When it Rains, it Pours

Typically, you can count on Mother Nature to impact the U.S. oil market during the winter months, courtesy of extreme cold weather. So, it’s fitting that the wild, unpredictable ride of 2015 comes to a close with news from Bloomberg that the crude glut could increase as a result of…RAIN?!?  Bloomberg reports that the heavy flooding in the Midwest has shut some pipelines and terminals, “potentially swelling a glut of crude and extending this year’s price slide.” Closures include Enbridge’s 200,000 bbl/day Ozark pipeline and Spectra Energy’s 145,000 bbl/day Platte pipeline in Wyoming. The Ozark runs from Illinois to Cushing, Oklahoma and its closure is expected to add to Cushing’s record high stockpiles.

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Mild News During a Mild Winter

Tuesday, WTI crude closed up $1.06/bbl to $37.87, HO closed up $0.0391/gal to $1.1295, and RBOB finished up $0.0434/gal to $1.2760. The gains yesterday appear to be driven by a lack of participants in the market, low liquidity, and the potential cooler weather forecasts. With many traders out during this week due to the holidays, the low volume trading will continue until the New Year, so volatility in prices can be expected.

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Cause & Effect

With the overall oil market news of oversupply and lessening demand remaining consistent over the past few months various U.S. state economies and international economies have suffered in different ways.

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Post Holiday Lull

There was not much movement in the market over the long holiday weekend. This morning we can see WTI crude trading down $1.08 at $37.02, its first decline in three days. This could be in part due to Iran repeating its goal of increasing crude exports the moment the sanctions are lifted. RBOB is currently down $.0273 and heating oil is down $.0121, while the spread between gas and diesel continues to hover around 15 cents, with gas being a premium to diesel.

  1. As Iran plans to boosts its exports of oil into a global supply glut there is potential for prices to drop even further. Iran is expected to add around 500,000 barrels a day initially. “If Iran adds as much as it plans to the already oversupplied market, there is definitely less hope for the market in the first half of next year,” Hong Sung Ki, senior commodities analyst at Samsung Futures Inc. in a phone interview by Bloomberg. Read More

You’re a Mean One, Mr. EIA

There was continued bullish data in the news yesterday with the EIA revealing a 5.9 million barrel decline in U.S. crude inventories from last Friday to tomorrow. That draw can be attributed to plummeting stocks in the Gulf Coast, which fell nearly 8 million barrels last week. Keep in mind that there were builds in Cushing, OK, with crude inventories increasing 2 million barrels to 62.1 million, which is about 100,000 barrels away from the all-time high. Even with that build, the overall data still revealed a draw.

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Gas > HO…Sounds Like The Widowmaker

Yesterday, HO closed down $0.0128/gal to $1.0876, RBOB closed down $0.0345/gal to $1.1749, and WTI crude closed up $0.33/bbl to $36.14. The gain in WTI was because contracts moved to the month of February.  Brent crude closed at $36.11, making it the first time that WTI closed higher than Brent since August 2010.  If U.S. production of crude declines, we could continue to see this.

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Where Were You 11 Years Ago?

Keeping an eye on WTI Crude has been quite amusing these past few weeks. Just this morning, with a tick of $33.89, crude hit a low not seen since 2004. What else happened 11 years ago?

  • On March 30th, 2004 the average price of a gallon of gas hit a record high of $1.753. However, that mark was shattered when an average of $4.11/gallon was set in August of 2008. (Today’s national average is $1.9970)
  • George Bush defeated the Democratic Party candidate, Senator John Kerry, to be reelected for his 2nd term as President.
  • The ‘Curse of the Bambino” ended with the Boston Red Sox winning the World Series, putting an end to an 86-year superstition.
  • The social network platform “Facebook” launched, which today is worth upwards of $300 Billion.

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The EIA & The Government, What Else Could It Be?

 

  1. Yesterday’s big news epicenter came in the form of government announcements. The Federal Reserve raised its benchmark U.S. federal funds rate for the first time since 2006, increasing by 0.25%. Lawmakers have agreed to end the ban on U.S. crude oil exports. Votes in both the House and Senate could come before the end of the week. Lifting the ban is expected to be a “long term game changer” for the U.S.: http://www.cnbc.com/2015/12/16/lifting-oil-export-ban-could-be-long-term-game-changer.html Read More