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WTI - 38.69 -1.10 -2.76%
WTI - 38.67 -1.12 -2.81%
WTI - 38.41 -1.38 -3.47%
The next few days will be interesting.
Stocks Swoon Along With Gold And Oil But Keep Your Eye On Fed Rates
Wednesday March 23, 2016 18:10
Poor earnings, plus sagging crude oil, and an extraordinary loss in a patent case in the biotech sector, weighed on equities prices today.
Stock prices, however, are trying to bounce back off their lows of the day, looking for a late afternoon session, which seems itself to be swooning.
European equities were mixed with the DAX and FTSE up a touch and the French CAC off a bit. While we still mourn the murdered in Brussels, the markets are going about their business. Asia was also mixed, but trended down (Nikkei and Hong Kong) while Shanghai was up modestly.
At 3:30 in New York, West Texas Intermediate crude is off over 4.00% and Brent North Sea product is down more than 3.00%. The reasons are clear-cut. The market was largely overbought recently and a rapid, unexpected build in stockpiles was the excuse traders were looking for.
The U.S. government reported a crude build three times above what analysts expected.
The increase marked the sixth straight week of record high inventories, rekindling worries of a glut that threatened to reverse the two-month-long, but tenuous, rally in the market.
The U.S. Energy Information Administration (EIA) said crude stockpiles rose 9.4 million barrels last week to a record total of 532.5 million barrels. Though this was not far off the 8.8 million build predicted by industry group American Petroleum Institute on Tuesday, it was light years away from the 3.1 million barrels expected by analysts in a Reuters poll.
"The data will do little to help oil bulls, given the monster build for crude inventories already at record high levels prior to this," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
Aside from helping to depress oil, the U.S. dollar helped to push spot gold down around 2.25% today, although regular trading was negative enough all by itself. The remaining components of the precious metals complex – silver, platinum and palladium were down approximately 4.00% each. (At 4 PM in New York.)
We think the U.S. dollar is rising on the annoyingly persistent chatter of non-voting members of the Fed this year. Patrick Harker, President of the Philadelphia Fed, contradicting a statement that was issued a week ago said he thinks the next interest-rate increase could come as soon as April. Another non-voter, Chicago Fed President Charles Evans, said we still might see two more increases this year, which is softer than Harker’s outlook but still considered a hawkish statement.
The two officials are noted inflation hawks, but what everyone tends to forget is that 2% is an inflation target and an average. We fall in the camp that says 2.5% or even 3.00% may very well be the likely spot where inflation may settle briefly later this year before being squelched.
We also feel as if the FOMC will not act hastily because of the presidential elections.
Inflation in the United States in January was the strongest in January in almost 4-1/2 years and it ticked up more than anticipated in February.
You will hear more and more about the Fed purposely falling behind the inflation curve in the second quarter. Probably they are more concerned with fuller employment than they are with inflation. In and of itself more employment will tend to drive inflation as more wages chase goods.
We also believe we are not out of the woods with China’s economy just yet, so the Fed may be factoring that in as well.
The kibitzing by the non-voting Fed members on the 2016 FOMC is a pointless distraction. Pay attention to the big three who actually cast a vote: Chairwoman Janet Yellen; Vice Chairman William Dudley, and Stanley Fischer of the Board of Governors. Without them, nothing will change.
Gary Wagner
thegoldforecast.com
http://www.kitco.com/commentaries/2016-03-23/Stocks-Swoon-Along-With-Gold-And-Oil-But-Keep-Your-Eye-On-Fed-Rates.html
WTI - 39.89 -1.56 -3.76%
WTI - 40.11 -1.34 -3.23%
WTI - 40.11 -1.34 -3.23%
WTI - 40.41 -1.04 -2.51%
WTI - 40.67 -0.78 -1.88%
WTI - 40.97 -0.48 -1.16%
WTI - 41.00 -0.45 -1.09%
Corruption at the top has been going on a long time. This is nothing new.
Follow the $$$...
