronger Canadian dollar. Stove, heating oils and diesel all show the same trend in for next week as well. Anything can happen to change that in the coming days however!

In the news

OPEC production figures show a new record
OPEC produced almost 10.7 million barrels a day in September according to one report today, that probably led speculators when the glut of oil in the markets will end. While the union of oil producers wonders when the glut will lead to higher prices, they show no signs of reigning in production in an attempt to maintain market share. Oil in "floating storage" again continues to climb, signaling an abundance of oil with nowhere to go. Floating storage now shows close to 178 million barrels waiting aboard tankers with "no sale" in sight.

 

IEA lowers world demand growth for 2016

The International Energy Agency has lowered its forecast for oil demand growth by another 600,000 barrels a day, already adding bad news to a market well over-supplied. The IEA has dropped worldwide demand for oil to 95.7 million barrels a day. Over the last five years, the IEA has tracked a yearly increase in demand of oil products by 1.8 million barrels, but has dropped that back to 1.2 million barrels of added consumption for 2016.

Iraq production well up ahead of Iran's market "re-entry"

Iraqi production in the month of September has hit 4.2 million barrels a day, well up from 3.8 million recorded a few short months ago. While Iran waits in the wings to begin production to a market free from sanctions, Iraq is simply trying to maintain their own customer base, ahead of Iran's re-entry with an added 500,000 barrels  a day output.

 

That's it for this week!

 

Regards,

 

George

Twitter @GeorgeMurphyMHA

Price changes for Thursday, October 8, 2015

Hi to all,

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

Heating and stove oil to increase by 4/10ths of a cent a litre.
Diesel fuel shows no change, and...
Gasoline shows an increase of 2/10ths of a cent a litre.

* A couple of notes first off. Winter blending is now in effect for heating oil as well as Diesel fuel. From now until later in spring, my numbers for these fuels will be slightly off because of the addition of jet fuel (kerosene) that is added as an anti-freeze agent. That's a fuel that I can't track as of yet. Use these numbers as a "guide" on the direction these fuels may go, and not the definitive.

In the markets

Russia and Saudi Arabia in talks
Interesting to hear that both countries are into discussions around the possibilities of controlling the outflow and production levels of crude oil. Both countries have a direct interest in supporting oil prices, but it could come at a cost if they're successful in limiting crude oil output.

At least, in the short term.

They run the risk of bringing back online all those wells that had been shut in as a result of lower oil prices, and in fact, if they do succeed in increasing oil prices, they may end up losing market share to US domestic producers and those countries who are waiting to also enter into the export markets. Countries like Venezuela and Ecuador are itching for oil prices to come back and they no doubt, will put out more oil to make up for lost revenues.

Still waiting in the wings however, is also the prospect of low China demand and Iran's entrance into the markets later this year in December, or in January, 2016. The entrance of Iran will add an immediate 500,000 barrels into an already over-supplied marketplace.

Oil up on lower US domestic production
The price of oil increased today on speculation that US domestic production has taken a pounding as a result of lower oil prices. Numbers are showing that production has dropped off anywhere from 500,000 barrels a day to as low as 150,000 barrels. That being the case, US domestic production rests somewhere around nine million barrels a day. Keep in mind though, that with any rapid rise in prices, there will be a response by the small oil producer out there. The spigots can be quickly turned back on.

Turning point?
"We're not there yet".
As some oil companies have said in the media, there's a belief that we've reached a turning point where they are saying a recovery is on the way, but they're not so eager to carry on with a return to oil $100 a US barrel. Predictions of a "recovery" include $57 US a barrel in 2016 and slightly more in 2017. What I do think is that they don't consider a rapid response from small US producers in the equation. $57 US is not a "recovery". It's a factor in determining if small producers turn the drill bits into the ground again.

I'll leave it at that for now,

Regards,

George

Twitter @GeorgeMurphyMHA

Price changes for Thursday, October 1, 2015

Hi to all,

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

Heating and stove oils to increase by a penny
Diesel to increase by 8/10ths of a cent a litre, and...
Gasoline shows an increase of 3/10ths of a cent a litre.

