Saudi Arabia said they will do whatever it takes to balance the oil market, again. Yet this time the market, unlike the last time, believes them as OPEC and their compliance has earned some market cred. Oil prices which were floundering lower overnight reversed course and surged higher after Saudi Energy Minster Khalid A. Al-Fali spoke and said that he was “determined to do whatever it takes to balance market.” He also said that oil producer will have more to do which is signaling that it is very likely that OPEC and Non-OPEC will extend current production cuts, as he says that they are “very flexible and will keep their options open”, even though it seems based on data that we are already in a daily supply versus demand deficit.
Khalid A. Al-Fali also noted the shale oil slowdown pointing out that shale oil production has risen only slightly. This is a strong statement as many feared was that shale oil production would offset OPEC and Non-Opec cuts, But the reality of shale economics and falling production per well has proven that at least right now, the shale oil producers were not up to the task.
The Saudi Energy Minster also said that compliance to the deal eased better than he expected and that global inventories are declining. In other words, OPEC is on the verge of accomplishing their goal of ridding the world of the oil supply glut and will create an environment for higher prices soon. This comes as the American Petroleum Institute should report another big drop in U.S. crude, gas and distillate supply. The possibility of an upside breakout is rising. Call for latest trades.
My buddies at GasBuddy say retail gas prices are going down in most places but not near me in Illinois. GasBuddy puts the “national average gas price is lower for the sixth straight week, the longest such decline since the summer of 2016,” said Patrick DeHaan, head of petroleum analysis for GasBuddy. “Perhaps even more wild is that the national average has now remained under $3 per gallon for nearly 3 years, or 1,087 days as the days of cheap oil have continued.
Prices continued to move lower as gasoline inventories posted another weekly rise, according to data from the U.S. Energy Information Administration, showing a rise in gasoline inventories of nearly a million barrels. To boot, refiners also increased processing rates to 84.5% of capacity, a rise of 1.1% versus the prior week. However, gas prices rose notably in the Great Lakes due to heavy maintenance as inventories there hit their lowest of 2017. Wholesale gasoline prices in the Great Lakes stand 20 cents per gallon higher than the Gulf Coast, which boasts the lowest wholesale prices.”
Ethanol demand is rising, with China mandating it in gasoline raising concerns of a new food or fuel controversy in the future. But could there be a new element in ethanol? DTN is reporting POET-DSM Hits Breakthrough in Cellulosic Ethanol Production. They write “pre-treatment breakthrough at POET-DSM Advanced Biofuels’ cellulosic ethanol plant in Emmetsburg, Iowa, likely won’t make national headlines.
Matt Merritt, communications director for POET-DSM based in Sioux Falls, South Dakota, however, said 2017 may be a turning point for the company in launching of full commercial-scale cellulosic production.
Difficulty with biomass pretreatment has held up POET-DSM and other similar companies in the industry. “If you go to ethanol conferences the last few years, all are saying the same thing,” Merritt said about cellulosic companies. Because POET-DSM is dealing with biomass that includes corn cobs, stocks, leaves and the like – it’s not as easy moving the feedstock through the pipes at the 25-million-gallon plant. During the past few years, Merritt said, the company has been honing mechanical aspects of the plant to allow the biomass to move more freely. “Moving stuff through the process, it is simple as getting this through pipes, through piping elbows, getting the right screens in place,” he said. “Now that we have pre-treatment figured out we can devote our time to downstream processes. It’s super exciting.”
Pre-treatment advancements allow the company to soften the biomass to enable enzymes to more effectively break down the materials for biofuels production, Merritt said.
— Phil Flynn
First Frost Advisory
We have the first Frost Advisory this autumn season in western Tennessee and northeast Alabama. Rains, Wind Advisories with Fire Weather Watch in the Plains and cold rainy, windy and cold weather in the Mid-West with wind chills reaching lows in the 30’s which should put a damper on harvest which is almost half done on Corn. In the overnight electronic session the December contract is currently trading at 350 ½ which is ¾ of a cent lower. The trading range has been 352 ¼ to 350 ¼. Could yesterday’s rally be a thing of the past or do the funds unwind more spreads?
On the Ethanol front the talk is the battle the Renewable Fuels Association (RFA) and the EPA to further reduce the Renewable Fuel Standard (RFS) and Renewable Volume Obligations (RVOs) proposed in July. This story was reported by Emily Druckman. The U.S. set an all-time high for Ethanol exports for the 2016-2017 marketing year at 1.37 billion gallons which with Corn bushels an equivalent of 488 million bushels. In the overnight electronic session the November contract posted a trade at 1.420 which is .001 of a cent higher. 3 contracts traded and the Open Interest declining to 546 contracts with the market currently showing 2 bids @ 1.409 and 1 offer @ 1.425.
On the Crude Oil front Saudi Aramco’s the name and the IPO is the emerging markets game. We should see intense interest from China and India, and also expect headlines in the coming months. It still looks like Production Cuts will be extended as the market is forging to get back in balance. Tonight we have the weekly API Energy Stocks which I am expecting further draws. In the overnight electronic session the December Corn is currently trading at 52119 which is 29 points higher. The trading range has been 5237 to 5155.
On the Natural Gas front the change in the weather which will get heaters kicking in this autumn season could show a continuation in yesterday’s rally. In the overnight electronic session the November contract is currently trading at 2.976 which is 1 ½ of a cent lower. The trading range has been 3.004 to 2.966.
— Daniel Flynn
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