• Tag Archives WTI
  • Is Oil About to Collapse?

    US producers simply don’t play along with OPEC and Russia.
    WTI really does look like it is about to collapse. Let’s be clear, I am not necessarily talking about a return to the sub-$30 of the beginning of 2016 here, but a return to the more recent lows around $42 before too long is distinctly possible, and if that happens, who knows where we go from there? There are, as I have noted in the past, reasons to believe that the long-term path of oil is still upward, but more immediately there is one dominant factor that keeps adding downward pressure, large and still growing supply from North American shale producers.
    Some say, as in this FT piece, that there are signs that U. S. shale production has peaked, but then that was also supposed to be the case in 2015 and 2016. I am sure that if I could bother to go back further I would find that the same thing was said in previous years too. The fact is though, that as the EIA chart below shows, after dropping off as price declined at earlier this year, U. S. crude production is growing again and will be higher this year than last and is expected to be higher again in 2018.

    This post was published at Wolf Street by Martin Tiller ‘ Dec 9, 2017.


  • The One Indicator OPEC Must Watch

    Authored by Nick Cunningham via OilPrice.com,
    ‘We will not let go of our current approach until we reach a balanced market,’ Saudi oil minister Khalid al-Falih saidMonday at a news conference in Riyadh.
    OPEC ended months of speculation last week when it decided to extend its production cuts through the end of 2018, easing concerns that the limits would be lifted before the oil market was ready. But while it put some uncertainty to rest, the next question is what OPEC does when the oil market becomes ‘balanced’? What is the exit strategy?
    There isn’t one at the moment, and we can assume OPEC doesn’t know what comes next. But we do know that the group has one key metric in mind: inventories. The target is to bring global oil inventories back down to the five-year average.
    Oil inventories exploded between 2014 and 2017, hitting record levels that left the world awash in oil. That metric, arguably more than any other, exemplified the glut of supply that led to the crash of prices.
    It has been a stubborn thing, getting those inventories back down to average levels. A wave of shale bankruptcies didn’t do it, the vanishing rig count didn’t do it either. That led OPEC and a handful of non-OPEC countries led by Russia to limit their production. But even that deal didn’t seem to be doing the trick at the start of 2017, as inventories remained stuck at elevated levels. The euphoria that followed the announcement of the initial deal gave way to a renewed sense of gloom, which pushed WTI back down into the low-$40s by mid-2017.

    This post was published at Zero Hedge on Dec 6, 2017.


  • WTI Slumps Despite OPEC ‘Deal’ As Russia Questions Remain

    Both WTI and RBOB prices are tumbling this morning after OPEC member agree to limit oil output through the end of 2018. While this is bullishly longer-than-expected (6-9mo was expected), OPEC members now rely on Russia to agree to these terms, and it appears the market is questioning that. Furthermore, despite US shale output at record highs, Saudi officials are shrugging off any impact.
    As The Wall Street Journal reports, OPEC members agreed in principle Thursday to keep limiting their output through the end of 2018, according to people familiar with the matter, providing assurance for an oil industry still struggling through a fragile recovery.
    The accord signals that the world’s biggest oil-producing countries believe that a global oversupply of oil is still weighing down oil prices, even a year after they struck their first agreement to cut crude production. Oil in storage – a proxy for the global glut – remains well above historical averages, national oil ministers said.
    Any agreement OPEC strikes will be contingent on support from a group of producers outside the cartel led by Russia, which pumps more crude than any country in the world. The Russia-led delegations are meeting with OPEC to hash out a final agreement.

    This post was published at Zero Hedge on Nov 30, 2017.


  • WTI Tumbles Below $57 As OPEC-Hype Fades

    Goldman’s Damien Courvalin seems to have perfecvtly summed things up – the market was pricing in an OPEC production cut extension of 6-9 months (accounting for around a $2.50 premium in the price). Today’s jawboning from Russia seems to signal April discussions (so a 6-month extension) which is a disappointment – and so WTI prices are tumbling…
    Sell the leaked, jawboned news?
    As we previously wrote, in conclusion, Goldman believes that oil prices have overshot fundamentals and that price risks are skewed to the downside into Thursday’s meeting.

    This post was published at Zero Hedge on Nov 29, 2017.


