• Tag Archives WTI
  • Saudi Strikes Back Against U.S. Shale

    Here we go again…
    The price of oil is plunging.
    For the first quarter of 2017 West Texas Intermediate (WTI) held a pretty stable range between $54 – 58 per barrel. Now it is back to the roller coaster that we have been on since mid-2014.
    As I write this, WTI is struggling to hold $43 per barrel and is sinking like a rock.
    This time though, I think the market is acting on some bad information. If not bad, then at the very least I think the information is incomplete.
    I believe that this most recent drop in oil prices is not being caused by the actual fundamentals of supply and demand. Those fundamentals are actually improving the bullish case for oil – slowly, but steadily.
    This recent oil price decline is more likely being caused by the market focusing not on the full picture, but rather on one stubbornly bearish detail:
    The amount of oil held in storage in the United States…
    Oil Is a Global Commodity
    Every week traders, investors and oil industry participants heavily scrutinize one set of data. That data set involves the weekly movements in United States oil inventory levels.

    This post was published at Wall Street Examiner on June 23, 2017.


  • Citi: Here Comes The V-Shaped Rebound In Oil

    Start buying oil.
    That’s not only this morning’s recommendation by Dennis Gartman but, as this afternoon, also Citi’s commodities team (led by OPEC’s impressario Ed Morse) which moments ago issued a report according to which crude oil markets will not only bottom, but more importantly, “investors should position now for a potential V-shaped rebound in crude oil prices, as price risk seems asymmetrically skewed to the upside.”
    Do two wrongs make a right? But we digress…
    Citi explains the recent collapse (which it did not in any way anticipate as it was bullish all the way into a bear market), by noting that WTI flat price has sold off another ~5% this week, as bearish sentiment continued to prevail among oil market participants. However, it counters, “both weekly and monthly storage data are pointing to a tighter market by end-2017, and Citi expects global oil stocks to draw ~200-m bbls to year-end. While it is possible for prices to dip even lower near-term, we do not view this as sustainable, and once market sentiment turns, prices could rally sharply.”
    Some additional observations from uber-bullish Citi on the crude vol surface:

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


  • WTI/RBOB Pump’n’Dump After Gasoline Build, Production Surge

    Following API’s reported build in gasoline (and distillates), oil prices have chopped around amid Saudi headlines and OPEC jawboning, as all eyes are focused on gasoline inventories in the DOE report. An unexpedted draw in Gasoline (and Crude draw) sent prices higher initially, but another surge in production capped some of the gains and prices fell back.
    API
    Crude -2.72mm (-1.2mm exp) Cushing -1.269mm Gasoline +346k (+500k exp) Distillates +1.837mm DOE
    Crude -2.45mm (-1.2mm exp) Cushing (-579k exp) Gasoline -578k (+500k exp) Distillates +1.08mm (+500k exp)

    This post was published at Zero Hedge on Jun 21, 2017.


  • Gundlach Warns Flatter Curve Is “A Concern For US Economic Growth”

    Doubleline Capital founder Jeff Gundlach warned that the flattening yield curve could become a concern for US economic growth when two and three-year notes yield about the same, and the price per barrel of WTI crude oil plunges into the $30s, he said during a phone call with a Reuters reporter.
    The last time the spread between two- and three-year yields held below 10 basis points was around the time former Federal Reserve Chairman Ben Bernanke announced the beginning of Operation Twist and then QE3 in late 2012.

    This post was published at Zero Hedge on Jun 21, 2017.


