Oil prices are under pressure after the American Petroleum Institute (API) reported a 3.947-million-barrel increase in crude supply, not unexpected because it is after all shoulder season. Yet, a 2.319 million barrel drop in Cushing Oklahoma oil supply should give the bears some pause. The continued draws in the NYMEX delivery point at some point will lend support as this delivery point supply is drying up.
We also saw gasoline supply rise by 4.364 million barrels, which may have been impacted by weaker demand caused by winter weather. We should start seeing draws soon as refiners and oil companies must draw down the winter blend of gasoline. Distillate inventories also increased by 1.1 million barrels adding to the negative mood this morning.
Yet, it does look like the outside markets are looking more stable and that should lead to more market optimism. The Dollar is weaker against the Yen and that should offer crude some backdoor support.
Really with the global oil demand rising, the selloff in oil should be temporary. We know shale is on the rise, but it is just replacing lost production from other areas, like Venezuela for example.
Venezuela oil production last moth fell to its lowest level in 30 years, according to OPEC. In Its monthly published report, it reported that Venezuela produced 1.6 million barrels of oil per day last month. Production in January was down 20% from a year ago.
OPEC says that world oil demand for 2018 will grow by 1.59m bbl/day to 98.6m bbl/day, on the back of a steady rise in global economic activities and increased vehicle sales in the US, China and India. This comes as global oil inventories continue to fall. In December, OPEC global stockpiles were about 109 million barrels above the five-year average, which is OPEC’s target. “In line with the existing overhang, the market is only expected to return to balance towards the end of this year.”
— Phil Flynn
Free Markets For Free Men!
Big day today with Ash Wednesday falling on St. Valentine’s Day starting out of the blocks with Consumer Price Index (CPI), Business Inventories, Real Earnings and Retail Sales at 7:30 A.M. At 9:30 A.M. we have the EIA Energy Stocks and at 2:00 P.M. we have Dairy Product Sales and a host of earnings ahead today and the Stock Market looks confident ahead of the data. On the Corn front the Grain complex is looking to be suffering from a Fat Tuesday hangover as the complex looks to be in a temporary halt. The market is still poised to rise regardless of carryover and the recent cancellation of U.S. Corn to China because of GMO concerns heightening demand for Corn in the Ukraine and bolstering their cash price which will eventually spillover to the world market and when you have emerging markets and a moving economy you must keep your people fed well and the big picture is demand will outsource supply before you know it on feed and human consumption. Weather in Argentina and Brazil is telling us their harvest will not be as good as earlier expected and weather here in the U.S. has investors keeping a keen eye on soon to be plantings. In the overnight electronic session the March Corn is currently trading at 365 ¾ which is 1 cent lower. The trading range has been 366 ¾ to 364 ¾.
On the Ethanol front the March contract posted a trade at 1.409 with 2 contracts changing hands and Open Interest at 1,028. The market is currently showing 1 bid @ 1.408 and 2 offers @ 1.413. This market is weighing in on demand from Corn and Crude Oil prices to be added to the gasoline supply.
On the Crude Oil front last night’s API Energy Stocks build of close to 4 million barrels gave the market the further heebie-jeebies as the market is trading and reacting on uncomfortable news. This morning’s EIA Energy Stocks could dispel those fears with consumers continuing to create demand unlike the broken record of the International Energy Agency (IEA) continued quotes of supply will distance and be above global demand. Just as in the past the IEA is spreading hearsay and conjuncture and in other words spreading Fake News! In the overnight electronic session the March contract is currently trading at 5846 which is 73 points lower. The trading range has been 5931 to 5823.
On the Natural Gas front the market seems stalled at the moment waiting for more fundamental news whether it is weather related or low prices to produce a spike. In the overnight electronic session the March Natural Gas is currently trading at 2.554 which is 4 cents lower. The trading range has been 2.623 to 2.554.
— Daniel Flynn
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