The Current Oil Price Rally Is Reaching Its Limits
Submitted by Tyler Durden on 03/22/2016 13:21 -0400
Submitted by Nick Cunningham via OilPrice.com,
Oil prices have climbed by about 50 percent from their February lows, topping $40 per barrel. But the rally could be reaching its limits, at least temporarily, as persistent oversupply and the prospect of new shale production caps any potential price increase.
U.S. oil production has steadily lost ground over the past two quarters, with production falling more than a half million barrels per day since hitting a peak at nearly 9.7 million barrels per day (mb/d) in April 2015. American oil companies have gutted their budgets and have put off drilling plans, with many projecting absolute declinesin 2016.
That has sparked a renewed sense of optimism among oil traders.Moreover, supply outages in places like Iraq and Nigeria have also knocked at least a quarter of a million barrels per day offline, an unexpected disruption that put upward pressure on prices in March. Geopolitical unrest still has the ability to influence prices, even while the world is awash in oil. More oil bulls are piling on in anticipation of the April OPEC meeting, on an unfounded belief that the production freeze may actually have any material impact on global oil supplies.
But while oil traders have found some reasons to believe that oil prices are rising, there are just as many, if not more, data points to backup bearish sentiment. Storage levels in the U.S. continue to set records, hitting 523 million barrels for the week ending on March 11. Until inventories start to deplete in a significant way, oil prices will face a lot of resistance trying to break above $40 per barrel. Iran also continues to add production, albeit at a slower-than-expected rate.
In fact, the rally to $40 was largely driven by speculation. As short bets peaked and started to unwind, traders closed out positions at a rapid clip, helping to push prices up by $12 to $13 per barrel in less than two months. The trend continued last week as hedge funds and other major money managers increased their net-long positions on crude by another 17 percent. Short positions are now at their lowest levels since last June.
But now, with oil traders taking the most bullish positions in months while the fundamentals still have not shifted in a correspondingly significant fashion, traders have set up the conditions where oil prices could snap back to the downside. Once it becomes clear that OPEC won’t come to the rescue, and traders have taken bullish bets to unwarranted levels, prices could fall back to the mid-$30s.
It isn’t just a speculator’s game, however. The physical market could change as well with oil prices as high as they are – shale drilling could comeback with oil prices at $40 per barrel and above. Some areas of North Dakota have breakeven prices at around $20 to $25 per barrel. Drilling for oil in shale is already a “short-cycle” event – a well can take weeks or months to be completed, whereas an offshore project can take several years.
On top of the quick lead times, U.S. shale companies are also sitting on thousands of drilled but uncompleted wells (DUCs). Over the past year, companies did not want to complete their wells and sell their output into a depressed market and/or they needed to save cash in the short-run so decided to defer well completions.
That means a wave of production, the extent of which is unclear, could come back online when oil prices prove enticing enough. Reuters cited a Wood Mackenzie estimate that found that the backlog of DUCs has already begun to decline, falling by about one-third over the past six months. In the Permian Basin and the Eagle Ford, more than 600 wells sit on the sideline awaiting completion, which could lead to the production of an additional 100,000 to 300,000 barrels per day. The backlog of DUCs should be worked through this year and next, returning to normal by the end of 2017.
"If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect," Michael Wittner, global head of oil research at Societe Generale, told Reuters. "More output is bearish.” Companies could even be forced to complete more wells in a rush to meet debt payments.
Neil Atkinson, head of the oil market division at the International Energy Agency (IEA), largely agrees with the potential shale restart. “If prices keep rising, we could find that because of the cost cutting and the technology improvements that some of this marginal production is switched back on,” he said in a March 18 interview with Fuelfix. “But how long does it take to reassemble crews, get the labor, the equipment and all the rest of it? This is what we don’t know.”
Baker Hughes reported that the oil rig count actually turned positive last week, rising by one to 387 (the overall rig count declined by four to hit 476, due to the loss of five natural gas rigs). Obviously, one data point does not prove a trend, but the dramatic declines in rig counts in 2016 have slowed and basically come to a halt in March. It is too early to tell, but drillers could begin to add more rigs if oil prices rise above various breakeven points. That is not good news for oil prices.
http://www.zerohedge.com/news/2016-03-22/current-oil-price-rally-reaching-its-limits
Libya won't attend April oil meeting, wants to boost output
Libya won't attend April oil meeting, wants to boost output: source
Oil price could fall by $10 if output freeze fails:
DNB Markets
Commodities
Mar 10, 2016 05:53AM ET
© Reuters
OSLO (Reuters) - Crude oil prices could fall by $10 per barrel, erasing recent gains, if OPEC and non-OPEC countries fail to finalize a plan to freeze output levels, Norwegian brokerage DNB Markets predicted on Thursday.
