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Refined Products

Recap: Oil futures opened the session trading to the upside, but were unable to sustain gains, as U.S. production once again overshadowed possibilities that OPEC would extend output cuts. After reaching a high of $50.22, June WTI slipped $1.19, to a low of $49.03, and then proceeded to fall into a 25 cent trading range for the remainder of the session. A lack of hedge fund buying, along with skepticism over the extension of OPEC output cuts has taken strength out of this market. June WTI fell 39 cents or 0.8%, to settle at $49.23 a barrel, while Brent for June delivery lost 36 cents, or 0.7%, to settle at $51.60 a barrel.

May RBOB fell 2.31 cents, or 1.4%, to settle at $1.6214 a gallon. Heating oil for May delivery settled at $1.5427, down 1.06 cents, or 0.68%.

Fundamental News:  Genscape reported that crude oil inventories held in Cushing, Oklahoma in the week ending April 21st fell by 1.1 million barrels on the week and by 346,000 barrels from Tuesday, April 18th to 69.9 million barrels on the week. 

The meeting of a technical committee of OPEC and non-OPEC nations in Vienna concluded that a six month extension of output cuts would be necessary. 

Iran’s Oil Minister, Bijan Namdar Zanganeh, said it is unrealistic to expect oil at $60/barrel. 

According to comments by Russian officials and details of investment plans released by oil firms, Russia’s oil output could increase to its highest level in 30 years if OPEC and non-OPEC producers do not extend a supply reduction deal beyond June 30th.  Russia’s Deputy Prime Minister, Arkady Dvorkovich, said investment programs show that it is possible that Russia’s oil production will increase once the deal expires.  He did not give figures but Russia’s Energy Minister, Alexander Novak, previously stated that the country’s output could reach 548-551 million tons a year or 11.01-11.07 million bpd in 2017, the highest average since 1987.  Under the deal with OPEC, Russia was to cut production to 10.947 million bpd from 11.247 million bpd. 

Societe Generale reported that OPEC will rollover its crude supply target of 32 million bpd in the second half of the year.  This will result in global draws of 1 million bpd over the same period. 

Libya’s National Oil Corp said the country’s Elephant oilfield remains shut in and requires power supply from the country’s largest oil field, the Sharara field, in order to restart.  Denying a report that the field had resumed operations after a two year halt, it said the Elephant field remains under force majeure status.   

Goldman Sachs reported that US production may increase by 535,000 bpd between the fourth quarter of 2016 and fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays, assuming the rig count remains at the current level. 

IIR reported that US oil refiners are expected to shut in 740,000 bpd of capacity in the week ending April 28th, increasing available refining capacity by 142,000 bpd in the previous week.  IIR expects offline capacity to fall to 558,000 bpd in the week ending May 5th.

Pennsylvania’s Department of Environmental Protection and the Pennsylvania Petroleum Association said the US state of Pennsylvania has no plans to restrict the sale of heating oil with more than 15 ppm sulfur on a statewide basis, denying a rumor that such a change would be implemented on June 1st.

The Bank of America Merrill Lynch said the Atlantic Basin gasoline market is expected to weaken into the second half of the year. 

Early Market Call - as of 9:00 AM EDT

WTI - June $49.16, down 7 cents

RBOB - May $1.6103, down 1.10 cents

HO - May $1.5409, down 18 cents

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Natural Gas

Monday, April 24th, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.079, roughly two cents below Friday’s closing price of $3.101.  Knocked down early in the day by expectations of mild weather, prices tumbled to a one-month intraday low of $3.031 by 10:40AM.  Mounting an uphill battle from here, the contract rose through the following ninety minutes to claim the intraday high of $3.092 shortly after midday.  Holding the $3.075 mark late into the day, May eventually withdrew to close lower on Monday at $3.066.

This morning in Globex, WTI Crude was down 13 cents; Natural Gas was up slightly; Heating Oil was down slightly; and, Gasoline was down one cent.  Additionally, cash prices were higher in New York and New England.

Natural Gas Glossary

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