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Dailyfutures.com
Crude oil, Reformulated gasoline, Heating oil and Natural gas
Crude Oil
Chart Comments
Long-term (not shown): Thanks to growing demand from China and few sources of new production, crude oil has done very well in the post-9/11 era. By July of 2008, prices peaked at $147 per barrel and many expected a pull-back from those highs, but no one predicted the financial panic that sent prices to their lowest level in five years. Prices found support around $35 a barrel in early 2009 and are now higher as the world slowly recovers. I expect prices to continue to recover, but not much past $80... at least for a while (updated 6-22-09).
Daily (below): On May 1st, crude oil closed above the 125-day average for the second time in eight months and, on May 4th, prices posted their highest close in three weeks. Now that prices are above $70, I am content to step back and watch, but there appears to be more to go (updated 6-25).
Key Events - Crude oil
2009
6-17 - DOE: Crude supplies at 358 mb.
6-12 - OPEC: World oil demand estimated at 83.8 mbd in 2009.
6-9 - DOE: World oil demand estimated at 83.7 mbd in 2009 and 84.4 mbd in 2010.
5-28 - OPEC met and kept the production quota unchanged.
5-13 - OPEC: World oil demand estimated at 84.0 mbd in 2009.
5-12 - DOE: 2009 world consumption estimated at 83.7 mbd.
4-29 - DOE: Crude supplies hit 375 mb.
4-15 - DOE: Crude supplies hit 367 mb, the most since September of 1990.
3-15 - OPEC met and kept the production quota unchanged, but wants members to stop over-producing.
3-12 - U.S. gasoline sales up 3.4% in February, the biggest monthly increase in over a year.
2-11 - DOE: Crude supplies hit 351 mb.
1-7 - DOE: Crude supplies at 325 mb.
2008
12-17 - OPEC cuts production 2.2 mbd.
10-24 - OPEC cuts production 1.5 mbd.
Fundamental Notes
Fundamentally, the key statistic in the crude oil market is world surplus production capacity and that was only 1.5 million barrels per day (mbd) in 2008 - most of it in Saudi Arabia. On June 9, 2009, the U.S. Energy Department said that surplus capacity was up to 4.3 million barrels per day in May - a much more comfortable margin. Even so, the politics of the Middle East remain tense. Roughly 20% of the world's oil flows through the Strait of Hormuz and Iran has the ability to block the channel.
On June 9, 2009, the DOE estimated OPEC's actual production at 28.7 mbd in May with 2.4 mbd coming from Iraq. That was down from 30 mbd in December of 2008. The DOE also estimated that world consumption will total 83.7 mbd in 2009 and 84.4 mbd in 2010. West Texas crude prices are expected to average $58.70 in 2009. As of June 26th, U.S. crude oil stocks were up 18% from a year ago.
| Inventory data from the U.S. Department of Energy (in millions of barrels): | |||
| For the week ending: | June 26, 2009 | Week ago | Year ago |
| Crude oil | 350.2 | 353.9 | 296.1 |
| Motor Gasoline | 211.2 | 208.9 | 209.4 |
| Total Distillates | 155.0 | 152.1 | 119.7 |
| High-Sulfur Distillates | 43.3 | 40.5 | 27.4 |
| Strategic Petro. Reserve | 723.4 | 722.8 | 705.7 |
Reformulated Gasoline
Fundamental Notes
Here we go again. The financial crisis of 2008 took the air out of the energy markets for a while, but it didn't solve our energy problems. Now that the economy is improving, energy prices are rising again. Unleaded gasoline supplies are up slightly from a year ago and demand over the past four weeks was up .9% from a year ago. On June 9, 2009, the DOE predicted that retail regular gasoline will average $2.33 in 2009.
Heating Oil
Fundamental Notes
The U.S. got away with another mild winter. Distillate supplies are up 29% from a year ago and demand for all distillates over the past four weeks was down 9.4% from a year ago. As of June 26th, heating oil supplies were up 58% from a year ago. On June 9, 2009, the DOE estimated that wholesale heating oil prices will average $1.62 in 2009.
Natural Gas
Chart Comments
Long-term (not shown): For the past six years, natural gas traded between roughly $4 and $10 per thousand cubic feet with higher spikes and we are now pushing the bottom of that range lower, thanks to the financial crisis and increased gas production. This may be near a low (updated 6-22-09).