 

In the news

 

A halt to Arctic drilling

Royal Dutch Shell has announced it is discontinuing its offshore exploration program off Alaska, and that goes in hand with sanctions against Russia over the Ukraine, in fact, hitting RDS twice. The plans by Royal Dutch Shell included a program of drilling in Russian Arctic waters that lay between that country and Alaska. While it may appear surprising, it shouldn't in a new world of $50 US a barrel oil along with the fact that they simply couldn't explore in their program against sanctions placed that disrupted exploration. It wasn't all about $50 US.

 

With the potential of upwards of 25 billion barrels estimated to be in Arctic waters, I find it hard to believe that they would turn away from a project that could result from the discovery of such potential reserves.

 

Canadian dollar figures against fuel prices...Again

The Canadian dollar has again accounted for a slight increase to prices this week. While some refined commodity prices slipped slightly this week, the drop in the Canadian dollar against the US greenback. Had the dollar remained stable this past week, we could have been looking at a drop of a penny across the board. As it stands right now, had the dollar been at par with the US dollar, we would be looking at heating/stove oils, gasoline and Diesel all 13 cents plus taxes lower than what we see to the consumer right now. 

 

 US refineries still down for winter maintenance

With almost 18.6 million barrel a day capacity, one would almost be in shock in learning that 1.4 million barrels is presently offline due to factors like winter maintenance schedules. No need to be alarmed as refiners routinely shut down refining to switch over to production of winter fuels like heating oils and diesel fuels at this ti. Refiner capacity should start to climb again in the coming weeks, taking further supporting pressure off gasoline prices as inventory is again added to stocks. 

 

That's it for this week!

 

Regards,

 

George

Twitter @GeorgeMurphyMHA

Price changes for Thursday, September 24, 2015

Hi to all,

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

Heating and stove oils to drop by 4/10ths of a cent a litre.
Diesel also down by 1.4 cents a litre, and...
Gasoline shows a small drop of just 6/10ths of a cent a litre.

In the news
Refiner capacity
With refineries mostly into maintenance mode now, not a lot of gasoline is coming back into the markets that shows we're into a strong inventory building mode. With a drop in gasoline demand as a result of the end of the summer driving season, and refineries offline due to the switch to winter production, markets are showing relatively steady for gasoline prices as demand fails to seriously impact inventories. While no inventories have been impacted by demand, any possible build has been sidelined as well, and it's showing in prices that are mostly steady as a result.

Crude in "floating storage"
Latest numbers indicate an overall drop in floating storage as a market oversupply continues to weigh down prices. Present figures show almost 150 million barrels still out there in storage with nowhere to go as over-production continues to negate any sale of crude.

China keeps buying "low"
China continues to buy at almost record lows of oil over the last ten years, and they may very well be a factor in where oil goes in the coming years. With China adding almost 500,000 barrels a day to their strategic reserve at these low prices, China has undertaken a program of adding additional storage capacity to their strategic reserve. With China stocks filled with 220 million barrels of crude, their added capacity program includes close to an added 135 million barrels now under construction and an added 148 million in the planning stage.

Future price of oil
With "futures" pricing showing crude selling at $58 and change for fiscal 2017, the news is not good for those hoping for higher oil prices. Fiscal 2016 Brent prices are hanging in the mid $53 US a barrel range. China's continuing purchase of crude to add to its strategic reserve remains a vital factor in why oil has not crashed completely. That, and the fact that US domestic producers simply can't master production at lower levels without hurting their bottom lines. If prices do rise, US domestic will only increase again to lower them as producers try to gain some revenue from their investment.

Iran continues to weigh on oil
The promise of Iran's "re-entry" into the oil markets also continues to keep prices down. While Iran is continuing to work toward meeting the goals required to lift sanctions, word is that they're extremely close to meeting the December goal that could add another 500,000 barrels immediately to world production of oil. While some don't think it will figure, any past addition/cut by OPEC in oil production has to have at least the temporary effect of lowering prices in this case. There's more trouble ahead for Brent!