  • Oil, Gold and Bitcoin

    The falling price of oil did not garner any mainstream financial media attention until today, when U. S. market participants woke up to see oil (both WTI and Brent) down nearly $2. WTI briefly dropped below $43. The falling price of oil reflects both supply and demand dynamics. Demand at the margin is declining, reflecting a contraction in global economic activity which, I believe the data shows, is accelerating. Supply, on the other hand, is rising quickly as U. S. oil producers – specifically distressed shale oil companies – crank out supply in order to generate the cash flow required to service the massive energy sector debt load.
    I am quite surprised by the rapid fall of oil (WTI basis) from the $50 level, because I concluded earlier this year that the Fed was attempting to ‘pin’ the price of oil to $50:
    The graph above is a 5-yr weekly of the WTI continuous futures contract. Oil bottomed out in early 2016 and had been trending laterally between the mid-$40’s and $55. I read an analysis in early 2016 that concluded that junk-rated shale oil companies would implode if oil remained in the low $40’s or lower for an extended period of time. Note that some of the TBTF banks who underwrote shale junk debt were stuck with unsyndicated senior bank debt (i.e. they were unable to find enough investors to relieve the banks of this financial nuclear waste). Thus, the Fed has been working to keep the price of oil levitating in the high $40’s/low $50’s, in part, to prevent financial damage to the big banks who have big exposure to shale oil debt.

    This post was published at Investment Research Dynamics on June 21, 2017.


  • WTI Plunges To 7-Month Lows – Enters Bear Market As HY Bonds Crater

    WTI Crude has entered a bear market (down over 20% from its highs) amid concerns OPEC-led output cuts won’t succeed in rebalancing the market (and not helped by the fact that Libya is pumping the most crude in 4 years).
    For the first time since Nov 2016, WTI front-month traded with a $42 handle…
    Here are eight factors that are behind the current fall in oil prices according to Arab News:
    1. High exports from OPEC: Despite the reduction in production from oil producers, the level of exports is still high as many tanker-tracking data showed. Morgan Stanley in a report on June 8 said that tanker-tracking data showed that waterborne exports increased strongly in May across the world, up by 2.2 million bpd from April and 3.3 million bpd from May 2016.

    This post was published at Zero Hedge on Jun 20, 2017.


  • Futures, European Stocks Flat As Oil Suddenly Tumbles; Pound Slides

    Maybe not too much of a surprise to see oil prices fall, given how much the G10 economic surprises index has collapsed in recent weeks. pic.twitter.com/aXkvHOzZMt
    — Jamie McGeever (@ReutersJamie) June 20, 2017

    European stocks were flat after starting off strongly earlier, dragged lower by energy stocks. Asian stocks, U. S. futures little changed as oil tumbled with Brent tumbling as low as $45.85/bbl to the lowest intraday since November 30 and taking out a 38.2% Fib support, after a one-minute spike in volume to a day-high 5,208 lots just after 6am, with WTI mirroring Brent’s momentum, and falling as much as 98c to $43.22, lowest since November 14.
    As Reuters’ Jamie McGeever points out, “maybe not too much of a surprise to see oil prices fall, given how much the G10 economic surprises index has collapsed in recent weeks.”
    The pound sank for a second day, with the GBPUSD tumbling to 1.2661, alongside gilt yields as Britain central bank governor Mark Carney reversed the earlier BOE “vote split” hawkishness and said he is still worried about the impact Brexit will have on the U. K. economy and said he “now is not the time” to raise rates. Sterling weakened against all of its Group-of-10 peers, and gilt yields declined as Carney said that domestic inflation pressures remain subdued. Speaking at London’s Mansion House on Tuesday, he also highlighted the weakness in the economy and the increased uncertainty as the nation formally starts talks to exit the European Union.

    This post was published at Zero Hedge on Jun 20, 2017.


  • Oil Plunges To November Lows On Sudden Volume Spike

    Oil dropped to the lowest in seven months, with both Brent and WTI sliding to prices not seen since November, following a burst of volume just after 6am, amid a revival in output from Libya and rising volumes of fuel held in floating storage, although today’s move was likely yet another hedge fund capitulating and liquidating long positions. As a reminder, Pierre Andurand was down 17.3% through end of May.
    Brent hit new year-to-date low at $45.85, after a one-minute burst of volume of a day-high 5,208 lots at 6:04am, taking out a 38.2% Fib support, after a one-minute spike in volume to a day-high 5,208 lots just after 6am. The move could spur a move toward the $44.66 measured support line according to Bloomberg technician Sejul Gokal.