Daily (below): Natural gas prices are near their lowest levels in seven years and may be in the process of consolidating, but I see no reason to buy yet (updated 6-22).
Key Events - Natural gas
2009
6-18 - DOE: N. gas supplies +32% from a year ago.
5-12 - DOE: Estimates 2009 U.S. demand at 62.3 bcf per day.
4-23 - DOE: Natural gas supplies +36% from a year ago.
4-2 - DOE: Natural gas supplies +32% from a year ago.
3-5 - DOE: Natural gas supplies +18% from a year ago.
2-19 - DOE: Natural gas supplies +10% from a year ago.
1-11 - Russia, Europe, and Ukraine find agreement that allows gas to flow again.
1-8 - DOE: Natural gas supplies +1% from a year ago.
1-7 - Russia shuts off gas to Europe (via Ukraine).
Fundamental Notes
Natural gas prices trended higher in the first half of 2008 with concerns that future rates of production would not keep up with demand. As the saying goes, high prices cure high prices and sure enough, producers found new technologies that allowed them to increase gas production in North America by more than the experts expected. On June 18, 2009, the Potential Gas Committee estimated that U.S. natural gas reserves increased from 1.532 trillion cubic feet in 2006 to 2.074 trillion cubic feet in 2008 - a 35% increase in just two years.
As of June 26th, the DOE said that underground storage levels were up 29% from a year ago and up 21% from the five-year average. On June 9, 2009, the DOE estimated that new supplies of U.S. natural gas will be down 2% in 2009 to 63.2 billion cubic feet (bcf) per day (including imports). That should cover the estimated demand of 62.2 bcf per day. The DOE expects the Henry Hub spot price to average $4.13 per thousand cubic feet in 2009 and $5.49 in 2010.
Which U.S. regions are the biggest consumers of natural gas? Number one is the West South Central Division, consisting of Arkansas, Louisiana, Oklahoma, and Texas. A close second is the East North Central Division, consisting of Illinois, Indiana, Michigan, Ohio, and Wisconsin. A distant third is the Pacific division, consisting of Alaska, California, Hawaii, Oregon, and Washington.
|
Inventory data from the U.S. Energy Information Administration (in trillion cubic feet): | |||
| For the week ending: | June 26, 2009 | Week ago | Year ago |
| Natural Gas | 2.721 | 2.651 | 2.106 |
Common terms
API is the American Petroleum Institute.
Brent crude oil refers to North Sea oil that trades primarily in London. It is quoted most often as the "world" price.
DOE is the U.S. Department of Energy.
EIA is the Energy Information Administration. This is a sub-branch of the U.S. government's Department of Energy.
IEA is the International Energy Agency. This organization is based in Paris, France. They issue monthly reports on the world oil situation and OPEC production estimates. They have ties to the OECD.
Imported or world or sour crude is primarily the type of crude oil referred to by OPEC and is known for having more than .5% sulphur. It tends to be $2 to $3 per barrel cheaper than the WTI price.
MBD stands for million barrels per day. KBD stands for thousand barrels per day.
OECD is the Organization for Economic Cooperation and Development. This group is composed of 30 member countries that share a committment to democratic government and market economies. The members are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
OPEC is the Organization of Petroleum Exporting Countries. There are thirteen countries in this well-known group: Algeria, Angola, Ecudaor, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates (UAE), and Venezuela.
OPEC-12 excludes Iraq.
OPEC's basket price is an average of the following seven types of crude:
Saudi Arabia's Arab Light
The UAE's Dubai
Nigeria's Bonny Light
Algeria's Saharan Blend
Indonesia's Minas
Venezuela's Tia Juana Light
and Mexico's Isthmus.
RBOB is reformulated gasoline blendstock for oxygen blending. RBOB conforms to industry standards for reformulated regular gasoline blendstock for blending with 10% denatured fuel ethanol (92% purity). RBOB is a wholesale non-oxygentated blendstock traded in the New York Harbor barge market that is ready for the addition of 10% ethanol at the truck rack (Source: NYMEX.com).
SPR is the Strategic Petroleum Reserve. This is an emergency supply of crude oil that is held in reserve by the U.S. government.
WTI is West Texas Intermediate or sweet crude. This is traded on the New York Mercantile Exchange and is commonly referred to in articles about domestic oil. It has less than .5% sulphur and tends to be $2 to $3 per barrel more expensive than imported crude.
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