Market News

Friday, November 17, 2017

Production cuts: Saudi Arabia's energy minister made comments yesterday that the world will still have a surplus of oil at the end of March when the original cut deadline is set to expire. The comments signaled a willingness to extend cuts further, not that it's a big surprise as it appears an extension has been very likely for quite some time now. Khalid al-Falih commented that he does not want prices to rise too quickly to shock consumers.

US Production: The International Energy Agency (IEA) came out yesterday and said that the US will likely account for more than 80 percewnt of global oil growth in the next 10 years and will be producing 30 percent more gas than Russia by that time.

Keystone leak: As mentioned in yesterday's PM market update TransCanada was forced to shut down its Keystone pipeline yesterday morning after 5,000 barrels leaked in South Dakota. What is probably worse for the company is that the event occurred just four days before Nebraska was set to decide on the company's long delayed Keystone XL line. Opponents of the XL line are using the incident to highlight their environmental concerns to try and keep the project from happening.

Market Opinion: Market is taking a step back higher today after seeing a down turn in prices more often than not over the past week or better of trade. Traders likely want to remain covered heading into the weekend and also position themselves for an abbreviated week of trade next week with the Thanksgiving holiday. Looks as if the recent weakness may have run its course for now as the rhetoric of production cut extension keeps popping into the market just enough to limit downside. The Keystone leak doesn't appear to be stressing the market at this point but will ultimately depend on how long it is down.

Thursday, November 16, 2017

Russia: Russia seems to be sending mixed signals on their support of extending production cuts through the end of 2018 with some officials stating there is currently no consensus among producers. However, the country's Energy Minsiter is stating that its domestic producers are committed to the output cuts.

US Crude Production: While the market tries to patiently wait for the OPEC meeting at the end of this month to see if production cuts are extended the US continues to produce record levels of crude. US production has hit a record 9.65 million bpd which is a 15% increase since the mid 2016 low. Yesterday's inventory report helped show that production with a build of 1.9 million barrels on the week when a draw of 2.2 million was expected.

Chinese refineries: Refineries in China are cranking out record amounts of fuel in the final quarter of 2017, trying to cash in on the best profits in two years. Officials at 5 state owned facilities said they are producing and shipping as much product as possible after receiving some healthy export quotas. This is creating a domestic shortage that the independent refiners are rushing to fill.

Market Opinion: The energy complex is slightly softer to start out the day after the EIA reported an overall bearish inventory report yesterday morning. With not much in the way of "fresh" news this morning traders are weighing prices between the likelihood of extended production cuts from OPEC and non-OPEC countries while at the same time the US is producing record amounts of oil. The uncertainty of what will transpire with the shift in power in Saudi Arabia seems to have cooled off for now but is likely to come up again in markets moving forward.

Wednesday, November 15, 2017

Venezuela coming up with plan to pay debts: Venezuela's national oil company PDVSA owes an Indian company $449 million and has not been able to make payment for six months due to lack of funds. However, they are making arrangements to utilize existing crude customers or new Indian state buyers to settle the debt. The Indian company (ONGC) is looking to expand operations in this South American country.

API's indicate large crude build: This week's inventory expectations suggested that there would be draws for both products and crude. Yesterday's API data indicated otherwise as crude showed a significant increase of 6.5 million bbls while gas also had a surprise gain of 2.4 million bbls. Distillates did show a decrease of 2.5 million bbls which was slightly more than Reuters estimate of a 1.26 million bbl draw.

Perry shows optimism over NAFTA: US Secretary of Energy Rick Perry is showing confidence that NAFTA can be successfully renegotiated by the United States, Canada, and Mexico. Meetings are underway in Mexico City (through next week) to move through this process. A key point will be the energy sector's heightened attention to protect pipelines and transmission facilities from cyber attacks.

Market Opinion: Yesterday's weakness for entire complex has spilled into this morning. RBOB is having the largest downturn with it trading weaker by as much as $0.06 yesterday then the report of the surprise weekly build from API.

Please contact Adam Wilbur with any questions 320-557-5151

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