Tuesday, December 10, 2019

John Kemp News

Oil Traders Bet on Economic Upswing in 2020

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Crude oil traders are betting the market will tighten significantly next year, even as the major statistical agencies predict production will outstrip consumption and oil inventories will rise.Most of the divergence can be explained by differing assumptions about global growth in 2020.The International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries are all projecting that the oil market will be in surplus in…

Hedge Funds More Bullish on Oil: Kemp

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Hedge funds have started to become more optimistic about the outlook for oil prices amid hopes that the United States and China will reach a trade truce and the global economy will avert recession in 2019/20.From a fundamental perspective, hedge funds are rebuilding long positions in crude and fuels because the news flow about the economy is no longer deteriorating, even if it is not yet improving much.From a positioning perspective, funds are anticipating that many of the futures and options…

U.S. Refiners Control Gasoline, Diesel Oversupply

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U.S. refiners have cut seasonal crude processing sharply since the start of the second quarter, averting a potential oversupply of gasoline and distillates, but worsening the build up of crude stocks.U.S. refiners have processed an average 16.64 million barrels per day (bpd) of crude since the start of the year compared with 16.94 million bpd at the same point in 2018 (https://tmsnrt.rs/2N9ziVH).Some of the loss can be attributed to the destruction of the 335,0000 bpd Philadelphia Energy Solutions refinery by fire near the end of June.But refiners started running below prior-year rates from March…

Hedge Funds Turn Bearish on Oil: Kemp

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By early last week, hedge funds had become the most bearish towards petroleum prices since the start of the year, as traders grew increasingly pessimistic about the global economy.Hedge funds and other money managers sold the equivalent of 95 million barrels in the six most important futures and options contracts tied to petroleum prices in the week to Oct. 8.Sales over the last three weeks have totalled 206 million barrels, according to an analysis of position records published by the U.S.

US Rig Count Slides

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U.S. energy firms this week reduced the number of oil rigs operating for a fourth week in a row as producers cut spending, leading to slower growth in crude output.Drillers cut five oil rigs in the week to Sept. 13, bringing the total count down to 733, the lowest since November 2017, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.In the same week a year ago, there were 867 active rigs.The oil rig count, an early indicator of future output…

Hedge Funds Buying Oil Despite Trump's OPEC Comments

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Hedge funds continued to boost their bullish position in crude and fuels last week despite a call from U.S. President Donald Trump for OPEC to "relax and take it easy".Hedge funds and other money managers were net buyers of an extra 16 million barrels of Brent crude futures and options in the week to Feb. 26, according to ICE Futures Europe.Fund managers have been net buyers of 155 million barrels of Brent futures and options since Dec. 4, increasing their net long position in 11 out of the last 12 weeks (https://tmsnrt.rs/2EJUvB4).Funds were net buyers in the week to Feb.

NOPEC Bills: Leverage for White House

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For a proposed statute still at the first stage of the legislative process, with only a handful of sponsors in the U.S. Congress, the “No Oil Producing and Exporting Countries Act of 2019” (NOPEC) is generating a lot of comment.The amount of attention being paid to the proposed legislation is out of all proportion to its probability of being enacted into law - unless oil prices spike higher at some point during the remainder of 2019 and 2020.Similar NOPEC bills were introduced into the House of Representatives (HR 948) and the Senate (S 370) early last month…

Traders bet on Saudis, White House Lifting Oil Prices

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Oil traders are becoming very bullish on the outlook for prices, betting that Saudi Arabia will do whatever it takes to tighten the market even if consumption growth slows, helped by U.S. sanctions on Iran and Venezuela.Brent's calendar spread for the second half of 2019 has surged into a backwardation of 90 cents per barrel, the strongest for more than three months and a huge swing from a 70 cent contango near the end of last year.For many traders, spreads rather than spot prices are a better…

US Drillers Add Rigs

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U.S. energy firms this week increased the number of oil rigs operating for the first time this year but the rig count in January fell the most in a month since April 2016, as the boom in the Permian, the nation's biggest shale oil formation, cools.Companies added 10 oil rigs in the week to Jan. 25, bringing the total count to 862, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.For the month, drillers cut 23 rigs in January, the most removed in a month since April 2016.