I'll leave it at that for now!

Regards,

George
Twitter @GeorgeMurphyMHA

Price changes for Thursday, September 17, 2015

Hi to all,

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

Heating and stove oils to drop by 2.2 cents a litre.
Diesel to drop by 2.9 cents a litre, and...
Gasoline to drop by 3.9 cents a litre.

In the markets
OPEC market tidbits
In what must be true irony, Venezuela is now proposing that OPEC adopt a new policy of having a minimum price for oil! With oil prices crashing and causing a stark reality of lower oil revenues to the OPEC member state, the country is having to face just how low oil goes as speculators also bet on how low prices can drop. In conversation the other day, I reflected on remembrances of OPEC being happy with maximum prices between $22 and $28 US as early as 1997 when I started studying oil. I wonder if they're really getting back to the new reality of oil now?

Iraq is asking oil companies operating there to reign in any capital spending for the next fiscal year, citing lower expected revenues from oil.

Out of China
China's future demand for oil is expected to drop further in the face of a weakening economy, with demand expected to drop from an added 400K barrels a day to only 260 K barrels a day better than what they use now. Slower growth comes a slower need with an economy in trouble. Latest word also has China adding just 400,000 barrels a day to their strategic reserves where they previously purchased 750K per day.

I'll leave it at that for now. If you need anything else, drop me a line.

Regards for now,

George
Twitter @GeorgeMurphyMHA

One of these days, I'm going to sit on a stage and give some of these oil companies some sage advice! Either that, or let them pick my brain...lol

Price changes for Thursday, September 10th, 2015

Hi to all,

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

Heating and stove oils to increase by 1.9 cents a litre.*
Diesel to increase by 2.3 cents a litre*, and...
Gasoline also adds 1.1 cents a litre.

*With increases to distillate fuels like heating and diesel exceeding that for gasoline, it's an easy signal that speculators in the markets have now turned their attention away from the gasoline markets for the next little while. I expect more attention on these fuels from the speculators for the next few months
.
In the markets

Volatility in the oil market continues to show wild swings as they attempt to find at least a temporary bottom to oil prices. Speculators still fear a further drop in oil prices, probably part of the reason why oil hasn't shown any appreciable increase in the past few weeks. Indeed, the gains and sudden drops in oil are consistent with speculators continuing fears of bad economic news yet to come with the markets. Some speculators are saying oil prices could retreat even further, and as low as $30 US a barrel before we see some sense return to the markets.

The latest production figures from the US Energy Information Administration are telling some news that the "oil price war" is beginning to tell on overall US domestic production. The Saudi's fired the initial shots to try and reign in US production of domestic resources by driving down prices for oil to a point that it simply wouldn't be affordable to pump. US domestic production has dropped from peak production in July of 9.6 million barrels a day to the latest August 28th report of 9.2 million barrels a day. Of course, part reason of market fears whenever we see oil prices rally also centers on the fact that, while the spigots have turned off, any increase in oil prices can easily turn them back on again.

That's it for this week!

Regards,

George
Twitter @GeorgeMurphyMHA

Price changes for August 27th, 2015

Hi to all,

 

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

 

Heating and stove oils to drop by 3.7 cents.

Diesel to drop by 3.9 cents, and...

Gasoline to drop by six cents a litre.

 

In the markets...

 

China...It's all about China.

 

With the collapse of the price of oil, it's easy to point to China as an example of how dependent the world has become in using China as a "crutch" to support oil prices. We all know that as an emerging nation, China would have an effect on demand for world oil, but no one yet has considered what has been done by China to break it's initial dependence on oil. It is estimated by some that China is about three years away from putting domestic drilling regulations in place so it can try and develop its own reserves. Through the years, I've also run into small tidbits from China that others have ignored. Shell, for example, just a couple of years ago, signed a huge agreement with China to develop both natural gas and join with the state-owned oil company in developing other "sources" of oil resources. No doubt, if the "frack" goes ahead in China soon, it will have started to crack its dependence on OPEC oil and done massive damage to OPEC's chief customers. Where does oil go then?

