July, 2016

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Market Currents: Chinese crude oil imports are slowing

| Fuel Fix

Market Currents: Chinese crude oil imports are slowing

A weaker U.S. dollar is once again wafting smelling salts under the nose of the crude market, and this time it appears to be working. A large miss for preliminary Q2 U.S. GDP has further stoked economic concerns, but the love/hate relationship betwixt crude and the U.S. dollar means crude is trying to close with its first gain in seven attempts. Hark, here are four things to consider in energy markets today.

lucky number slevin1) As crude prices move lower, the U.S. gasoline market has been a splendid scapegoat for the recent drop in prices. According to Goldman Sachs, however, the downside risk to prices in the near-term lies primarily with U.S. dollar strength, and not the glut.

One of my favorite movies is Lucky Number Slevin. In it there is something called the Kansas City Shuffle. It is essentially a trick by a con artist, who uses misdirection to outsmart his audience. The audience is so focused on one thing, that they totally miss what is happening elsewhere.

From a ClipperData perspective, this is happening to some extent in the global crude market. While everyone is focused on the current product glut – something which has steadily been building like a tribal drumbeat since early in the year – China has fervently been stockpiling oil like a squirrel storing nuts.

As the product glut reaches new heights and bearishness abounds, Chinese oil imports are showing significant signs of fatigue. Waterborne imports into China thus far in July are in line with the prior two months, and some 6.5 percent below the peak of import volumes seen in April.

2) Preliminary GDP data for Q2 has come in at +1.2 percent, well below consensus of 2.6 percent. This puts growth in the first half of the year at its slowest pace since 2011, as business investment was soft – offsetting strength seen in consumer spending. This weak number is again throwing cold water on any rate hike expectations, hence the dollar is charging lower today (and lending support to crude).US gdp

3) The product glut is by no means to be dismissed, however. Total crude and product inventories have clambered to a new record high this week at 1.39 billion barrels, 113 million barrels above year-ago levels.

Crude stocks are just 20 million barrels shy of the 541 million barrels seen earlier in the year – itself the highest level in over 90 years. Meanwhile, gasoline inventories are at their highest level in at least 20 years, and edging higher at a time we should be seeing them drawn down by peak summer driving demand.

US oil andproduct inventories

4) Switching commodities, U.S. natural gas prices rallied strongly yesterday, as the weekly storage report yielded a mere +17 Bcf injection. This compares to last year’s +52 Bcf injection and the five-year average of +52 Bcf. This also shrinks the surplus to last year to under 15 percent – after being nearly 70 percent back in spring.

As the chart below illustrates, natural gas has now surpassed coal as the leading source for power generation on a double whammy: low prices encourage natural gas use…while coal plant retirements limit coal consumption.
natural gas versus coal


About The Author

Matt Smith is a Director of Commodity Research at ClipperData. Matt specializes in extracting key themes from technical and fundamental analysis of the global energy market, and communicating these through daily and weekly deliverables. He also provides oil and natural gas analysis and commentary to national and international media outlets that include CNBC, Fox Business, Russia 24, the Wall Street Journal, MarketWatch, AFP, Reuters, and The Oil Daily. Prior to ClipperData, he spent eight years at Schneider Electric as a Commodity Analyst, where he also founded and authored the blog, Energy Burrito. Prior to Schneider, he spent eight years at the Royal Bank of Canada in London as a portfolio manager and financial analyst.

US oil settles up 46 cents, or 1.12 pct, at $41.60 a barrel

Nikodash | iStock/Getty Images Plus
Oil prices steadied on Friday amid short-covering after a week-long selloff but were on track to end the month about 15 percent lower on persistent glut concerns.

Slower economic growth and high inventories in crude and refined oil products have pressured Brent and U.S. West Texas Intermediate (WTI) crude futures some 20 percent lower from their 2016 highs, technically placing both in bear market territory.

The two benchmarks hit April lows on Friday before paring losses on what traders described as short-covering by investors taking profit on bearish bets placed over the past week.

Also on Friday, Baker Hughes reported the number of oil rigs operating in U.S. fields rose by 3 to 374 last week, marking the fifth straight increase in a row. At this time last year, drillers were running 664 rigs.

A three-week low in the dollar also supported oil, making commodities denominated in the greenback, such as crude, more affordable to holders of the euro and other currencies.

Big moves for big oil?

Big moves for big oil?   

Brent crude oil futures were down 21 cents at $42.49 by 2:39 p.m ET, down 0.49 percent on the day.

