Here’s what I have for price changes for this week, all data in:
Keep in mind winter blending, which may throw off the distillate numbers a little!
*Heating, stove oil and Diesel all show an increase of 1.2 cents a litre, and...
*Gasoline shows an increase of 1.7 cents a litre at the pumps.
Saudi Arabia to add to cuts
In an effort to support prices and indeed increase them, Saudi Arabia announced yesterday that it would add more cuts starting in March.
While previous cuts of 800,000 barrels have already started to hit the markets, the additional cuts will bring Saudi output of crude oil down to 9.8 million barrels a day.
Saudi Arabia is possibly trying to reach a balanced budget point for the year, but according to the International Monetary Fund, they need oil priced at $80 US to do it.
Keeping a close eye to this piece of news as the cuts come immediately leading into the spring run-up as we head to the summer driving season.
U.S and China trade talks on again
Trade talks are on again between the U.S and China as we quickly approach their own March 1stdeadline.
Speculators are optimistic that if tariffs are still in place by that time, then the likelihood of a further slowdown in the Chinese economy will occur, thus driving the price of oil down again as a result of lower demand.
EIA predicts new production in the U.S
The U.S Energy Information Administration predicts that U.S domestic production will hit 13.2 million barrels a day through the year 2020, if the present trend holds out and oil prices stay steady or increase further.
U.S domestic growth has increased to the point that it is now the highest it has been in recent memory. Since 2008, oil production in the U.S has increased almost six million barrels a day.
*Heating and stove oils show an increase of 2/10ths of a cent a litre.
*Diesel fuel shows an increase of 3/10ths of a cent, and...
*Gasoline shows an increase of 5/10ths of a cent a litre.
**Keep in mind that winter blending may throw off the distillate numbers somewhat.
Keep watching Venezuela
The political situation in Venezuela is being watched closely as political protests continue. But the real possibility of revolution in Venezuela still weighs on the markets, even though sanctioning of Venezuelan crude has been put in place.
While sanctioning keeps their crude out of the U.S, it also means that the U.S has to look for other sources of crude oil to replace supplies lost from the South American country.
U.S domestic production is believed to be one real possibility as crude prices or West Texas Intermediate have risen more noticeably than Brent. Brent prices, in the meantime, have risen in recent weeks also, but are probably more influenced by upwards pressure from OPEC Plus (OPEC and non-OPEC producers) cuts that have nnot really taken a full bight of the markets as of yet.
What’s holding oil back?
With all the word on a possible drop in exports from Venezuela, it’s the weight of disturbing economic news that also permeates the markets.
Economic growth just about stagnated in the Eurozone during January month, sending ripples through the markets and signifying that all may not be well with projected demand that would help bolster prices.
It was a slowdown in the Chinese economy last month, but any signals from Europe would only bolster the thought that any slowdown is underway.
Electric vehicles to impact oil?
I remember a number of years ago, King Fahd I think it was, said that the Kingdom had fifty years more to sell oil and make whatever it could from the riches it had been given.
His prophecy may come true.
With a caveat about rare earth minerals, the Bank of America has stated that the advent of the electric vehicle will kill overall demand growth for crude oil by the year 2030.
That has huge implications as rare earth metals such a lithium and cobalt, predominant metals in electric vehicle batteries are only recently being explored. Countries in Central America have the most promise, says the bank, and if more is found, then the predicted growth in demand may indeed falter. Oil demand itself may peak amidst predictions of a collapse in demand growth, and may in fact drop off again as other alternatives besides crude oil become readily available to world consumers.
Here’s what I have for this week’s price changes. Keep in mind that winter blending is still in effect and that may throw off the distillate numbers slightly!
*Heating and stove oil to drop by 1.9 cents a litre.
*Diesel fuel to drop by 1.5 cents a litre, and...
*Gasoline to drop by 3.5 cents a litre.
Markets were topsy-turvy this past week as weak economic data was mixed with inventory numbers that sent speculators wondering where it would all end.
Inventory data this past Thursday suggest that demand for gasoline is off for now, but margins are still good for distillate fuels like heating, stove oil and diesel. With those fuels still in a high demand phase with colder weather in central regions of North America, refiners are still operating at just shy of 93 percent capacity to take advantage of the situation.
Crude oil is still also gaining inventory, with crude adding eight million barrels and gasoline adding another 4.1 million to an ever expanding inventory ahead of the spring run-up in prices.
In spite of colder weather, particularly in the central US and Canada, distillate inventories only dropped 600,000 barrels on the week.
In the meantime, big troubles may be on the way for Venezuela politically, but oil increased today as the U.S placed sanctions on the Venezuelan state-owned oil company Petroleos de Venezuela SA.
Increasing violence and tensions are mounting, adding the possibility that supply disruptions could result if a shutdown to the oil industry occurs.