  • WTI/RBOB Spike On OPEC Headlines After Bearish Inventory/Production Data

    Update: WTI/RBOB was fading after DOE data but then Kuwait dropped the following meaningless headline: OPEC JMMC RECOMMENDS EXTENSION, DIDN’T FINALIZE DURATION. And the algos took over…
    Last night’s API-reported surprise crude build sparked selling that not even Russia/Saudi jawboning could rescue, but DOE data showed the exact opposite with a big crude draw and even bigger gasoline draw. Added to a new record high in US crude production and RBOB is fading and WTI is not rallying.
    As Bloomberg reports, the U. S. has proven at least one thing this year with its expansion of crude and products exports: we are becoming more energy independent than ever before.

    This post was published at Zero Hedge on Nov 29, 2017.


  • Is $40 WTI Now More Realistic Than $60?

    Authored by Tsvetana Paraskova via OilPrice.com,
    The current rise in oil prices is more of a fear trade right now, driven by fear of what is going on in the Middle East, rather than a result of growing OPEC chatter or inventory reports, Todd Horwitz, chief strategist at Bubbatrading.com, told Bloomberg on Wednesday.
    ‘The oil premiums are very narrow going out to the future, which means that this is more of a fear trade in the front month,’ Horwitz said on ‘Bloomberg Markets’. ‘To me, this is more of just another farce of what OPEC is trying to do, and trying to push these prices higher,’ the strategist noted.
    OPEC and its non-OPEC partners in the production cut deal are scheduled to meet in Vienna on November 30 to discuss the extension of their pact.

    This post was published at Zero Hedge on Nov 24, 2017.


  • WTI/RBOB Slide After Smaller Than Expected Crude Draw, New Record High Production

    With WTI at its highest since July 2015, vol at 8mo lows, and the front-end flipped into backwardation for the first time since Nov 2014, it appears a lot of hope is priced into continued equlilibration (and OPEC). Last night’s API (crude draw) provided some more confirmation but this morning’s DOE data disappointed with a smaller than expected crude draw, and production rose once again to a new record high.
    ‘Domestic production is going to be the big nugget that everybody will be racing to see, in terms of whether those levels continue to rise or not,’ John Kilduff, a partner at Again Capital, says.
    ‘They likely will, so that can be a counter-balance to the drawdown’

    This post was published at Zero Hedge on Nov 22, 2017.


  • Ruble, Real Tumble As Oil Slumps On Weaker IEA Outlook

    WTI Crude is tumbling this morning, breaking down below $56 following a monthly report Tuesday from the International Energy Agency that said 2017 price gains along with milder-than-normal winter weather are slowing demand growth. This drop is weighing on oil-producers with the Ruble and Real dropping most…
    The IEA reduced its demand estimate for next year by 200,000 barrels a day to 98.9 million a day, according to projections in its report. Forecasts for demand growth next year also fell by 100,000 barrels a day to 1.3 million a day.

    This post was published at Zero Hedge on Nov 14, 2017.


  • Chart of the Week: Another Compelling Note of Caution

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Leveraged loan prices and WTI tracked each other pretty well during the ‘rising dollar’, unsurprising given that the oil sector was over-represented in most new deals as the one truly booming part of the domestic US economy. That was the case on the rebound, too, where leveraged loan prices rose at the same time oil prices did. And then both started falling again earlier this year in March.
    Only leveraged loan prices continued to fall, diverging noticeable from WTI in June/July. With prices still almost two years after the bottom significantly less than before the ‘rising dollar’, it’s an unmistakable note of caution amplified in the diverging trend recently from oil (indicating broader risk concerns than just US shale producers).
    It’s a gentle downturn in prices at this point, but a persistent one (eight month so far). The last time this leveraged loan price index diverged so much from WTI? Summer 2013.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ November 10, 2017.


  • Oil at Two-Year Highs as Saudi Arabia Engages in Its Own ‘Game of Thrones’

    Recently I identified five agents of change that I believe investors should know about right now. I’d like to add one more to the list: Mohammad bin Salman. The crown prince of Saudi Arabia, 32, was little known outside the region before this past weekend when he jailed members of the royal family, presumably in an attempt to consolidate power ahead of taking the throne. Resembling a plotline from an episode of ‘Game of Thrones,’ the mass detentions signal a seismic change in Saudi leadership – which, in turn, is putting upward pressure on global oil prices.
    Saudi Arabia is the world’s second-largest oil producer and single biggest oil exporter, so any development that might alert investors that the kingdom’s production levels or oil policy could be disrupted has historically had a profound effect on prices. When the country’s former king, Abdullah bin Abdulaziz Al Saud, passed away in January 2015, oil jumped more than 8.6 percent for the week.
    And so was the case on Monday, after news broke of the shakeup. West Texas Intermediate (WTI), the American benchmark for crude, closed above $57 a barrel for the first time since June 2015, adding nearly 35 percent from its summer 2017 low. A weaker U. S. dollar, down about 3.2 percent from the same time last year, is also providing support, as is slower U. S. supply growth following Hurricanes Harvey and Irma.

