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 great oil market rebalancing will continue as low oil prices have sparked demand and global oil and shale oil production is failing to keep pace. Under investment due to the crash in oil prices is keeping the market in a tight situation. More pressure on shale by activist investors that are worried that they are not getting the bang for their buck may further hamper an industry where already investor have pulled back because of the lack of good returns in the shale patch.
While the oil market stalled on the first day of the quarter the global rebalancing of the oil market is still under way. We should see more evidence of that in tonight’s American Petroleum Institute supply report that will be released today after last week’s surprise drop in U.S. crude oil supply. Libya oil output was at a 5-month low as their biggest oilfield was shut down and the market is going to react when they hear that the field may come back on-line. But in the bigger picture oil is looking to see if it can hold $50 as we enter what is rationally weak demand period for oil. Yet the traditional shoulder season for oil is off as Hurricane Harvey, Irma have made it necessary for many refineries to put off maintenance to replace lost supply and to keep up with growing global demand.
The distillates fell hard after the market recorded record long positions. Still the long distillate short RBOB gasoline spread did well. The market knows that diesel is very tight globally so any signs of winter arriving early could make this market soar.
Nat Gas is in a weird situation. New rule to support Coal and Nuclear could reduce demand for natural gas this winter. Yet globally natural gas demand could be stronger. Reuters on a report by Wood Mackenzie said that China will add 10 billion cubic meters of gas demand this winter. That’s about 5 percent of China’s consumption last year or the equivalent of Vietnam’s total annual use. As the country tries to move Northern Cities off of dirty coal, the project will also need heavy investment in infrastructure such as pipelines and storage tanks according to the report.
Reuter is reporting that “Activist investors are taking aim at U.S. shale producers, the companies most responsible for turning the nation into a global energy powerhouse, pushing them to stop rewarding executives for spending billions of dollars on new wells when crude prices are depressed.
U.S. crude output has surged past 9 million barrels a day largely because of the shale sector, whose output this year is up 27.5 percent. The gains are fueled by a boost of about 50 percent in capital spending, benefiting executives come bonus time but crimping shareholder returns. Investors want the higher spending to go to dividends and buybacks, not more drilling. The shift they are seeking could dampen spending on new wells, chilling a shale boom that has benefited U.S. motorists and consumers. It could help the Organization of the Petroleum Exporting Countries, Russia and other producers who are trying to drain a global crude surplus. Booming U.S. shale production has largely thwarted OPEC output cuts aimed at lifting prices. Low oil prices, in turn, have hurt shareholder returns. Stay tuned! As I said before, you can’t lose money on every barrel and expect to make up for it in volume.
Bloomberg reports that “ President Donald Trump may soon have a chance to prove wrong the notion that economics will kill the U.S. coal industry and keep clean energy thriving. Two initiatives pending in Washington — one to prop up large traditional power plants and a second to impose tariffs on solar panels — could let Trump upend wholesale electricity markets and tip the advantage away from renewables.
The moves, which both invoke laws that haven’t been used in a decade, come as Congress begins debating a White House tax plan that may undermine a key source of financing for clean energy. Together, they raise questions about whether falling costs will be enough to keep wind and solar thriving under a president intent on supporting fossil fuels. For natural gas this could weigh until we get clear rules.
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
Prosper Tuesday! Stay tuned to the Fox Business Network the only place where you get the Power to Prosper! Who is going to go to the Big D? I am back at the MoneyShow Dallas, October 4-6, 2017, at the Hyatt Regency Dallas. I will be there With Steve Forbes and many other fantastic speakers. I’d love for you to join us! Reserve your free spot! Call me at 888-264-5665 or email me email@example.com.
Twitter: @energyphilflynn | Facebook: Phil Flynn
Call me at (888-264-5665) or Email firstname.lastname@example.org.
Not a Subscriber but want to be? Click Here!
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- Unemployment Data This Morning. The Corn & Ethanol Report 12/08/17
- What slowdown? The Energy Report 12/08/17
- Analysts expect these energy stocks to rise the most in 2018 as oil rebounds
- Oil prices recover on GDP gains in Europe, U.S. labor
- Rare December Injection No Surprise For NatGas Futures as Bears Already in Control
- 76 Years Ago Today A Day That Will Live in Infamy. The Corn & Ethanol Report 12/07/17
- Silver turns slightly lower for the year. The Nemenoff Report 12/07/17
- Home for The Holiday. The Energy Report 12/07/17