 

OPEC countries worried

 

"Weaker" OPEC producers are beginning to worry over overall OPEC production and the Saudi drive to cut US domestic production. In what is beginning to look more like a suicidal motion towards trying to maintain market share, some of the smaller OPEC producers are beginning to question the moves by Saudi Arabia in over-producing to try to maintain market share and cut into US domestic costs to produce. It's costing smaller OPEC members to also absorb the hit to their own revenues, and has them calling for an emergency meeting to address the long-term goal of OPEC. Are we witnessing a crack in OPEC unity?

 

It's been a long drive back from the west coast, so, I'm going to leave it at that for now.

 

Regards,

 

George

Twitter @GeorgeMurphyMHA

Price changes for August 20, 2015

Hi to all,

Here's what  have for this week's price changes;

Heating and stove oils show an added 4/10ths of a cent a litre.
Diesel fuel shows no change this week, and...
Gasoline shows an additional 1.5 cents a litre at the pumps for Thursday.

In the markets

December 18th...
That's the key day to watch for as the International Energy Agency says is the earliest date by which Iranian crude will be released clear of sanctions. It's estimated that, Iranian exports from the country will amount to an immediate influx of 500,000 barrels of crude oil a day with another 500,000 to hit the markets in the intervening six months. Brent crude prices have been showing a little to the "down side" in the last coupe of days, out of par with the movement of West Texas Intermediate.

Refinery outages lead to tight gasoline markets. Prices rise
In the mid-western US states as well as western Canada, consumers too a huge hit at the pumps with gasoline spot prices rising as much as 10 to 20 cents a litre as a result of a Whiting, Indiana refinery outage that took 400,000 barrels of crude processing offline. With refinery capacity at 96.1 per cent last Wednesday, it shows just how tight the gasoline market was. Still, almost 605,000 barrels out of a possible 18.3 million barrels of refining capacity remains offline. Gas prices in Calgary hit $1.22.5 cents a litre as a result.

Speaking of Calgary...
It's a shining example of what can happen to a rapidly growing oil industry that gets handicapped by the lack of export infrastructure and a lack of secondary processing. Prices for Western Canadian Select sold at market yesterday for $22 US a barrel, while in neighbouring Edmonton, their Syncrude Sweet sold in the markets for $37 US and change. While projects like Keystone XL and projects pushing oil to the BC coast remain delayed, also delayed is any possible recovery of Alberta crude oils without a "way out", barring any other geo-political or economic factors.

Jet fuel surcharges persist...
I'm surprised at the lack of reaction from consumers who still pay absurd amounts in fuel surcharges, even though the price of jet fuel is down close to 37 cents a litre less than it was for the same time period last year. Market numbers show jet fuel selling on the New York mercantile exchange for 50.7 cents a litre, down from 87 cents a litre.
              Overseas, airlines based in Asia, like Japan Airlines and South Korean will be revisiting their fuel surcharges based on lower than expected oil prices. Japan Airlines expects their fuel surcharges to be half of what they were this time last year. Can't say the same for here. What is the policy to our Canadian airlines, WestJet and Air Canada?

That's it for this week,

George Murphy
Twitter @GeorgeMurphyMHA

Price changes for Thursday, August 13, 2015

Hi to all,

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

Heating and stove oils down by 6/10ths of cent a litre.
Diesel to drop by the same 6/10ths of a cent, and...
Gasoline to drop by 3.2 cents a litre.

Market news

China demand to hit oil?
Besides the fact that there's a problem worldwide with economic recovery, particularly evident are concerns around Chinese growth. Growth has been stagnant to say the least, with problems even arising in the Chinese trading markets. Add to that, the Chinese government's move late yesterday (today) to devalue its own currency in an attempt to attract more business to at least stabilize the downfall of industrial output. The move has led speculators to worry about the real problems in the China economy, and that, in turn, has led to another round of drops in oil prices. Fears abound about a further drop in oil demand in China, reflecting on oil.