U.S. West Texas Intermediate (WTI) crude settled up 46 cents, or 1.12 pct, at $41.60 a barrel, and last rose 34 cents to $41.48 a barrel, but was set to end the month near its biggest decline since July 2015.

Cheap crude has led refiners to produce more fuel worldwide, adding to a market already bloated with supply. Weak refining margins led to dismal earning in the second quarter for oil majors such as ExxonMobil, BP and Royal Dutch Shell.

“Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end,” Stephen Brennock of oil brokerage PVM, said.

Data showing weaker-than-expected growth in the U.S. economy also cast a shadow on potential oil consumption growth.

Oil nearing bear market

Oil nearing bear market   

“The major portion of the downside price acceleration during the past couple of weeks has related to the fundamental deterioration,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

“We are maintaining a bearish posture while at the same time suggesting that additional crude price declines of around $4 barrel from current levels could require a few more weeks.”

Oil could see technical support in the near-term after Brent and WTI’s drop below the 200-day moving average earlier on Friday, some traders said. A breach of those levels prompt algorithmic and automated trades covering short positions, they said.

Oil analysts in a Reuters survey this week also said they expected higher prices for this year based on demand growth.


Crude Oil Price Looks To Part Ways With Gold As Dollar Demand Remains Strong Post-FOMC


Commodity markets appear manic ahead of the hotly anticipated Bank of Japan meeting where many look to see if Abe’s promise of further easing will spur another round of elevated asset prices. On Wednesday, the Federal Reserve came away rather risk-Friendly as it appears we’re not about to see the start of a rate-hike cycle that many have feared post-QE.

Rising concern of over-supply in Oil is likely to weigh on economic cycle-sensitive crude oil prices. Meanwhile, gold prices are moving higher after the Federal Reserve talked up the economy more than future interest rates. Gold’s ~26% rise YTD looks comfortable following a gradual rise higher as the stage is still set for haven assets that perform well against possible inflation from seemingly endless QE-programs from various major Central Banks.

Where are gold and crude oil prices heading in the third quarter? See our forecasts here!

GOLD TECHNICAL ANALYSIS – Gold prices are sitting comfortably above the Ichimoku Cloud, and the trendline drawn off the June lows hinting a move higher may be ahead for the price of Gold. A daily close above 1,351 would signal a bullish resumption by trading above the R2 Weekly Pivot Level. Alternatively, a reversal below the weekly opening range low at 1313.30 targets the 50% threshold of the May-July range at 1287.30. The Relative Strength Index is also looking to favor further upside.

Crude Oil Price Looks To Part Ways With Gold As Dollar Demand Remains Strong Post-FOMCCRUDE OIL TECHNICAL ANALYSIS – Crude oil prices slumped back to levels not seen since April 20 when the price of Crude broke to 21-week highs. Now, fear of oversupply, and move back below the 100-DMA at $44.63/bbl will stoke fears of a possible sub-$40 trading level. Ichimoku is showing a breakdown with Price & Momentum (Bright Green Line) poking below the cloud on the daily chart. Given the slow moving nature of Ichimoku, a reversal of both Price & Momentum should be respected, and push our eyes to the lower right of the chart for anticipated price action. A break above the 100-DMA mentioned above would shift the bias to neutral until we obtain further clarity.

Crude Oil Price Looks To Part Ways With Gold As Dollar Demand Remains Strong Post-FOMC— Written by Tyler Yell, CMT. Currency Analyst for DailyFX.com

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US crude oil slips into bear market

MarketsUS crude oil slips into bear market

The primary US crude oil benchmark has slipped into bear market territory – a drop of over 20 per cent from its recent peak – a move that renews pressure on the energy industry and oil-dependent countries.

West Texas Intermediate has slipped from an intraday high of $51.67 per barrel on June 9 to $41.14 on Thursday afternoon, a drop of 20.4 per cent, as a glut in oil-derived products has once again weighed on demand for the commodity, writes Robin Wigglesworth.

Oil prices are still comfortably above the nadir touched at the start of the year and Brent oil, the North Sea benchmark that is the most used international measure of crude prices, is still hovering just over bear market territory, falling 19.2 per cent since its June peak.

Energy stocks have held up better than they did in the oil crashes of earlier this year and 2015, but slipped 0.2 per cent on Thursday – while the broader S&P 500 gained 0.2 per cent – and have lost 4.4 per cent since the peak earlier this month.

“Investors need to keep an eye firmly on oil prices at the moment,” Nicholas Colas, chief market strategist at Convergex, said in a note. “Crude oil price volatility is clearly moving higher, and history says that it is a setup for a move lower for stocks since crude prices are declining.”