Saudi Energy Minister Goes to OPEC with a Weak Hand: Kemp

Saudi Arabia’s energy minister, Khalid al-Falih, must play a bad hand of cards as well as he can at next week’s meeting of OPEC and non-OPEC oil producers in Vienna.Falih’s challenge is to get other countries on board with output cuts to avert another crash in oil prices next year while disguising the kingdom’s diminishing leverage in the oil market.Front-month Brent futures have fallen by a third since the start of October while the six-month calendar spread is in contango, indicating most traders expect the market to be oversupplied in 2019.The market outlook is strikingly similar to 2014…

Hedge Funds Enforce Correction to Oil Market's Course

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Hedge funds have sold the equivalent of almost half a billion barrels of crude oil and refined products in the last six weeks, as worries about slowing demand replaced earlier concern over sanctions on Iran.Hedge funds and other money managers cut their combined net long position in the six major petroleum futures and options contracts by another 108 million barrels in the week to Nov. 6.Portfolio managers have sold 479 million barrels of crude and products since the end of September, the…

Maritime Rule Change Stirs Fears of Diesel Shortage: Kemp

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The International Maritime Organization (IMO) has so far resisted pressure to soften or postpone the implementation of new regulations requiring ships to use bunker fuels with a lower sulphur content from the start of 2020.That has prompted warnings from some analysts that the regulations will squeeze the availability of low-sulphur diesel and jet kerosene required by trucks, trains, aircraft, farmers and industry, resulting in big price increases.The regulations and any associated rise in fuel prices will occur in the run up to the next U.S.

Low U.S. Gas Market Stocks Tempered by Mild El Niño Forecast: Kemp

U.S. natural gas stocks are going into winter at the lowest level for fifteen years despite a slightly faster rate of injections into storage over the summer than in 2016 or 2017.Low inventories have encouraged hedge funds to build their largest position in futures and options for more than eight years and pushed benchmark prices to their highest level for almost nine months.But pressure on stocks and prices is being tempered by the development of El Niño conditions over the Pacific which…

U.S. Oil Boom Starts to Cool, Tightening Global Market: Kemp

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U.S. oil production is running into capacity constraints, which are starting to have a material impact on the global availability of crude, causing the market to tighten and putting upward pressure on prices.The biggest problem is the lack of sufficient pipeline capacity to move oil from shale wells in western Texas and eastern New Mexico to refineries in the Midwest and export terminals on the Gulf Coast.But production in the Permian Basin has also been constrained by shortages of labour…

Freight Fuel Market Moves Back Towards Balance: Kemp

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The market for freight fuels is moving close to balance, after tightening significantly in 2017 and the first quarter of 2018, contributing to the recent stabilisation in crude oil prices.OECD stocks of middle distillate fuels, including road diesel, marine gasoil and jet fuel, totalled 513 million barrels at the end of June, according to the International Energy Agency (“Oil Market Report”, August 2018).Stocks have fallen compared with the slump years of 2015-2017 (when they ranged from…

Fuel Markets Confirm Global Growth Slowdown: Kemp

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If the global economy starts to grow more slowly, the impact will show up first in the price of refined fuels such as road diesel, marine gasoil and jet fuel that play a central role in the freight transport system.Middle distillate fuels are principally burned in the high-powered engines used in trucks, railroads, ships, barges and aircraft to move freight around the world, as well as in factories, on farms and at mines and oilfields.Mid-distillates account for more than a third of the oil used around the world every day…

Oil Market Enters Post-OPEC Era: Kemp

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Saudi Arabia and Russia started to raise their oil production several weeks before the formal decision to increase output was taken by OPEC and its allies towards the end of June.Saudi Arabia increased its production to 10.49 million barrels per day (bpd) in June from 10.03 million in May and 9.87 million bpd in April, according to government data submitted to OPEC.Russia’s Rosneft also started to raise output from late May, anticipating a relaxation of the supply curbs, according to an investor…

Why Trump is Pressing Saudis to Lower Oil Prices: Kemp

The United States and Saudi Arabia appear to have reached an understanding: Washington will reduce or eliminate Iran’s oil export revenues and in return Riyadh will guarantee oil supplies and stabilise prices. The basic deal is well understood by policymakers in both countries, with U.S. President Donald Trump repeatedly emphasising his great personal relationship with the Saudi king and crown prince. But strong personal relationships between the leaders and agreement on the overall deal obscure disagreement on some key details, not least the desirable level for oil prices.

U.S. Motorists React to Rising Pump Prices: Kemp

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U.S. traffic volumes are levelling off in a sign the previous stimulus from cheap gasoline prices is fading as pump prices rise. The volume of traffic on U.S. roads was down by almost 0.6 percent in April compared with the same month a year earlier, after seasonal adjustments, according to statistics released on Monday. Traffic volumes declined year-on-year for the first time since the first quarter of 2014, according to the Federal Highway Administration (“Traffic volume trends”, FHWA, July 2018).

Hedge Funds Continue Selling Oil, Especially Fuels: Kemp

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Hedge funds became much more bullish about the outlook for U.S. crude prices last week, following an outage on Canada's Syncrude system, which supplies the U.S. Midwest, and a drawdown in crude stocks around Cushing. But in the rest of the petroleum complex, the persistent liquidation of formerly record bullish positions continued for the tenth week running, according to an analysis of exchange and regulatory data. Hedge funds and other money managers raised their combined net long position in the six most important petroleum futures and options contracts by 36 million barrels in the week to June 26.