    This post was published at GoldSeek on 9 November 2017.


  • “A Classic Head Fake”: Why One Trader Is Using The Saudi Turmoil To Sell Crude

    Overnight, following the recent Saudi turmoil, prices in the crude complex jumped to the highest levels in over two years, amid speculation that Saudi Arabia is more likely to back output curbs following this weekend’s crackdown by Crown Prince Mohammed bin Salman. “It creates some hope that the current policy by the Saudis will be continued after March,’ said ABN Amro senior energy economist Hans van Cleef. “We’re still in the longer-term upswing, the uptrend is still intact”, and indeed Dec. WTI rose +31c to $55.95/bbl after earlier touching $56.28, the highest since July 2015, while Jan. Brent was also up +35c to $62.42, after rising to $62.90, highest since June 2015
    And yet not everyone believes that the recent chaos in Saudi Arabia is a bullish catalyst for oil: taking his usual contrarian stance, Bloomberg commentator and ex-Lehman trader Mark Cudmore writes that what happened is “largely irrelevant” for oil prices and the resultant oil price spike has “the look of a classic head fake and may mark the final push higher before a correction.”
    Attacking the key point underscored by oil bulls, Cudmore says that “an extension of OPEC supply cuts is fully expected by the market, and the weekend changed nothing on that front” meanwhile “oil prices are still dominated by the overhang of potential supply that can come online so easily from U. S. shale fields. The rig count may have been dropping recently, but it remains 62% above the level of a year ago. And, crucially, U. S. production is near the highest in more than two years, according to the Energy Information Administration.”

    This post was published at Zero Hedge on Nov 6, 2017.


  • WTI/RBOB Sink As Inventory Draws Disappoint

    WTI/RBOB held on to gains overnight following major draws reported by API and more OPEC jawboning (this time from UAE), but the DOE data disappointed compared to API’s huge draws with Crude and Gasoline drawing down but considerably less than API reported (and Distillates barely drawing down at all).
    Bloomberg Intelligence energy analyst Fernando Valle:
    Strong demand continues to spur inventory drains. Crude-oil stocks remain elevated, but refined-product inventories are looking increasingly tight.
    Wide WTI discounts to Brent are likely to push inventories down in coming weeks, driven by exports and increased refinery utilization.

    This post was published at Zero Hedge on Nov 1, 2017.


  • Mexico’s “Legendary” Oil Hedging Desk Spent $1.25 Billion On 2018 Puts

    Mexico’s “legendary” oil hedgers (profiled her emost recently one year ago and by Bloomberg in this exhaustive article) are confident that prices won’t linger above $50 a barrel, because this summer, which is why the world’s most-active sovereign oil-trading desk spent a near record $1.25 billion on put options to lock in export prices for next year, Bloomberg reported, citing data from the country’s Ministry of Finance.
    The news is especially notable because, as we pointed out yesterday, with WTI prices holding at 6-month highs around $54 (and Brent at $60), hedge funds have never been more bullish on the entire energy complex, having accumulated a record 1.189 billion barrel equivalent long positions in the five major petroleum contracts (Brent, WTI (x2), RBOB, HO)…

    This post was published at Zero Hedge on Oct 31, 2017.


  • Hedgies Have Never Been ‘Longer’ The Energy Complex As Analysts Raise Oil Price Forecasts (Again)

    With WTI prices holding at 6-month highs around $54 (and Brent at $60), Reuters’ John Kemp notes that hedge funds have never, ever been more bullishly positioned in the entire energy complex.
    Hedge Funds have accumulated a record 1.189 billion bbl of long positions in the five major petroleum contracts (Brent, WTI (x2), RBOB, HO)…
    This surge in buying is coming as analysts once again follow the trend and begin raising oil price forecasts.
    As OilPrice.com’s Tsvetana Paraskova notes, just a few of months ago, analysts and investment banks slashed their oil price forecasts as OPEC’s production cuts drew down the global oil oversupply slower than initially expected, and rising U. S. shale production capped any short-lived oil price gains.
    But at the end of the summer, as OPEC and the International Energy Agency (IEA) started reporting stronger-than expected global oil demand growth and an accelerated pace of inventory declines, the market sentiment began to change. As 2018 and the November 30 OPEC meeting draw nigh, the cartel is said to be favoring a 9-month extension of the deal through the end of next year.

    This post was published at Zero Hedge on Oct 30, 2017.