North Sea crude currently trades at just over $40 per barrel, a rise of almost 50 percent from a 12-year-low seen in January but still far below a mid-2014 peak of around $115.
An Iraqi oil official told state newspaper Al-Sabah on Wednesday that the world's biggest oil exporters both in and outside the Organization of the Petroleum Exporting Countries plan to meet in Moscow on March 20 to discuss an output freeze.
The report was later denied by Russia's energy ministry, which said no date or place had been set for a possible meeting.
"If they can agree on a production freeze I think we have seen a bottom. If they fail, I think the oil price will drop $10 per barrel again," DNB Markets analyst Torbjoern Kjus told an energy conference in Oslo.
OPEC members Saudi Arabia, Qatar and Venezuela, along with non-OPEC exporter Russia, pledged earlier this year to leave supply at January's levels if others cooperated.
DNB Markets predicted last week that the price of North Sea Brent crude would reach $45 in three months and $55 in six months.
nb-markets-389112" rel="nofollow" target="_blank">http://www.investing.com/news/commodities-news/oil-price-could-fall-by-$10-if-output-freeze-failsnb-markets-389112
WTI - 40.94 -0.58 -1.40%
WTI - 40.84 -0.68 -1.64%
WTI: 40.67 -0.47 -1.14%
WTI: 40.77 -0.37 -0.90%
Largest U.S. refinery now belongs to Saudi Arabia
Charles Kennedy, Oilprice.com10:32 a.m. EDT March 19, 2016
Royal Dutch Shell and Saudi Aramco appear to be getting a divorce, breaking up their joint venture in U.S.-based refining assets.
The two companies joined together to create Motiva Enterprises LLC in 1998, a 50-50 joint venture that operated three refineries on the U.S. Gulf Coast. But Shell and Saudi Aramco have seen their interests head in different directions. "It is now time for the partners to pursue their independent downstream goals," said Abdulrahman Al-Wuhaib, a senior vice president of Saudi Aramco’s downstream unit.
Reuters reported that the relationship started to fray after Motiva announced a $10 billion expansion of the Port Arthur refinery, doubling its capacity to 603,000 barrels per day, making it America’s largest refinery. It produced gasoline, diesel and jet fuel. A leak shortly after the expansion was completed in 2012 led to ballooning costs, exacerbating tension between Shell and Aramco. A 2015 workers strike also sparked anger between the two companies.
The two companies signed a nonbinding letter of intent, a plan that would divide up Motiva’s refineries between them. The refineries have a combined capacity of 1.1 million barrels per day and are all located close to each other. The breakup will allow Saudi Aramco to take over the Port Arthur refinery and 26 distribution terminals, and Aramco will also hold onto the Motiva brand name. Shell will take over the other two refineries, Convent and Norco, both located in Louisiana. Shell said that it would operate the two refineries as one plant with a combined throughput of 500,000 barrels per day.
The split will hand the largest U.S. refinery to the state-owned Saudi oil company. The Wall Street Journalspeculates that it could also pave the way for some sort of listing of Aramco’s assets in a public offering, something that Saudi officials have alluded to for several months. Few expect Aramco to list its upstream production assets in Saudi Arabia; downstream assets are much more likely to be offered up.
OilPrice.com is a USA TODAY content partner offering oil and energy news and commentary. Its content is produced independently of USA TODAY.
http://www.usatoday.com/story/money/markets/2016/03/19/largest-us-refinery-now-belongs-saudi-arabia/81974062/
Don’t bet on a rapid recovery for oil prices
By Myra P. Saefong
Published: Mar 18, 2016 2:49 p.m. ET
WTRG’s James Williams sees oil falling back to $30
WTI oil prices could fall back to $30, says James Williams of WTRG.