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WTI Crude Oil Price Rebounds as FOMC Keeps Rates Flat


Short Term Strategies, Scalping, Price Action Analysis, and Risk Management

The price of WTI Crude Oil (CFD:USOil) has temporarily found support after this afternoons FOMC rate decision and statement. The event found the FOMC keeping rates unchanged at 0.50%; and key statements read that for the month of June “Market-based measures of inflation compensation remained low.” As such, Crude prices and other commodities such as gold have rebounded from lows put in place during the event. If prices remains supported, it opens Crude Oil up to trade back towards session highs at $43.17. Alternatively, if support falls it would suggest a continuation of the commodities daily decline.

Crude Oil Prices, 4Hour Chart

WTI Crude Oil Price Rebounds as FOMC Keeps Rates Flat(Created using Marketscope 2.0)

In the 5-minute graph below, we can see the price of Crude Oil moving off of session lows at $41.66. The Grid Sight Index has indicated that short-term momentum is currently pointing higher through the creation of a series of higher lows. After reviewing 4,451,998 pricing points, GSI has advanced a minimum of $0.14 in 64% of the 379 matching historical events. The first historical distribution line falls at a price of $42.19. A move through this price would suggest the beginning of a bullish daily reversal for Crude Oil. In this scenario, traders should watch for prices to test the last bullish historical distribution at $42.55. From here, traders may begin to target the previously mentioned daily high of $43.17.

It should be noted that the first bearish historical distribution currently resides at $41.37. The Grid Sight Index found that prices declined $.068 or more in just 8% of the matching 379 historical events. A move through this value would suggest a resumption of bearish momentum for Crude Oil on the creation of new daily lows.

Want to learn more about GSI? Get started learning about the Index HERE.

WTI Crude Oil Price 5 Minute GSI Chart

WTI Crude Oil Price Rebounds as FOMC Keeps Rates FlatAre FXCM traders long or short the market? Find out here!

It should be noted that Sentiment for Crude Oil (Ticker: USOIL) has moved to a positive extreme from our last reported SSI reading of +1.43. Currently 69% of positioning long, with SSI reading at +2.28. Typically, an extreme positive reading is indicative of future declines in price. If Crude Oil prices breakout to new lows, SSI would be expected to remain at positive extremes. Alternatively, if prices were to rebound, traders should look for SSI figures to move back towards values that are more neutral.

WTI Crude Oil Price Rebounds as FOMC Keeps Rates FlatTo Receive Walkers’ analysis directly via email, please SIGN UP HERE

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Canadian energy company says crude oil has leaked into river

| Fox News

Canadian energy company says crude oil has leaked into river

Canadian energy company Husky Energy says between 52,834 gallons (200,000 liters) and 66,043 gallons (250,000 liters) of crude oil and other material has leaked into the North Saskatchewan River in west-central Canada.

Husky Energy said Friday that booms are being used in an effort to contain the spill, which leaked Thursday morning near Maidstone, Saskatchewan.

Saskatchewan Mayor Ian Hamilton says in the event any oil makes it through to North Battleford, the city will shut down its water treatment plant, which draws its supply from the North Saskatchewan River.

The pipeline runs from Husky’s heavy oil operations to its facilities in Lloydminster, between the border of Alberta and Saskatchewan, and carries oil mixed with a lighter hydrocarbon, called a diluent, that’s added to ease the flow.

Oil dives 4 percent on the week on U.S. rigs rise, glut threat

| Reuters

Crude oil drips from a valve at an oil well operated by Venezuela’s state oil company PDVSA, in the oil rich Orinoco belt, near Morichal at the state of Monagas April 16, 2015.
Reuters/Carlos Garcia Rawlins/File Photo

NEW YORK Oil prices settled lower on Friday, losing 4 percent on the week, after the fourth weekly rise in the U.S. oil rig count added to worries about a global crude glut.

Crude futures were already down, with Brent at two-month lows, on fears of more Iraqi supply before a report by energy services firm Baker Hughes showed U.S. oil drillers added 14 rigs this week to bring the total rig count to 371.

“The oil complex is already struggling with oversupply issues. More than ample inventories and upcoming refinery turnarounds and maintenance have the bulls on the defensive,” said Pete Donovan, broker at Liquidity Energy in New York.

“An increase in rigs is the last thing they need.”

Brent settled down 51 cents, or 1.1 percent, at $45.69 a barrel, after falling to $45.17, the lowest since May 11. For the week, Brent lost 4 percent.

U.S. West Texas Intermediate (WTI) crude closed down 56 cents, or 1.3 percent, at $44.19. It fell 3.8 percent on the week.

