The Trump administration invited a group of U.S. senators to the White House to discuss the bio-fuels policy. This meeting is aimed at helping refineries cope with rules of the Renewable Fuel Standard (RFS). Sources say the senators will include Iowa senators Chuck Grassley and Joni Ernst from the state of Iowa on the Corn front and senators representing refineries Pat Toomey from Pennsylvania and Ted Cruz from Texas. Stay Tuned. In the overnight electronic session the July Corn is currently trading at 404 ¾ which is a ¼ of a cent lower. The trading range has been 405 ¼ to 403 ¼. Plantings are on the rise but remember what Mother Nature reminds us, “it is not what you plant but what you grow.”
On the Ethanol front the May contract closes in on Expiration and there were no trades posted in the overnight electronic session. The June contract settled at 1.454 and the market is currently showing 1 bid @ 1.452 and 2 offers @ 1.455 with Open Interest at 855 contracts. On the Crude Oil front the market held key support a $67 a barrel and I anticipate higher prices heading into the weekend, especially with fundamentals of supply & demand and also the geo-political front. In the overnight electronic session the June Crude Oil is currently trading at 6763 which is 30 points lower. The trading range has been 6828 to 6753. On the Natural Gas front we have the EIA Gas Storage data due out today and we are going no where fast. The Thomson Reuters weekly poll with analysts predicting builds of 40 bcf to 68 bcf. This compares to the one-year build of 68 bcf and the five-year average of 69 bcf. The fundamentals remain the same and future prices remain premium to cash. In the overnight electronic session the June contract is currently trading at 2.744 which is 1 cent lower. The trading range has been 2.773 to 2.743.
— Daniel Flynn
The Energy Report: The West Coast barrels
The West Coast saw a huge crude oil build, but for traders the left coast is sometimes the left-out coast. Barrels out west are sometime erratic and really does not reflect the larger picture when it comes to the larger oil supply and demand picture in terms of the West Texas Intermediate delivery point. So, one must respect West coast barrels, but if you leave them out as many traders do, it shows that crude oil supply in the East Coast, Gulf Coast and in the Rocky Mountain region are a much tighter market. You then must look at more geopolitical and production woes like the fact that the IMF is threatening to kick out Venezuela from the group, cutting off one of their lifeline for cash and the fact that it looks increasingly likely that the United Sates is going to pull out of the Iranian nuclear deal.
The Energy Information Administration reported that crude supply spiked by 6.2 million barrels, which almost 5 million barrels of that build was in the West Coast. Throw out the West Coast and consider the fact that the SPR released 450,000 barrels of supply the number does not look nearly as bearish. Even if you assume that every barrel should be counted equally then you still have to say that despite the big increase, supply overall is below the average ranger for supply.
The International Monetary Fund (IMF) is threatening to expel Venezuela for the lack of paper work and not explaining what the heck they do with the money that they are given. Reigniting market concerns over the struggling nation’s crude production, Market Watch reported that “The IMF said it has issued a “declaration of censure” against Venezuela for its failure to implement certain remedial measures and failure to comply with specific obligations. The IMF said it called on Venezuela “to adopt specific remedial measures and will meet again within 6 months to consider Venezuela’s progress in implementation.”
“It is another nail in the coffin for the Venezuelan oil industry,” said Phil Flynn, senior market analyst at Price Futures Group. “The IMF could be a lifeline for cash that may dry up if they are booted out.
The economic crisis in Venezuela has led to sharp declines in the nation’s crude production.” The Energy Information Administration has said the country’s crude output fell to 1.6 million barrels a day in January of this year, from 2.3 million barrels a day in January 2016, as reported by MarketWatch.
Reuters is reporting that U.S. President Donald Trump has all but decided to withdraw from the 2015 Iran nuclear accord by May 12, but exactly how he will do so remains unclear, two White House officials and a source familiar with the administration’s internal debate said on Wednesday. If that is true it will be risky to be short oil or products in that environment. While the market has priced in a pullout to a large extent, the trade will have to still be on guard for how Iran and the rest of the partners of the agreement react.
For oil products, the EIA reported that gasoline inventories rose by 1.2 million barrels last week, pretty much in line with expectations. Distillate fuel fell by 3.9 million barrels last week and are in the lower half of the average range for this time of year.
Natural Gas Intelligence reports that natural gas futures dropped close to a nickel Wednesday ahead of a government storage report expected to show the season’s first injection. Spot prices saw mostly small adjustments amid forecasts for generally moderate temperatures, and the NGI National Spot Gas Average finished down 2 cents at $2.36/MMBtu. The June contract settled at $2.754 Wednesday, down 4.8 cents after trading as high as $2.811 and as low as $2.745. July settled at $2.791, down 4.6 cents. Wednesday’s price action reversed a 3.9-cent gain from the day before, when the prompt-month traded as high as $2.820, testing the upper end of a long-standing trading range, according to analysts. Estimates for Thursday’s Energy Information Administration (EIA) storage report point to the injection season officially getting underway this week — about a month later than unusual.
A Reuters survey of traders and analysts on average called for EIA to report a 52 Bcf injection into lower 48 gas stocks for the week ending April 27, with responses ranging from 40 Bcf to 68 Bcf. A Bloomberg survey produced a median build of 51 Bcf, with responses ranging from 40 Bcf to 62 Bcf. Last year EIA recorded a 68 Bcf injection during the period, while the five-year average is a build of 69 Bcf.
Saudi Arabia is the largest oil producer in the Organization of Petroleum Exporting Countries and the de facto leader of an effort to drain a surplus from the five-year average in global crude oil inventories. That surplus helped push the price of oil below $30 per barrel two years ago and the OPEC-led effort, coupled with heightened geopolitical tensions, has left oil trading in the $70 per barrel range for most of the year.
— Phil Flynn
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