Venezuelan production has dropped to close to 1.1 million barrels a day, and could drop further if violence ensues in the South American country.
Still no word from the federal Competition Bureau in Ottawa as I filed a complaint regarding the sale of Ultramar gas stations to Irving some time back.
Places such as Conception Bay South have lost the competition between companies that I believe is costing them lower prices at the pumps as of late. And with the added closure of a Canadian Tire gas bar here beside the Ultramar station , consumers here are pretty much left with three of the larger companies who’s prices have crept up and left one company in more than a dominant position, I believe, in the CBS market particularly.
The loss of the ValueMax program along the shore, not to mention the benefits of Canadian Tire has meant that consumers don’t have as much say on lower prices. CBS gas station prices are now a few pennies above most prices in St. John’s, a condition that hasn’t happened in years.
Prices here are still somewhat below the regulated maximum, but not as much as they used to be. I’ll let you know if I do hear anything back...
*Heating and stove oil shows an increase of 1.7 cents a litre.
*Diesel fuel shows an increase of 1.4 cents a litre, and...
*Gasoline shows an increase of 1.9 cents a litre.
Keep in mind that “winter blending” may throw the distillate numbers (heating, stove and Diesel) off slightly.
Oil climbs this week, but...
Oil prices increased this week as OPEC cuts started to take hold of the markets, but it may have been short-lived.
Disappointing economic news from China, along with fears of a worldwide economic slowdown bordering on recession sent oil prices lower today after reaching a two month high of $63 and change on Friday.
Chinese expansion was reigned in at 6.6 percentage points in 2018, far off from a “usual” nine percent plus. It’s the lowest read on Chinese growth in thirty years.
That wasn’t the only piece of news that sent oil lower today. The International Monetary Fund, or IMF, also said that projections for world economic growth are lower than previous predictions setting the new number at 3.5 percent from the 3.7 percent previous estimate, indicating a lower demand for crude oil and it’s refined products.
US inventories recorded a drop in crude oil stocks for the first time in weeks as crude supplies declined by 2.7 million barrels.
Gasoline inventories were up by 7.5 million barrels, while distillate stocks increased by three million barrels.
U.S domestic growth was up another 200,000 barrels with production there now sitting at 11.9 million barrels a day.
Rig count lower
US drilling rigs operating in the field was down again last week as the rig count dropped by 25 according to Baker Hughes weekly count.
There are now 1050 operating drill rigs in the U.S now, a full 114 more than the same week last year.
But with the prospect of oil heading lower, there is a chance that we could see more rigs fold up operations again, sending U.S domestic production lower, and the world economic prospects at the moment aren’t all positive.
*Heating and stove oil to increase by 3.4 cents a litre.
*Diesel shows an increase of 3.6 cents a litre, and...
*Gasoline shows an increase of 6/10ths of a cent a litre.
Gasoline prices remain on the moderate side as inventories of crude oil still being soaked up by refiners churn out added gasoline stocks that simply aren’t being used. While refiners are enjoying good margins for distillates like Diesel and heating oils, they are also turning out gasoline that for the moment faces no demand pressures like the distillates do. Gasoline spot prices have remained almost steady to a couple of tenths as inventories show lots on hand in the low demand season.
Margins are also healthy as new regulations around distillate fuels will be coming into force in 2020 as rules around sulphur content take hold. As these new regulations take hold for all distillate users, some are saying there could be a market shortfall of distillate fuels that will increase it’s value as 2020 gets closer, and that is also part reason why we’re seeing elevated prices for those fuels.
Inventories meanwhile, also are enjoying the upside as gasoline gained 8.1 million barrels in the latest U.S Energy Information Administration report last Wednesday. Refiner capacity remained well above 96 percent and distillates also saw a massive gain of 10 million barrels.
U.S domestic production increased again, but this time by a barely noticeable two thousand barrels a day, so essentially remaining close to 11.7 million barrels a day.
The U.S rig count also dropped by seven rigs as the possibility of lower oil prices may be taking a bite out of working rigs. There are 1138 rigs operating in the U.S up to January 10th.
Distillate prices are subject to “winter blending” so they could potentially be off slightly.
*Heating and stove oils to increase by 1.9 cents a litre.
*Diesel fuel to increase by 2.1 cents a litre, and...
*Gasoline to increase by just 6/10ths of a cent a litre.
Oil rises for the first week of 2019
It is usual for market speculators to look at the first five days of any New Year and make predictions that the year in question will be a good one.
If that is the case, then the first five days of trading this year may be an indicator that oil prices will rebound somewhat, probably to within OPEC’s target range of $70 US a barrel.
With oil rising for the first five days, market speculators have sensed that OPEC’s round of cuts will soon take hold and are seeing the December cut in production as being positive for rising oil.
