Newsletters

The Week In Numbers for the Week Ending April 21, 2017

In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

Since we have not sent the Newsletter in about a month, I will give you the prior numbers from the last Newsletter followed by current:

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Ty's Take For 4-21-2017

In writing the articles for this week, I did my usual review of 10-20 news stories everyday. And most of the stories were fairly mundane. Everyday occurrences like: Oil Company X Acquires drilling rights in Y. And really, over the past few weeks, I feel as though oil markets have been fairly stable. Indeed, at the time I’m writing this article (or drafting it), oil prices have only moved about $0.03 from where they started April. Now granted, in that time they went higher and then fell back lower. But overall, they just seemed to ebb and flow. Some days a little more than others.

So when I went to put together this week’s Five Star Standard, I had to really think what to write about. And as I review several different sources everyday and take some notes of articles, etc., I looked back at my notes and started realizing there were some themes emerging.

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So When Will Markets Rebalance?


Over the past several weeks, a fundamental shift has appeared to happen in markets and in oil market commentators.  While there are certainly still skeptics concerned about market rebalance who continue to cite surging shale production as a principal culprit that will keep oil prices suppressed and the world in a constant state of oversupply, most of the commentators  now seem to be debating the question of when, rather than if, markets will rebalance.

The IEA’s monthly market report, released last week, suggested that the global oil market is “very close” to coming into balance.  The IEA forecasts non-OPEC supply will grow by 485,000 barrels per day, with U.S. production forecast to increase 680,000 barrels per day.  This alone means that other nations will see a decrease in production according to the IEA.  However, they also revised their demand growth forecast slightly downward by about 100,000 bpd.

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OPEC Cuts Appear To Be Working

Finally!  Over the past few weeks we have started seeing some inventory draws as reported by the EIA in its weekly assessment of U.S. Inventories.  And that is good news indeed.  Because many people, the author included, were beginning to doubt the veracity of the OPEC output cuts.

But despite the resurgence of U.S. Shale, everything appears to be on track with oil markets rebalancing.  First, OPEC reported in its last monthly report that production had dropped 152,700 barrels per day, to 31.9 million b/d last month.  These were led by declines from Libya, Nigeria, Iran, and UAE.  According to OPEC, demand for their product is estimated to be 32.2 mmbd in 2017, suggesting that they are producing under current demand (or at least, close to it).

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U.S. Oil Data May Create False Impression

Every week many of us pour over numbers.  We look at the “rotary” rig count data from Baker-Hughes, API Inventory reports, and EIA reports.  That’s in addition to the monthly reports out of OPEC, the EIA, and the IEA.  Traders speculate and pundits fill volumes of internet news websites giving their educated opinions on oil.

And every time a member of OPEC opens their mouth to the media, a constant litany of self-promotion comes out and they brag about OPEC’s high compliance rate, and how OPEC has achieved record compliance.  Yet, storage didn’t seem to be drawing down in a significant way.  Now this certainly made since for the first few months of 2017.  And may make some sense in the early part of the year, but by March we expected to start seeing some draws in U.S. inventory.

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The Week In Numbers for the Week Ending March 24, 2017

In each edition of the Standard, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from API and EIA on Inventory Data. And we also throw in the rig count for good measure.

Since we have not sent the Newsletter in about a month, I will give you the prior numbers from the last Newsletter followed by current:

&n
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Ty's Take 3-24-2017

The last two weeks have been a wild ride for oil. In writing the articles for this week, what interested me most was the technical shift that occurred on February 21, 2017, but didn’t seem to result in a major market shift until the last few weeks. When viewed historically, as I discuss in this week’s article about price volatility, every bench mark indicator peaked on February 21, 2017, and then began a steady decline. Obviously, until we view historical data after the event, we can’t see that. But I nevertheless remain fascinated that on that particular day, the overall impression of the media was that oil remained headed for positive territory.

In the last edition of The Five Star Standard, we presented a view held by many that we may be looking at this all wrong: the world is about to enter into supply deficit and unless there is a rush of capital expenditure, oil could be headed up dramatically in the coming years.

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Oil Price Volatility And Recent Market Fluctuation

crude oil implied volatility

The last few weeks have been an interesting time for oil. On March 09. 2017, we hosted a customer for a Five Star Lunch and Learn presentation. As part of our presentation for each luncheon, we give a market analysis for where we see oil prices headed.

During that presentation, I spoke about the lack of volatility, since the beginning of the year, in oil prices. If you took a snap shot of WTI and Brent on from the beginning of the year until March 08, 2017, you would have seen a very stable commodity price. In fact, what you would have noticed is that front-month prices over the last month (one measure of volatility) fell to their lowest level since July 2003 – suggesting a vary narrow price range for oil. And presumptively, suggesting some consensus in the market.

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The Supply Glut That Just Won't Go Away

fid production graph
graph peak oil production

In the last edition of The Five Star Standard, we wrote an article on CERAWeek. One of the more interesting comments to come out of the meeting, was Saudi Oil Minister Kahlid al-Falih stating that oil markets were taking longer to rebalance than he had anticipated, yet that he saw some signs of recovery.

We similarly reported optimistic projections by the IEA and others indicating markets should move into supply deficit in 2H 2017 with world demand increasing. OPEC compliance is running has high as 94%, and everything seemed rosy.

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U.S Gets Strong Boost From Exports

U.S Crude Oil Exports
2016 US Crude oil  Exports (excluding Canada)

The United States oil market has greatly benefitted from the global trade of energy products, particularly to Latin America recent reports suggest.

The U.S. exported record quantities of natural gas, propane, gasoline, distillate fuel oil, and light crude last year while simultaneously importing heavy oils needed by refineries. Gas exports increased by almost 30% in 2016 and have more than tripled in the last decade, which has limited the build of unused gas and supported prices in recent months. Similarly, record propane exports eliminated a surplus despite low heating demand.

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