Oil Prices Break-Out of Trading Range

Robert Boslego - INO.com Contributor - Energies


Oil futures prices have broken above the trading range where they have been since February when the market was expecting supply and demand would balance quickly as a result of the OPEC/non-OPEC deals. But those hopes were dashed because the global demand was in a seasonal decline, and inventories remained stubbornly high.

Prices managed to break higher due to a combination of circumstances:

U.S. and Global Inventories

Hurricane Harvey in the U.S. Gulf of Mexico (GOM) disrupted refinery operations, causing product stocks to draw rapidly. It was followed by Hurricane Nate, which disrupted crude oil production in the GOM.

In addition, U.S. crude exports reached record levels recently, averaging 1.744 million barrels per day (mmbd) over the past four weeks, a gain of 293 % from the same weeks a year ago. Petroleum product exports have also been strong, averaging 5.125 mmbd in the same period, up 23% v. a year ago.

Together, these trends have reduced U.S. inventories by 40 million barrels since the week ending September 8th. Global OECD stocks have dropped about 51 million barrels from May through September, though this is largely due to normal seasonal trends. Continue reading "Oil Prices Break-Out of Trading Range"

Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts

Robert Boslego - INO.com Contributor - Energies


Ministers from eleven Non-OPEC oil producing countries, led by the Russian Federation, met at OPEC’s headquarters in Vienna on December 11th. It had been reported for weeks that they would agree to cut their oil production by 600,000 b/d.

What they actually agreed to was a watered-down version of that. It turned out that they did not get to 600,000, that much of the “cut” was due to a natural decline in certain countries, such as Mexico, that Russia’s 300,000 b/d cut would be gradual over the first six months of 2017, and that it was all voluntary.

The key portion of the press release reads as follows: Continue reading "Non-OPEC Deal Delivers "Voluntary" Oil Production Cuts"

What OPEC Cut Is Priced-Into The Crude Oil Market?

Robert Boslego - INO.com Contributor - Energies


As all seasoned traders know, oil futures contracts reflect the market’s probability-weighted price expectations. In addition, I believe that the market provides a risk premium to the long side which underprices oil to some extent.

One important question now is how much of a potential OPEC/Non-OPEC cut is already priced into futures contracts? The answer determines the risk-reward to being long or short, depending on the outcome of the 171st OPEC Meeting on November 30th.

Before going further, there is no definitive financial theory or procedure of telling specifically. So I have to make some informed guesses based on possible outcomes and past market reactions. Continue reading "What OPEC Cut Is Priced-Into The Crude Oil Market?"

How The Natural Gas Storage Glut Has Been Cut This Summer

Robert Boslego - INO.com Contributor - Energies


The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total.

CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65°F. If the temperature mean is above 65°F, we subtract 65 from the mean.

Example: The high temperature for a particular day was 90°F and the low temperature was 66°F. The temperature mean for that day was: Continue reading "How The Natural Gas Storage Glut Has Been Cut This Summer"

Natural Gas Producers Pressuring Futures Prices Lower

Robert Boslego - INO.com Contributor - Energies


Natural gas futures prices rose by 2.0% last week (ending August 2nd to correspond to the data below) then dropped back to close the week 10 cents lower at $2.77.

NYMEX Nat Gas Futures Nearby Month

Prices rose in advance of the Energy Information Administration’s (EIA) Thursday storage report in anticipation of a draw in inventory, which was confirmed in the data release. As a result, the year-over-year storage glut was cut to 13.4%. Continue reading "Natural Gas Producers Pressuring Futures Prices Lower"