Markets responded positively to news that OPEC members successfully lowered production by 530,000 barrels a day for the month of December.
Canadian dollar rises
The Canadian dollar increased roughly three cents against the U.S greenback over the last nine days with the dollar trading at $1.3638U.S on the 28th of December to today’s $1.3293.
With the rise in the dollar, consumers gained a little with refined product prices. For each penny the Canadian dollar gains, the rough equivalent of close on three quarters to a full penny is saved by consumers.
U.S inventories tell a story
U.S refiners may be looking at adding more refiner capacity just to “soak up” added oil inventories in recent weeks.
With crude inventories expanding to 441 million barrels in the U.S, almost eight percentage points over their own five year averages, refiners have turned up production to try to bring the crude levels down.
But are they succeeding in supporting prices?
While oil prices have increased, West Texas Intermediate prices have not increased at the same rate as Brent prices, with the differential between the two expanding by $4 US with Brent rising faster than WTI.
Refiners are left in a quandary, that if they can’t export enough to the outside, then they are left to try to refine it to remove it from inventory.
The problem they have this week in the numbers is that, while crude inventories remained steady, gasoline showed a massive gain of 6.9 million barrels, while distillates showed an increase of 9.5 million barrels. Another such build as this week showed, anything else added may complicate inventories as a consideration to the sell price to the end user in spite of rising oil, and that squeezes margins.
Refiner capacity was recorded at 97.2 percent with the data for the week up to December 28th.
U.S domestic oil production also remained steady through the Christmas holidays at 11.7 million barrels a day.
Keep in mind winter blending as that mix may throw off the distillate numbers somewhat, and also that there is EXTREME volatility in the numbers that could be pointing the numbers lower than what I have here now.
*Heating and stove oils show a drop of 8/10ths of a cent a litre.
*Diesel fuel shows a drop of 9/10ths of a cent, and...
*Gasoline shows a drop of 1.3 cents a litre.
OPEC cuts ineffective?
Talks of a slowing world economy not only sent the stock markets into a volatile condition the last few days, but oil is also starting to pay the price on a possible slowdown.
With less demand for oil in a slowing economy, the prospects of absorbing a glut worldwide is becoming doubtful. Growing shale production in the U.S has seeded doubts that oil prices will have support as more oil is seen to be added to the markets. The last two days have seen oil retreat with even refined prices starting to trade much lower right along with it, possibly to reflected at the pumps over the next two weeks.
The likelihood of cuts being effective is also being outweighed by word from Russia that oil production has increased there, even with the word that the country was keen to join OPEC in making their last round of cuts to oil production.
API inventories up
The American Petroleum Institute also released their inventory data late this evening that also showed a moderate build of 3.5 million barrels in overall U.S crude inventories, along with building inventories in Cushing, Oklahoma where West Texas Intermediate is traded. Oil was up there by just over a million.
Inventories of gasoline were also said to be up just over 1.7 million barrels nationwide.
All eyes will be on the Energy Information Administration inventory report due shortly after 12:30PM NST for further word on oil inventory, as well as any growth in U.S domestic production figures.
Here’s what I have for price changes for this Thursday.
ALL DATA IS IN, SO THERE WON’T BE A NEED FOR A WEDNESDAY UPDATE.
*Heating and stove oils show an increase of 1.2 cents a litre.
*Diesel fuel shows an increase of 1.6 cents a litre, and...
*Gasoline shows an increase by an even penny.
OPEC+ (Plus) institutes production cut
Both OPEC and non-OPEC members, otherwise known as OPEC+ have agreed as of Friday past, to institute a round of production cuts that amounts to a little over a million barrels a day with OPEC absorbing about 800,000 barrels of that.
The agreement between the two groups is for six months and totals close to 1.2 million barrels.
Exempt from making any cuts are Venezuela, Iran and Libya who are all under production pressures, but Iran having been placed under sanction by the U.S and other counties.
Canadian dollar loses ground
The Canadian dollar lost more ground against the US dollar over the last week losing about two cents against it’s southern counterpart.
Weakness in resource prices like oil is mostly to blame, but a busy U.S economy also figures into the equation.
Expect market instability
Markets will be shaky the next few weeks and months as markets weigh evidence that the cuts will have some sort of positive impacts on prices, but there are a couple of other factors worth watching.
A worldwide economic slowdown is seen as being on its way as stock markets have shown. Lower than estimated returns have spurred the thought that there has been some downturn in demand and that has been reinforced with OPEC making cuts to what some believe as an “over-supplied” oil market.
A tit-for-tat spat between the US and China continues, even though a 90 day truce was agreed upon early on Saturday as both countries try to find a solution to their trade issues. Tariffs placed on Chinese goods were enough to bare watching as a slowdown in the Chinese economy is said to be starting. However, late news this evening includes a telltale sign that China may not be hurting as much as first thought as imports of oil in November hit ten million barrels a day for the first time ever.