The dollar’s rally to a more than four-month high also hurt demand for greenback-denominated oil among holders of the euro and other currencies.

Iraq’s oil exports were expected to rise in July, according to loading data and an industry source. If confirmed, it would put OPEC’s No. 2 producer back on track for supply growth after a two-month lag.

“These large and increasing stocks will not only up the likelihood of additional commercial short hedges, but will also encourage the commercials to defer long hedges,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Earlier this week, the U.S. government reported that domestic crude inventories were at 519.5 million barrels last week, historically high for this time of year, even after a ninth straight week of drawdowns.

On Thursday, traders said market intelligence firm Genscape reported a build of 725,176 barrels in the latest week at the Cushing, Oklahoma delivery point for U.S. crude futures.

Falling oil prices have encouraged traders to send U.S. supplies to Europe, counterbalancing 700,000 barrels per day in lost Nigerian supply..

U.S., European and Asian oil product stocks rose 2.35 million barrels last week for a second week of growth.

“The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion,” UBS oil analyst Giovanni Staunovo said.

(Additonal reporting by Libby George in LONDON and Keith Wallis in SINGAPORE; Editing by Marguerita Choy and David Gregorio)

Iran, Kenya to Bolster Cooperation in Oil, Energy


  • 20:04 (Friday, July 22, 2016)
  • TEHRAN, July 22 (Shana) – Kenyan Minister of Finance Minister Henry Rotich on Friday called for Iran-Kenya cooperation in oil and energy.
  • Rotich made the call in a meeting with Iranian Minister of Economy and Finance Ali Tayebnia on the sidelines of the Fourteenth session of the United Nations Conference on Trade and Development (UNCTAD 14) in Kenya, Nairobi, from July 17–22.
    The Kenyan Minister said his country wants to use Iran’s energy, oil, gas and refinery potential.
    He referred to recent excavations in oil reserves in Kenya and said regarding Iran’s skills in exploration and construction of refinery, it is important for Kenya to cooperate with the country.
    Tayebnia, referring to good diplomatic relations between Iran and Keyna, said regarding willingness of the two sides for having more extensive relations, volume of relations between the two countries stands at about 57 million dollars a year.
    He referred to Iran’s potential in refinery, oil exploration, power plant and dam construction and provided his host with necessary explanations for mutual cooperation.

Oil down 2 percent as record U.S. stockpiles heighten glut worry

 | Reuters

NEW YORK Oil prices fell 2 percent on Thursday, as the market took a closer look at U.S. government data that showed growing inventories of gasoline and other oil products pushed total petroleum supplies in the No. 1 oil consumer to record highs.

In the previous session, Brent and U.S. crude futures rose by up to 1 percent after the Energy Information Administration (EIA) said crude inventories dropped 2.3 million barrels last week, versus forecasts for a 2.1 million-barrel decline. It was the ninth straight weekly draw.

Still, U.S. crude inventories are at a historically high 519.5 million barrels for this time of year, the EIA said. Also, total U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels as gasoline stocks posted a surprise build of 911,000 barrels during summer driving season.

Adding to that, market intelligence firm Genscape reported a build of 725,176 barrels for the week to July 19 at the Cushing, Oklahoma delivery point for U.S. crude futures, traders said.

“The market is technically weak, inventories are still high for summer, maintenance season is not far off and we have floating barrels at sea to top it all,” said Pete Donovan, broker at Liquidity Energy in New York.

Brent crude LCOc1 closed 97 cents, or 2.1 percent, lower at $46.20 a barrel.

U.S. West Texas Intermediate (WTI) crude settled down $1, or 2.2 percent, at $44.75.

ABN AMRO senior energy economist Hans van Cleef said Brent could slip toward the $42-$43 level. “Near-term, there are still some downside risks.”

Phil Davis, trader at PSW Investments in California, pointed to the 4.2 million-barrel build of “other oils” cited by the EIA, which eclipsed the gasoline build.

Those other oils include special gas for smaller airplanes and less-known industrial oils, which refiners typically crank out when there was too much gasoline and distillate supply, Davis said.

“These other oils don’t get as much attention as the headline numbers put out by the EIA and have been a clever and convenient way to hide weak product demand,” he said.

Lending some fundamental support to crude, exports of Nigeria’s largest crude oil stream, Qua Iboe, will remain under force majeure for at least one month as operator Exxon Mobil Corp (XOM.N) fixes a pipeline, sources said.

(This version of the story was refiled to remove extraneous timestamp in paragraph 6)

(Additional reporting by Christopher Johnson in LONDON and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and David Gregorio)