    This post was published at Zero Hedge on Jun 20, 2017.


  • Quiet Start To Quad Witching: Stocks Rebound Around The Globe, BOJ Hits Yen

    Today is quad-witching opex Friday, and according to JPM, some $1.3 trillion in S&P future will expire. Traditionally quad days are associated with a rise in volatility and a surge in volumes although in light of recent vol trends and overnight markets, today may be the most boring quad-witching in recent history: global stocks have again rebounded from yesterday’s tech-driven losses as European shares rose 0.6%, wiping out the week’s losses.
    USD/JPY climbed to two-week high, pushing the Nikkei higher as the BOJ maintained its stimulus and raised its assessment of private consumption without making a reference to tapering plans, all as expected. Asian stocks were mixed with the Shanghai Composite slightly softer despite the PBOC injecting a monster net 250 billion yuan with reverse repos to alleviate seasonal liquidity squeeze, and bringing the net weekly liquidity injection to CNY 410 billion, the highest in 5 months, while weakening the CNY fixing most since May. WTI crude is up fractionally near $44.66; Dalian iron ore rises one percent. Oil rose with metals. Treasuries held losses as traders focused on Yellen hawkish tone.
    The MSCI All Country World Index was up 0.2%, and after the latest global rebound, the value of global stocks is almost equal to that of the world’s GDP, the highest such ratio since th great financial crisis, BBG reported.

    This post was published at Zero Hedge on Jun 16, 2017.


  • Stock Prices Fall as Senate Passes Russia Sanctions Bill

    In Dow Jones news today, stock prices fell as the Senate passed a bill that would place new sanctions on Russia.
    Here are the numbers from Thursday for the Dow, S&P 500, and Nasdaq:
    Now here’s a closer look at today’s most important market events and stocks, plus Friday’s economic calendar.
    The Five Top Stock Market Stories for Thursday
    European finance ministers debated another round of debt relief for the embattled Greek economy and decided to offer a bailout of 8.5 billion euros ($9.5 billion). Greece’s current bailout program is the third effort by international finance leaders since the nation fell into economic calamity in 2010. Crude oil prices cratered and hit a seven-month low on news of a huge spike in U. S. gasoline inventory levels and expectations that OPEC will not be able to balance supply and demand. Crude oil prices are now off more than 12% since May 25. The WTI crude oil price today fell 0.7%. Brent crude dipped 0.2%.

    This post was published at Wall Street Examiner on June 15, 2017.


  • Oil Prices Suffer First ‘Death Cross’ Since 2014 Collapse

    or the first time since September 2014, after which oil prices collapsed almost 75%, Brent and WTI Crude futures both just flashed a ‘death cross’ signal as the 50-day moving-average crossed below the 200-day moving-average.
    The crossover is typically seen a loss of short-term momentum and last occurred in the second half of 2014, when prices collapsed due to oversupply amid surging U. S. shale oil production.

    This post was published at Zero Hedge on Jun 13, 2017.


  • Is $50 Oil Still Realistic?

    With crude (and gasoline) prices doing nothing but tumble since OPEC announced its ‘extension’ deal, erasing all the hope-fuelled bounce off cycle lows, the question once again becomes, is $50 oil still realistic?
    Oil prices have plunged back to levels not seen since OPEC announced its original production cut deal last November. Prices have been falling since the group extended their cuts for another nine months, a two-week slide that puts WTI back in the mid-$40s.
    The underlying factors for the price drop are the same as before: U. S. shale production continues to rise; inventories remain elevated; and the markets are concerned that the OPEC cuts are not doing enough to drain the surplus.
    But, in fact, the outlook has grown a bit darker more recently, as downside risks to the market have grown.
    The immediate spark to the sharp percent selloff in crude oil prices on Wednesday came from the unexpectedly bearish EIA inventory report, which surprised market analysts. The report was especially bad news because both crude oil and gasoline inventories increased by 3.3 million barrels each at a time when stocks typically decline heading into the driving season. The increase ended several consecutive weeks of drawdowns and poured cold water on any hopes of swift rebound in prices – WTI and Brent dropped roughly 5 percent.