Here’s what I have for this week’s price changes. Keep in mind that the distillate fuels are subject to winter blending, so they may be off slightly.
*Heating and stove oils to drop by 2.4 cents a litre.
*Diesel fuel to drop by 2.5 cents a litre, and...
*Gasoline to drop by 8/10ths of a cent a litre.
These numbers will be adjusted again via social media Wednesday morning when the last data-point becomes available.
Alberta and OPEC both to cut production
In what some may think to be an unusual move, Alberta will do as OPEC countries have long been doing to support prices from time to time. For the first time I can think of, Alberta will cut back oil production by 325,000 barrels a day in order to try and support prices for their land-locked oil resources.
By limiting production by 8.5 percent, the Notley government is hoping that the price for Alberta crude oils will rise, thus increasing their revenue take and helping to keep Alberta fields working.
Meanwhile, in the Middle East, and after the G20 meetings in Argentina, both Saudi Arabia, other OPEC members and Russia are talking about an initial production cut of 1.3 million barrels a day. But latest talk out of the Middle East is signaling that cut may be reduced to a million barrels a day as Alberta has taken over 325,000 thus making OPEC think twice about cuts that were to be brought in.
We’ll find out later this week exactly how much OPEC will cut production by later this week when OPEC meets again in Vienna.
US-China trade war ceasefire
The US and China have signaled their intent to call a 90 day ceasefire in their trade war in an attempt to reach an agreement on the imposition of tariffs on goods manufactured in China.
The Chinese were countering the tariff call by the US with a call for a twenty five percent tariff on imports of U.S crude. While oil increased in price just a little, it has since flattened out on doubts an agreement could be reached.
Concerns over oil prices arose with the possibility of Chinese economic troubles had tariffs been placed on Chinese goods and oil fell appreciably as a result. Mind you, Trump has said that placing major tariffs on China remained a possibility if the US doesn’t achieve what it believes to be a fair deal on trade and
Global economic slowdown on the way?
Concerns over a global economic slowdown continues to weigh against oil again today as some companies continue to report lower than expected earnings.
The issues of lower earnings seem to rise every few days in the markets and that weighs against oil as demand is seen to possibly slip with any worldwide slowdown.
Crude averages for this year so far
Merrill Lynch is reporting that the average price for Brent so far this year is $72.80 a barrel, while West Texas Intermediate coming in at $66.10 a barrel US.
Brent has averaged $72.86 a barrel between April 1st and the end of October according to my numbers.
The province has said it thinks Brent will average $74 US a barrel for this fiscal year.
Here’s what I have for this Thursday’s price changes. Keep in mind that these numbers will be updated to contain Tuesday data in the final numbers. Also, distillate fuels like heating, stove oil and Diesel may be off slightly due to winter blending.
*Heating and stove oils show a drop of 5.2 cents a litre.
*Diesel fuel shows a drop of six cents a litre, and...
*Gasoline shows a drop of 3.2 cents a litre.
Trump tries to take credit for lower prices
Donald Trump is trying to take credit for lower prices, but the reality of his words may come back to haunt him.
Well, the lower that oil prices go south of the border, the more likely he is to damage the growth in U.S domestic production!
For some time now, growth in the shale fields was based simply on more money earned for a higher oil price, so lots of junior producers and some majors went back to the drilling fields and domestic production blossomed right along with it.
But now that oil prices are slipping, the prospect of better profit margins is slipping away. Some may be taking that sober second thought about entering the energy field while such insecurity reigns. And the Saudi’s and OPEC may be quick to lash out.
Will he be so quick to take credit if the markets collapse again?
Saudi Arabia and OPEC worried?
While oil prices have been slipping, the prospect of lower revenues to Middle Eastern exporters again is coming into focus with most of that pointing directly at Saudi Arabia, who have to be worried that unrest again will bring unease within its borders as happened in 2014.
The last time prices collapsed, the Kingdom was left with much lower revenues and was forced to cut back on some major programming, and faced a larger than usual problem of keeping everyone happy who had been drawing from the kingdom’s riches.
If the Saudi’s and OPEC, in concert with Russia, decide to cut production, it could have the reverse effect and open the markets to the whims of growing U.S domestic production, thus complicating their end desired result.
If they maintain present levels, the markets may see it as over-production and that would likely send oil lower causing grief within its borders.
Trump’s tariff war against China is helping to send oil prices lower.
As the prospect of an economic slowdown as a result of tariffs on goods from China into the U.S grows, the promise of lower oil use in China, the world’s second largest consumer, is also weighing on the markets.
In the meantime, U.S inventories reported a build in crude oil inventory in spite of an increase in refiner capacity.
Distillate inventories were also down, but less than expected and gasoline inventories reported a drop of just shy of 1.3 million barrels.