  • Global Stocks Hit New Record High, Dollar Mixed After Dovish Fed

    In a trend observed every day this week, S&P futures are slightly in the red ahead of a post-open ramp with the VIX rising to 9.91, as Asian shares climb, European stocks are little changed. WTI crude pares recent gains, slipping below $51 after API showed an unexpected crude build. Earnings season launches with bank earnings reports from JPMorgan and Citigroup, while Economic data include PPI figures, jobless claims.
    As Reuters notes, broader investor risk sentiment has improved this week after Catalonia dialed back plans to break away from Spain, with MSCI’s 47-country world stocks index reaching a record high. Global equities now appear to be taking geopolitical developments such as the secessionist push in Spain and tensions on the Korean peninsula in their stride, to reach those record tops.
    Analysts will be keeping a close eye on banks Q3 reports: Trading probably dropped from the same period a year earlier. Executives from JPMorgan, Citigroup and Bank of America Corp. told investors last month to expect declines ranging from 15 percent to 20 percent. Goldman Sachs Group Inc., coming off its worst first half for the trading business in more than a decade, said the third quarter remained challenging. Subdued volatility, especially compared with the turmoil from Brexit and the U. S. election a year earlier — made the period particularly tough.

    This post was published at Zero Hedge on Oct 12, 2017.


  • OPEC To Take Drastic Action Despite Shale Slowdown

    WTI recently dipped below $50 per barrel for the first time in a month, erasing the strong September rally. It’s no coincidence that after two weeks of price declines, OPEC has tried to talk up the oil market again, hinting that more drastic action could be forthcoming.
    Echoing the world’s top central bankers, OPEC’s Secretary General said that the oil cartel might need to take ‘extraordinary’ measures to balance the oil market next year. ‘There is a growing consensus that, number one, the re-balancing process is underway,’ OPEC’s Mohammad Barkindo told reporters on Sunday in New Delhi. ‘Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward.’
    As always, OPEC is vague on the specifics, but the working assumption is that the group will agree to an extension of the cuts until at least mid-2018, or perhaps even as late as through the end of the year. There’s been some discussion about deeper production cuts, but there aren’t a ton of analysts who see OPEC going that far, despite Barkindo’s cryptic language.

    This post was published at Zero Hedge on Oct 11, 2017.


  • “All-In” Hedge-Funds Turn Cautious Ahead Of OPEC As Oil Prices Stumble

    With WTI back below the Maginot Line of $50, speculative investors are growing increasingly anxious about their record extreme bullish positioning across the energy complex.
    As Reuters’ John Kemp reports, hedge fund bullishness towards crude oil and refined products including gasoline and diesel appears to have peaked for now, according to an analysis of regulatory and exchange records.
    Speculative traders’ positioning across crude and especially refined fuels had looked increasingly lopsided in recent weeks as fund managers turned from very bearish in June to super-bullish by the end of September.

    This post was published at Zero Hedge on Oct 9, 2017.


  • WTI/RBOB Plunge On Saudi, Russia Comments; Rig Count Resumes Decline

    WTI and RBOB are plunging following comments from the Saudi minister that “he doesn’t know” if November meeting will agree on a production cut deal extension, and Russia’s Novak confirmed that there is “no clarity” on a deal extension.
    Saudi Arabia will work with Russia to reach a consensus in the next few weeks before the Nov. 30 OPEC/non-OPEC meeting in Vienna, Saudi Energy Minister Khalid Al-Falih says at a meeting with Russian counterpart Alexander Novak in Moscow. OPEC and non-OPEC producers will discuss ‘what to do beyond March’ at that meeting: Al-Falih
    Both ministers say it’s too early to say whether or not the November meeting will yield an agreement to extend the production cuts
    Amid higher OPEC production and the prompt return of supplies from Libya, futures prices are under pressure.
    After last week’s surprise rise (+6) in the rig count, the US Oil rig count declined by 2 this week to 748…

    This post was published at Zero Hedge on Oct 6, 2017.


  • WTI Tumbles Below $50 To 3-Week Lows

    On the heels of continued dollar strength, output increases by OPEC (and US production at 2 year highs), and Libya restarting its biggest oilfield, WTI prices are tumbling for the 3rd time this week, back below $50 to their lowest in 3 weeks…
    As Bloomberg notes, while oil rallied into a bull market last month on the prospect of stronger demand, prices struggled to hold above $52 a barrel as supply grew from the U. S. and two members of the Organization of Petroleum Exporting Countries that are exempt from making cuts.

    This post was published at Zero Hedge on Oct 6, 2017.