Gains for oil this week were impressive, but Friday’s slump in crude has helped support skeptics’ view that crude’s rocket rise isn’t sustainable.
West Texas Intermediate oil CLJ6, -2.14% CLK6, -1.27% traded lower on Friday after settling a day earlier at their highest levels of the year. April oil, which expires at Monday’s close, dipped under $40 a barrel on the New York Mercantile Exchange.
The “crash” in oil prices was “linear, but the recovery will not be,” said analysts at Bank of America Merrill Lynch, in a note Friday.
Where did 800,000 barrels of oil go?(4:17)
Amid global oversupply, the crude market has a mystery: 800,000 missing barrels of oil. WSJ's Georgi Kantchev joins Shelby Holliday to discuss. Photo: Getty
Oil has lost more than half its value since mid-2014. Still, they were poised Friday to tally a five-week gain of roughly 35%.
Crude prices have climbed “on growing hopes that the oil market is going to rebalance itself because of strong demand and a drop in supply given the noticeable idling of oil rigs in the U.S. in recent months,” said Fawad Razaqzada, technical analyst at Forex.com and City Index.
The latest data from Baker Hughes BHI, +1.35% shows that the total number of active U.S. drilling rigs has dropped to their lowest level on record. On Friday, Baker Hughes said total U.S. rigs fell 4 to 476. The U.S. oil-rig count edged up by 1 to 387 after 12 weeks of declines.
Domestic supplies of crude, meanwhile, have been rising over the last five weeks. The Energy Information Administration pegged total U.S. crude inventories at 523.2 million barrels for the week ended March 11. They’re at “historically high levels for this time of year,” the EIA said.
Market needs an output ‘cut’, not a ‘freeze’
The prospect of a deal to freeze output between Russia and the Organization of the Petroleum Exporting Countries has also given oil a boost, Razaqzada said.
Oil producers plan to meet on April 17 in Doha, Qatar to discuss limiting output, raising hopes that producers will work together to find a way to ease the glut of global supplies and boost prices.
However, the “goal” of the April meeting is, with the exception of Iran, to “have everyone put a cap on production,” said James Williams, energy economist at WTRG Economics.
“That is not bullish because at current production, the world is oversupplied by 1.5 to 2 million barrels a day,” he said. “Only a production cut is bullish and the nearest possible time” for a decision to cut would be during the next scheduled OPEC meeting in June.
“So far, price movements reflect more hope than reality,” said Williams. Given that, he expects WTI prices to “make another trip down toward $30.”
The Fed and oil’s rebalance
But not everyone is bearish on the outlook for oil.
Tim Evans, chief market strategist at Long Leaf Trading Group, said the gains for oil are sustainable because a sizable amount of weakness in the market over the last 12 months was based on the expectations that the U.S. Federal Reserve would be raising interest rates this year. WTI prices have lost over 30% from a year ago.
The central bank on Wednesday left interest rates unchanged and now forecasts two rate increases this year instead of an earlier estimate for four. Prospects for higher interest rates had lifted the appeal of holding dollars, dulling demand for dollar-denominated commodities.
Now the oil market has “to reprice that expectation, allowing energies to recover aggressively,” Evans said.
The mix of a weaker U.S. dollar DXY, +0.30% which is set for a weekly loss of over 1% in the wake of the Fed announcement, and strong demand for oil has given the market a “fundamentally strong outlook,” said Evans. “As of now, the market is not solely relying on a supply-side change in order to find direction.”
Instead, the market might be looking more closely for an overall balance.
Prices have apparently “started to reflect the prospect of tighter fundamentals in the future,” said Matthew Parry, senior oil analyst at the International Energy Agency.
Read: Oil rally is too little too late for cash-strapped producers
Parry said that the three years of a “heavily oversupplied market” could potentially end in 2017.
The closer the market gets to that time, “the less downside pressure there should be on oil prices,” said Parry.
http://www.marketwatch.com/story/dont-bet-on-a-rapid-recovery-for-oil-prices-2016-03-18?mod=MW_story_latest_news
WTI is 39.95
WTI is 39.95
Oil at 40.24
DWTI at 124.46
Bought more at 118.60.