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


  • All About Inventory

    Andy Hall has been called the God of Oil. As chief of Astenbeck Capital, he has proven at times that even gods can be mortal. In the ‘rising dollar’ period, for example, after making money on the way down Mr. Hall went bullish. That was March 2015:
    We suspect their projection of current prices into the future will again be frustrated by the market. For that reason we have closed out all of our bearish bets (at a substantial profit) and started adding to our bullish ones. We might be premature but think the chance of seeing new lows for oil prices – other than possibly at the very front of the curve – is relatively small even though volatility is likely to remain high in the coming months.
    In the more than two years since then, Hall has remained steadfast about $100 oil – even as it went to $26. At that time in early 2015, under much the same calm as now, it appeared to be a possibility, perhaps likely. The ‘rising dollar’ was really two events separated by several months (and Chinese currency machinations). What was the calm in between them, which allowed for WTI to climb all the way back above $60 from a then low of around $43, did for a time look like ‘transitory’ weakness.

    This post was published at Wall Street Examiner on June 7, 2017.


  • Qatarstrophe Sends Gold Near Post-Election Highs As Crude Tests 2017 Lows

    With Treasury yields at their lowest since the election, it appears a shift towards safe-havens (or Trumpflation unwinds) is well underway. Gold is nearing $1300 this morning – its highest since the election. WTI Crude has sunk back to a $47 handle, ignoring dollar weakness as the Qatarstrophe raises more doubts about OPEC coordination.
    A weaker dollar is helping precious metals (and Bitcoin) but not crude – a break in the relationship regime we have seen this year.

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


  • WTI/RBOB Mixed After Biggest Crude Draw Since 2016, Production Hits 21-Month Highs

    U. S. COMMERCIAL CRUDE STOCKS are drawing down much earlier and harder than normal for time of year pic.twitter.com/WRWVPPrYsU
    — John Kemp (@JKempEnergy) June 1, 2017

    Oil prices have roller-coastered since last night’s API report of the biggest crude draw since September (hurricane-impacted), but kneejerked higher after DOE confirmed a big crude draw (though less than API), the largest since Dec 2016 and 8th weekly draw in a row. Distillates saw a surprise build, crude exports hit a record high, and production rose again to its highest since Aug 2015.
    API
    Crude -8.67mm (-3mm exp) – biggest since Sept 2016 Cushing -753k Gasoline -1.726mm (-1.5mm exp) Distillates +124k DOE
    Crude -6.43mm (-3mm exp) Cushing -747k (-500k exp) Gasoline -2.86mm (-1.5mm exp) Distillates +394k (-700k exp)

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


  • WTI Crude Tumbles To $47 Handle As OPEC-Compliance Drops

    Crude oil prices have retraced 50% of their pre-OPEC-deal hope rally and dropped back below $48 as JBC Energy reports OPEC compliance dropping to 92% in May from 96% in April.
    Additionally, Bloomberg notes: OPEC-14 OUTPUT ROSE 370K B/D TO 32.5M B/D IN MAY: JBC ENERGY

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


  • Is This The “Mystery” Massive Long Supporting The Oil Market?

    Usually when CFTC data shows a big speculative position, it is easy to spot the corresponding mood amongst traders. For example, take the current situation with the Canadian dollar. There are record net speculative shorts, and that bias is obvious amongst hedge funds and other professional traders.
    However, over the past few years, I have been puzzled by the building of a massive record net long speculative position in the WTI crude oil market.
    The monster speculative long position doesn’t correspond to the general attitude amongst traders. In fact, without looking at the data, I would argue most specs are negative towards crude oil. The data does not jive with my anecdotal evidence.