Saudi's to drive oil lower?
If Chinese demand retreats as expected, a concerted move by Saudi Arabia to maintain overall production in the markets could lower oil prices to $36 US a barrel (WTI). The production figures out of Saudi Arabia show that 10.36 million barrels a day was pumped by the OPEC member in July. That leaves worldwide oil production at 2.9 million barrels a day more than what the world is consuming.

US domestic production keeps rising
Enter Uncle Sam...
Over the past eight months, US domestic production of oil has added close to 600,000 barrels a day, with US production hitting 9.4 million barrels a day. While OPEC is forecasting an added 90,000 barrels a day in consumption for the 2016 year, it hardly scratches both additional US domestic production and added oil to the markets from Iran, who boosted their own domestic production to 2.9 million barrels a day in anticipation of another entry into the markets. IF US producers can manage expenses in production costs, then oil prices are in a heap of trouble and bets for higher prices are off.

I'll leave it at that for now,

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Price changes for Thursday, August 6, 2015

Hi to all,

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

Heating and stove oils to drop by 2.25 cents....
Diesel to drop 2.3 cent, and...
Gasoline shows a drop of just 8/10ths of a cent.

As predicted, with the drop in the price of Brent and WTI the last two days, the Canadian dollar took another pounding against the US buck. It's the lowest in six years right now.

Consider this: If the dollar was at par with the US dollar right now, you'd be looking at prices a rough 18 cents a litre lower than they are right now.

Right now, refiner capacity remains tight with levels reaching close to 96 percent of overall US capacity, and inventories of gasoline still show signs reflecting the market volatility.

"Demand" continues to be a factor in gas prices. As we come to the end of the summer driving season, there's some hope of further retreat, but I expect refiners and speculators to play with the fact that refineries across North America will soon begin winter maintenance routines, and they'll use that "excuse" to keep prices elevated.

We'll see what happens!

That's it, short and sweet for this week.

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Price changes for Thursday, July 30, 2015

Good evening all,

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

Heating and stove oils predicted to drop by 1.25 cents a litre.
Diesel to drop by 8/10ths of a cent, and...
Gasoline to drop by 3.2 cents a litre.

Market noise
Bank of America on oil
Bank of America is projecting more weakness for oil to come in the third quarter of this year. Expectations of the company show Brent prices to average $50 US from their previous estimate of $54 US  a barrel. Prices for WTI (West Texas Intermediate) were expected to average $45 US a barrel from their previous estimate of $50 US.

US domestic production seen rising
US drillers added an unexpected 21 drill-rigs to the markets this week. The move was a surprise, but shouldn't have been with investors looking for a return on their investment as well as expectations from cost cutting measures. Those measures included everything from salaries to "re-fracking" previously producing wells to get new production. The move removes previous drilling costs with the assumption being that the well is already done, so the frack can occur. Canada added eight rigs over the same time frame last week.

Brent prices to falter amidst market turmoil?
Oil prices pushed lower this last regulatory session as market unease in China played heavily through the week and continues to do so. As stated last week, there were considerable debate from market speculators about the longevity and stability of the markets in China. While growth has massively slowed, stocks there continue downwards, increasing doubts of overall Chinese oil demand. As well, all bets are off now in how much oil Iran can add to the markets, considering the world situation with oil prices. Speculators feel that, with massive world inventories of oil out there, Iran's addition of oil to the pot will only hinder the glut problem on the markets, making it less likely for oil prices to recover anytime soon. Add to that problem a simple fact that, with Iran's entry back into the markets expected soon, competition amongst oil producers will only increase, with that likelihood that everyone is going to be forced to compete for market share.

On this date
Brent oil price on July 29, 2014?...$106.47 US a barrel
Those were the days, my friend!...

That's it for this week!

Regards,

George
Twitter @GeorgeMurphyMHA