Analyst: Why the U.S. shale bust is about to get MUCH worse
Submitted by IWB, on March 16th, 2016
From Matt Badiali, Editor, Stansberry Resource Report:
A terrible bit of news went unnoticed in the commotion amid the modest rebound in oil prices over the past two weeks.
While every news outlet shouted about Iran and OPEC, a U.S. energy icon quietly announced news that could potentially shatter the industry.
As I’ve explained recently, many oil companies are teetering on the brink of bankruptcy. But news out of Alaska could lead to disaster.
BP Prudhoe Bay Royalty Trust (BPT) – operated by the Alaskan division of oil giant British Petroleum (BP) – sells oil from the Prudhoe Bay oilfield. It just announced a 65% drop in its economic oil reserves.
We’ll explain exactly what that means in a moment… but you can expect the numbers that the other area shale explorers release in the coming weeks will be even worse…
From 1968 to 2015, Prudhoe Bay was the most prolific oilfield in the country, according to the U.S. Energy Information Administration (EIA). Today, Prudhoe Bay ranks third in the U.S. behind Texas’ Eagle Ford and Spraberry Shales.
Prudhoe was so large, three major oil companies – BP, Arco, and Humble Oil – spent $8 billion in 1977 constructing the Trans-Alaska Pipeline System (TAPS) to bring its oil to market. That’s more than $31 billion in today’s dollars.
For a while, that investment paid off. By 1988, the field produced nearly 2 million barrels per day – almost as much oil as the entire state of Texas. From 1985 to 1995, the field produced as much as 25% of the entire U.S. oil output.
In 2013, the North Slope fields still produced more than 479,000 barrels per day, though that accounts for only about 5% of U.S. production. In 2014, more than 12.5 billion barrels of oil remained in the area, according to the Alaska Oil and Gas Commission. But that’s actual barrels… not “economic reserves.”
Even though an oilfield can hold a tremendous amount of oil, only some of that oil is profitable at certain prices. Those barrels are called economic reserves. And that’s where the problem lies…
You see, the U.S. Securities and Exchange Commission requires publicly traded oil companies to calculate economic reserves using an average oil price from the previous year. Here’s what BP Prudhoe Bay Royalty Trust’s price and reserve calculation look like…
As you can see, from 2014 to 2015, the average price per barrel fell 47%… but the reserves fell 65%. That’s a huge change from 2013 to 2014, when reserves fell just 10%.
Prudhoe Bay is a giant legacy field, with a vast network of pipes and wells already in place. So production costs are lower there than in most shale fields. So if Prudhoe Bay’s economic reserves fall 65%, the rest of the industry is in big trouble.
Reserve calculations will be a big problem for most U.S. oil companies as they report over the next few weeks. Using the new $50.28-per-barrel price is going to result in a massive reduction in U.S. oil reserves.
In some cases, certain companies could have ZERO economic reserves left.
According to Bloomberg, only one shale oil region (out of 38) – Oklahoma’s SCOOP – is economic below $50.28 per barrel. Even if we factor in lower service costs – which dramatically increases risk – only 10 shale regions are economic…
GSW3-16table
Notice that some high-profile shales aren’t on the list. For example, companies drilling in the Bakken’s Elm Coulee region need oil prices to stay above $72 per barrel to be economic. Companies drilling the Permian Basin’s Cline Shale need $64-per-barrel oil to make money.
That oil won’t be considered reserves this year. Don’t be surprised to see some of these shale explorers take majorreserve decreases. When that happens, the banks will have no choice but to tighten up the amount of money they can lend. (Less collateral means smaller loans.)
The next leg down will be on these reserve revisions… and oil explorers are going to feel the pain.
Good investing,
Matt Badiali
March 16th, 2016 | Tags: analyst, bust, shale, worse |
http://investmentwatchblog.com/analyst-why-the-u-s-shale-bust-is-about-to-get-much-worse/
WTI at 40.02
WTI at 39.98
WTI at 39.91
WTI at 39.85
39.72 appears to be difficult to cross.
WTI at 39.72
Will Crude Oil Prices Hit $25 per Barrel?
