Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
The biggest crude oil draw of the year and drops in gas and distillate supply is signaling that the global oil market is already in balance. The American Petroleum Institute (API) reported that crude oil inventory fell by 1.3 million barrels last week. This came even as supply in Cushing, Oklahoma increased by 300,000 barrels showing a sharp drop in U.S. OPEC imports as the cuts that were not supposed to happen according to some, are now starting to take hold. Gasoline supply also fell yet again, dropping 2.56 million barrels and distillate fell by 2.09 million barrels as well. With seasonal factors kicking in and a tightening global supply, disruptions of production anywhere in the global are going to start to matter.
The oil market’s washout just below $50.00 and now its resurgence back to the highest close in a month, has the bulls back in control. Oil reversed on reports of a problem with production in the North Sea that shut some offshore production. The Buzzard oil field shut down after an unplanned outage, knocking out an estimated 150,000 barrels a day of production. That seems to matter more because Europe is already being impacted by the sharp drop in OPEC output.
While oil has had its ups and downs, we have been saying for over a year that oil is at a generational bottom. While we have seen some crazy moves as the market tries to work off oversupply, the adjustments are happening. In a few years in hindsight, it will be easy to look back and see that all the crazy moves and the readjusting of supply as well as the cuts investment, was an obvious long term bottom but it sometimes does not feel that way when you are living it.
If history is a guide, we may start going more in an upward momentum on the moves. With the gasoline market tightening dramatically in recent weeks and refiners ramping up, we should see crude draws really start to accelerate. The crude draws are going to get larger and more frequent and the impact of the OPEC and non-OPEC cuts will be really felt. OPEC and non-OPEC will extend cuts. More than likely players without a quota will agree to one to get a big-time rise. Despite the best effort of shale producers, they will fall short of replacing OPEC cuts and the decline rate of other oil projects. While oil struggled in the first quarter due to the hedge funds getting ahead of themselves and a rising dollar and oil coming out of the Strategic Petroleum Reserve, the reality is that we are on a path to the tightest market we have seen in over a decade.
That should bode well for the Hess IPO. The MLP that is investing in shale at the right place at the right time .
Natural gas was on the attack as Manteca and a record amount of nuclear power plants and some weather challenges have driven this market back to the highs. We have seen strong demand for electricity and that has kept demand for gas strong.
Get the Power to Prosper on the Fox Business Network! Call for my Daily Trade Levels at 888-264-5665 or email me at firstname.lastname@example.org.
Questions? Ask Phil Flynn today at 312-264-4364
A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA
Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- Morning Softs. 04/26/17
- Morning Grains. 04/26/17
- Corn Rallies – What Happened. The Corn & Ethanol Report 04/26/17
- Tedious Trading. The Energy Report 04/26/17
- Morning Grains. 04/25/17
- Morning Softs. 04/25/17
- Exports Stay Strong. The Corn & Ethanol Report 04/25/17
- Riggs or Mortis. The Energy Report 04/25/17