Author: Robert Boslego

Oil Prices Break-Out of Trading Range

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Oil futures prices have broken above the trading range where they have been since February when the market was expecting supply and demand would balance quickly as a result of the OPEC/non-OPEC deals. But those hopes were dashed because the global demand was in a seasonal decline, and inventories remained stubbornly high.

Prices managed to break higher due to a combination of circumstances:

U.S. and Global Inventories

Hurricane Harvey in the U.S. Gulf of Mexico (GOM) disrupted refinery operations, causing product stocks to draw rapidly. It was followed by Hurricane Nate, which disrupted crude oil production in the GOM.

In addition, U.S. crude exports reached record levels recently, averaging 1.744 million barrels per day (mmbd) over the past four weeks, a gain of 293 % from the same weeks a year ago. Petroleum product exports have also been strong, averaging 5.125 mmbd in the same period, up 23% v. a year ago.

Together, these trends have reduced U.S. inventories by 40 million barrels since the week ending September 8th. Global OECD stocks have dropped about 51 million barrels from May through September, though this is largely due to normal seasonal trends. Continue reading "Oil Prices Break-Out of Trading Range" →

OPEC's Fake Results and Upcoming Quagmire

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


OPEC’s market monitoring committee reported that OPEC reached “120% compliance” with the production adjustments. It also reported that commercial OECD stocks had been reduced by 178 million barrels “since the beginning of the year.”

In reality, OPEC exceeded its collective production limit by about 850,000 b/d in September. It reported production at 32.748 million barrels per day, but that level must be adjusted to be comparable to the 32.5 million production ceiling it set last November.

To get a comparable figure, two adjustments must be made. Production from Indonesia must be added (740,000 b/d) because its output was included in the ceiling, notwithstanding it was dropping out. And production from Equatorial Guinea (140,000 b/d) must be deducted because it was not an OPEC member and its output was not included. Continue reading "OPEC's Fake Results and Upcoming Quagmire" →

Oil Price 'Risk Premium' to Play Out Over 4Q17

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


The Energy Information Administration (EIA), International Energy Agency (IEA) and Organization of Petroleum Exporting Countries (OPEC) each released their monthly global oil assessments and projections. They agree that the global oil glut will not be whittled down to anywhere near OPEC’s target of the 5-year OECD average by year-end. Their numbers also imply that global inventories in 1Q18 will build.

The EIA numbers indicate that stocks will be 130 million above the average, just slightly below September’s estimate at end-March.

Global Oil Inventory

OPEC does not project its own production, and it, therefore, does not produce future global inventory levels. But assuming September OPEC production for 4Q17 and 1Q18, stocks will drop by 51 million barrels in 4Q17 and rise by 74 million in 1Q18, a net gain in inventories from September. Continue reading "Oil Price 'Risk Premium' to Play Out Over 4Q17" →

Does The Oil Rally Have Legs To Go Higher?

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


WTI Crude oil prices staged a 23% rally from June 21st through September 25th. The rally appeared to be running out-of-steam as OPEC’s market monitoring committee met September 22nd and made no recommendation about continuing the production limits beyond March next year.

But on Monday, the 25th, there was a surprise announcement by the president of Turkey that he would block the Kurds’ crude oil exports through the pipeline that is on Turkish soil if Kurdistan becomes an independent state. The vote was imminent.

Crude prices rose 3% to the highest rate since May, blowing through technical resistance levels. No doubt there were stops at those levels that were hit, triggering more buying. In the CFTC Commitment of Traders report for the week of September 26th, most of the buying was indeed short-covering by specs and hedgers. A minority of the buying was new long speculative positions. Continue reading "Does The Oil Rally Have Legs To Go Higher?" →

What Oil Price Band Do The Saudis Want?

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Back in December, I deduced that the Saudis had budgeted a little less than $53 for oil in 2017. Their budget was based on their belief that they didn't expect to see any U.S. shale oil production response in 2017. Saudi Energy Minister Khalid A. Al-Falih said it in answer to a question in the press conference after the OPEC/non-OPEC meeting (see video starting at 51:35). He backed-up his belief basing it on the time lag of when oil prices had peaked in 2014 and when production peaked in 2015.

After the deals went into effect on January 1st, oil prices remained above $50 per barrel. According to the EIA’s weekly production data, U.S. crude production rose by 318,000 b/d between the last week of December and the week ending March 3rd, just before Al-Fahil’s speech in Houston during on March 7th.

U.S. Crude Production

He said he is optimistic about the global oil market in the weeks and months ahead, but "I caution that my optimism should not tip investors into 'irrational exuberance' or wishful thinking that OPEC or the Kingdom will underwrite the investments of others at our own expense." Continue reading "What Oil Price Band Do The Saudis Want?" →