Market Realist By Gordon Kristopher
13 hours ago, March 16, 2016
Will Crude Oil Prices React to the EIA’s Crude Oil Inventory Report?
(Continued from Prior Part)
EIA STEO report
The EIA (U.S. Energy Information Administration) released its STEO (Short-Term Energy Outlook) report on March 8, 2016. It reported that the global crude oil supply-demand gap will be ~0.7 MMbpd (million barrels per day) in 2017. Previously, in its February STEO report, it estimated that the global crude oil supply-demand gap would be ~0.29 MMbpd in 2017. Growing global supplies would have a negative impact on crude oil prices. However, the IEA (International Energy Agency) estimates that the global crude oil supply-demand gap will be around zero by the end of 2017.
Crude oil price estimates
A Reuters poll suggests that Brent prices will average around $40 per barrel in 2016. On the other hand, the National Bank of Abu Dhabi suggests that crude oil prices could test $20 per barrel in the short term due to fragile economic conditions in the Middle East and North Africa region. Read How Are Oil Prices Squeezing OPEC Members’ Budgets? to learn more. Moody’s suggests that crude oil prices could hit $25 per barrel if Iran increases production.
In its February STEO report, the EIA estimated that Brent crude oil prices could average around $38 per barrel in 2016 and $50 per barrel in 2017. WTI (West Texas Intermediate) oil prices were estimated to average at $38 per barrel in 2016 and $50 per barrel in 2017. However, in its March STEO report, the EIA expected West Texas Intermediate and Brent crude oil prices to average ~$34 per barrel in 2016 and ~$40 per barrel in 2017. The downward revisions in the oil prices suggest more pain for the crude oil market.
Low crude oil prices have a negative impact on oil and gas producers’ margins like Apache (APA), QEP Resources (QEP), Synergy Resources (SYRG), WPX Energy (WPX), and Hess (HES). The volatility in the oil prices impacts ETFs and ETNs like the iShares U.S. Energy ETF (IYE), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
http://finance.yahoo.com/news/crude-oil-prices-hit-25-011018911.html
I just added more D's.
Crude Oil Prices: Key Support and Resistance Levels
Market Realist By Gordon Kristopher
5 hours ago
March 15, 2016
US Crude Oil Inventory Report: Will It Overshadow the Bull Market?
(Continued from Prior Part)
Short-term crude oil price trends
Crude oil prices have been on a roller coaster ride since the beginning of 2016. Oil prices have rallied more than 40% since the low in February 2016. On the other hand, oil prices have fallen by 65% since June 2014. The delay in oil producers’ meeting and record US crude oil inventories are limiting the upside for crude oil prices.
Key support and resistance
Rising US crude oil inventories could push crude oil prices lower. The estimates of rising supplies from Iran could also push oil prices lower. The important support level for crude oil prices is seen at $25 per barrel. Prices tested this mark in 2003. In contrast, oil producers’ meeting and estimates of the slowing US crude production and oil rig count could support crude oil prices. The next resistance for crude oil prices is seen at $45 per barrel. Prices tested this level in October 2015.
Crude oil price forecast
The forward curve suggests higher crude oil prices in the future. WTI (West Texas Intermediate) December 2020 crude oil futures contracts were trading at $48.92 per barrel as of March 15, 2016. In contrast, Goldman Sachs (GS) lowered the crude oil price forecasts for 2016 and 2017. Goldman Sachs forecasts that Brent crude oil prices will average $39 per barrel in 2016 and $60 per barrel in 2017. It estimates that WTI’s crude oil price forecast will average $38 per barrel in 2016 and $58 per barrel in 2017.
Multiyear low crude oil prices will impact oil and gas producers like Oasis Petroleum (OAS), Northern Oil & Gas (NOG), Triangle Petroleum (TPLM), Halcon Resources (HK), and Sanchez Energy (SN).
ETFs and ETNs like the iShares U.S. Energy ETF (IYE), the iShares U.S. Oil Equipment & Services ETF (IEZ), the Direxion Daily Energy Bull 3x Shares ETF (ERX), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI) are also influenced by uncertainty in the oil market.
http://finance.yahoo.com/news/crude-oil-prices-key-support-134922750.html