Posted on 03/10/2015 5:25:42 AM PDT by thackney
After several weeks of stability, the crude-oil market may once again be on the move.
Prices fell Tuesday morning in London as some market participants worried about the start of another downward shift.
“Most of the supportive factors for Brent are starting to fade,” said analysts at Energy Aspects.
After the steep selloff between June and January, the oil market had recovered in February, and appeared to reach some sort of a plateau toward the end of the month. In part, that was because of a rush to buy up oil stocks to be able to sell them at higher prices in the future, which absorbed some of the global glut.
But as storage tanks around the world have filled up, concerns about the oversupply of crude are returning. A barrel of Brent crude for April delivery was nearly 8% lower since the beginning of March. On Tuesday, the price of a barrel of Brent traded on London’s ICE Futures exchange fell 1.3% to be at $57.76 a barrel.
Energy Aspects said that while supplies had declined because of weather problems and technical issues, they are now starting to return—right at the time when the largest number of refineries around the world will be shut down for maintenance.
(Excerpt) Read more at wsj.com ...
Why oil decline could get ugly again
http://www.cnbc.com/id/102489010
Still drilling at four-decade highs, the U.S. oil industry could help drive another price collapse in crude this spring.
OPEC Secretary General Abdalla Salem el-Badri told a conference this past weekend that the cartel’s policy has hurt the U.S. shale oil industry and triggered a global reduction in capital spending that could ultimately lead to a shortage—and higher prices.
The U.S. industry, however, has not slowed its high levels of oil production, despite OPEC’s best efforts to curb drilling with lower prices. The U.S. has pumped more than 9 million barrels a day since early November, and last week it produced a multidecade high of 9.32 million barrels. Industry output has not been at such a level on a sustained basis since the 1970s.
Oil analysts say the strong production in the U.S. should ultimately wind down, as the output of some wells in operation declines and more wells are shut in. But for now, as seasonal factors like refinery maintenance affect demand, U.S. production could be a catalyst for even lower prices and a new bottom for crude.
“You could touch a surprisingly low price sometime in the next month or two,” said Citigroup energy analyst Eric Lee. “As we get into summer, refineries come back from maintenance. Demand could pickup stronger than it was before the rig cuts and capex cuts, and globally there will be capex cuts starting to have an effect.”
Lee and other analysts said West Texas Intermediate crude, at $50 per barrel Monday, could easily head toward $40 a barrel.
“WTI could take another leg down,” said Lee. “If there’s enough distress, if imports into the U.S. don’t budge, which they wont ... if exports don’t rise quickly enough, which is a wild card, then producers at various locations need to shut in pipelines or run at low utilization so it doesn’t come to Cushing.”
Lee said if the market becomes very distressed, then the price could head to $40 per barrel and there is a chance it could see a price in the $20s before bouncing back to higher levels. West Texas Intermediate closed at a low of $44.53 per barrel Jan. 29, before moving higher during February.
Traders have been focused on the high level of oil storage capacity being used in the U.S., particularly at Cushing, Oklahoma, the storage hub for the benchmark West Texas Intermediate oil futures contract.
excerpted
Why Oil Prices Haven’t Hit Bottom Yet — One Analyst’s View
http://www.thestreet.com/story/13070940/1/why-oil-prices-havent-hit-bottom-yet—one-analysts-view.html
...Current inventories in Cushing, Okla., one of the most important crude trading hubs, are within 3 million barrels of the record high, which occurred in April 2013 due to a lack of outbound pipeline capacity from Cushing, according to energy market data provider Genscape, which monitors oil storage tank volume levels at Cushing.
As of Feb. 27, 63% of Cushing storage capacity was being used. Since Genscape began monitoring Cushing in 2009, capacity has never exceeded 80%.
As the most affordable crude oil storage facilities like Cushing fill up, the cost of storage is on the rise. The higher cost will affect ETF investors, who need the spot price to rally more than $2 just to break even as their oil futures contracts roll forward to the following month.
That’s because the curve is normal, with pricing rising each month, so when investors roll forward they sell at a lower price and buy at a higher price. With the $2.00 cost of storing oil baked into the equation — $1.50 higher than what it costs under normal conditions — ETFs will see that as a drag on their performance.
It’s going to be frustrating for those holding oil ETF positions, whose numbers have grown to the highest level in five years, said Citi’s Evans.
They’re looking for the great turn in energy market fundamentals they hope will happen, leading oil prices to behave so well despite a dearth of positive news.
“Just by oil getting 20% off its low, they think the sun has come back out and the birds are singing and it’s a wonderful time to own oil,” Evans said. “Meanwhile, the statistics show oil production hit its highest level since the early 1970s — a 40-year high — and is 15% higher than a week ago.”...
excerpted
- - - - -
Okay, that last line is utter nonsense. Oil production did not grow 15% in a week.
The swagger in Midland Texas is gone
The oil boom last year was easy to see at the airport in Midland, Texas, the gateway to the biggest crude-producing region in the U.S. The 30 or so spaces for private planes were often filled.
On one day in early February, a lone corporate jet sat on the tarmac, the empty spots a harbinger of the slowdown looming in a city that is 85 percent dependent on the oil and gas industry.
Whew, $2.21 for regular was getting to me...especially after we saw $1.81 not too long ago!
Have you seen this article? Contango is a new word for me.
Little Guys Lose Out On Oil Bonanza
“Oil storage capacity in the U.S. is more than half full as commodities traders and some midstream firms take advantage of an inversion in the price of crude.
Nymex futures contracts for U.S. benchmark West Texas Intermediate crude on Friday priced oil for delivery in January 2016 about 19% above the current spot price. That situation, called contango, is the opposite of normal pricing, which decreases in more distant, or forward, months.”
http://finance.yahoo.com/news/little-guys-lose-oil-bonanza-212800221.html
Contango is where the future price of oil is more than the cost to store it that long.
Nothing new. But with the storage price rising with the falling spare capacity, the situation will go away.
The following shows how the prices currently climb in future months/years.
http://online.wsj.com/mdc/public/page/2_3028.html?category=Energy&subcategory=Petroleum
Thanks.
In regards to the price of storing oil...the fix is to cut the price and sell it off.
That will happen, not so much for oil in storage at first, but oil without an affordable place to be stored.
Obama’s Veto was Feb 24.
And that chart shows a 20% rise, not 40% as I linked and stated above.
I confused you with another poster in another thread. Which is why my two comments above make no sense.
Regards,
thackney
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