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


  • Greek, Italian Risks Weigh On European, Global Markets; Oil, Gold Slide

    Tuesday’s session started off on the back foot, with the Euro first sliding on Draghi’s dovish comments before Europarliament on Monday where he signaled no imminent change to ECB’s forward guidance coupled with a Bild report late on Monday according to which Greece was prepared to forego its next debt payment if not relief is offered by creditors, pushing European stocks lower as much as -0.6%. However the initial weakness reversed after Greece’s Tzanakopoulos denied the Bild report, sending the Euro and European bank stocks higher from session lows. S&P futures are fractionally lower, down 3 points to 2,410.
    Elsewhere, the Japanese yen rallied after strong retail sales data while US Treasuries ground higher after returning from a long weekend largely unchanged; Australian government bonds extend recent gains as 10-year yield falls as much as four basis points to 2.37%. Asian stock markets and were modestly lower; Nikkei closed unchanged despite a stronger yen. China and Hong Kong remained closed for holidays while WTI crude was little changed.
    Despite the rebound, the Stoxx Europe 600 Index declined a fourth day as data showed that contrary to expectations of a record print, euro-area economic confidence fell for the first time this year, and as Draghi’s dovish comments to the European Parliament weighed on banking shares. As discussed yesterday, Italian bonds edged lower as traders digest the prospect of an earlier-than-expected election.

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


  • Ignore OPEC, It’s China That Dictates Oil Prices

    The OPEC deal will lead to an ongoing tightening of the crude oil market, putting a floor beneath crude prices in the $50s per barrel in the second half of 2017, according to Helima Croft of RBC Capital Markets. She said that prices should ultimately ‘grind higher into the $60s’ by the fourth quarter, with an average price for WTI expected at $61. Political and economic pressure surrounding Saudi Aramco’s IPO and Russian elections – both of which are slated for 2018 – will ensure that OPEC and non-OPEC does ‘whatever it takes’ to keep oil prices stable and on the rise.
    But there are a lot of factors outside of OPEC’s control. High up on that list is the role of China, a country that has received little attention in the oil world as of late amid all the furor over the OPEC vs. U. S. shale debate. But China could make or break the oil market this year and next, depending on what happens with its economy. “If you wanted to know where the downside risk is, it is not in OPEC’s decision or in U. S. driving demand or in global inventories rebalancing. I think China is the big source of concern,” Prestige Economics President Jason Schenker told CNBC.

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


  • Wall Street Throws Up On OPEC: Barclays Sees “No Light At The End Of The Tunnel”; MS Cuts WTI Price Target

    Oil bulls were unhappy with yesterday’s OPEC announcement, which disappointed by adding nothing to the 9 month supply cut extension announcement which had already been leaked and largely priced in while leaving key questions unanswered, including what it has planned for the long-term.
    The broader Wall Street commentary was similarly downbeat: ‘To say that yesterday’s performance was disappointing for bulls is an understatement,’ Tamas Varga, analyst at PVM Oil Associates wrote in an emailed report. ‘It is, however, not a foregone conclusion that the trend is definitely turning. The question now is whether yesterday’s sharp drop in oil prices was a panic long-liquidation or the technical picture is now firmly turning bearish.”
    Barclay’s analyst Michael Cohen captured the mood best with a note overnight titled “No light at the end of the tunnel:, in which he writes that “OPEC and several non-OPEC countries finalized plans to extend production cuts for an additional nine months (through Q1 2018) without specifically articulating an exit strategy. During the press conference, Saudi Energy Minister Khalid Al-Falih expressed confidence in the plan to extend the cuts through Q1 2018, saying that inventories would fall below the five-year average before year-end, but cuts should remain in place during Q1 2018 due to seasonal demand weakness, which we highlighted yesterday (OPEC’s Vienna Meeting: Intermission, May 24, 2017). By our calculations, if half of the supply deficit is applied to OECD stocks, we do not see the inventory level approaching the five-year average by this timeframe.”
    This is exactly what we warned about in “The Math Behind OPEC’s Revised Production Cut Still Does Not Work.”
    Below we excerpt some other of the key highlights from MS, which was clearly soured on the outlook for oil prices after OPEC’s meeting:

    This post was published at Zero Hedge on May 26, 2017.