Around The Barrel – Crude Oil Outlook with Iran and Israel at War

EIA reported a crude build of +2.735Mbbls offset with draws in gasoline and diesel. Gasoline stocks fell -1.154Mbbls. Distillate fell -2.760Mbbls in inventories. The WTI Futures Hub at Cushing stocks rose with a +0.33Mbbls build. Domestic US oil production was unchanged at 13.1mbpd just off the all-time high 13.3mbpd. Refinery demand unexpectedly slowed. Refinery utilization fell -0.2% to 88.1%. There was +0.648Mbbls added to SPR inventory WoW. Markets will focus more acutely over the coming weeks on the effects of the Iran attack on Israel Saturday which included 300-odd drones as well as missiles launched directly from Iranian territory.

Territories with Iranian-backed militias via Bloomberg

Previously Iran had launched covert attacks on Israel or relied on regional proxies to do its bidding. Israel in response on Sunday said they thwarted Iran’s attack said “99 per cent” of the missiles and drones were shot down by its forces and those of the United States and other allies across the region. While there is hope that escalation is thwarted there exists a grim possibility of full-scale war between Iran and Israel which would probably drag the United States into the fray. Both crude benchmarks, Brent and WTI had traded at their highest levels since October earlier.

There is also the possibility of a knock-on effect of Russian aggressive opportunism. We saw that with the attack on Ukraine natural gas storage just days before the Iranian invasion. Oil rose around 1% on Friday on the tensions in the Middle East but posted a weekly loss on a bearish world oil demand growth forecast from the International Energy Agency (IEA) and concerns about slower U.S. interest rate cuts which rattled stock markets also. The IEA cut its forecast for 2024 world oil demand growth to 1.2 mbpd. This is in conflict to OPEC on Thursday in its MOMR where it said world oil demand will rise by 2.25 mbpd in 2024.

Oil Outlook Messy

Futures have been ignoring China’s economic implosion and the Central Bank maelstrom, so the selling was a little catch up there. Prices have been boosted by the unsettling geopolitical background and a continuing asset rally with stock indices at record highs in the US and elsewhere. Oil futures have continued to rise with safe haven bids from ongoing Ukrainian attacks on Russian refineries and the potential for a widening of the Middle East conflict after Israel is believed to have killed Iran commanders in Syria. Israel has not claimed responsibility for the attack. Iran, the third-largest OPEC producer, vowed revenge against Israel.

Since the EU cap, if not before, Russian exports have been redirected to India and China in particular. Russian crude exports.

The continuing dominating themes are playing out, Chinese economic mess with geopolitical noise, currency shifts, KSA and Russia manipulation attempts and Mid East threats. China’s crude imports rebounded on record Russian barrels. China’s Russian crude imports surged to an all-time high in March, masking the underlying sluggishness in overall demand.

Russia’s war on Ukraine increasingly focuses on attacks on energy installations, the Israel-Gaza conflict has become more entrenched. OPEC+ said it sees no need for any policy changes during the last Joint Ministerial Monitoring Committee (JMMC) meeting. Russia for its part has ordered Russian oil companies to comply with lower production.

Oil prices have so far ignored much of the negative morose from the Central Bank maelstrom continuing to roil sentiment as risks of global recession threaten the demand picture with higher rates pushing the likelihood of a meaningful recession higher.

Around The Barrel Contents

Click on the links below to navigate to the relevant section.

  1. Geopolitical Watch
  2. DOE & API Petroleum Storage Forecast Matrix
  3. Crude Oil Quick Summary
  4. Weekly DoE US Petroleum Storage Report Breakdown
  5. API Crude Inventories
  6. Cushing Oil Stocks
  7. Crude Imports
  8. Crude Exports
  9. Gasoline
  10. Rig Watch
  11. Crude Oil Production
  12. Weather
  13. WTI Crude Oil Futures Technical Analysis
  14. DCOT Report
  15. Option Volatility and Gamma
  16. Key EIA and CME Dates

Geopolitical Watch

Oil prices continue to be subject to geopolitical bifurcation dynamics with sudden changes that accompanies the onset of chaos. The unexpected knock-ons continue with imperfect bifurcation with political influence and personal vagaries from world leaders such as Putin, Scholz and Biden in addition to routine crude dynamics.

Middle East

What now for Israel and Iran?

Revolutionary Guards affiliated Tasnim news agency described the Iranian attack on Israel as a “multi-layered attack from four directions”, deploying “hundreds of drones and a large number of missiles of different types”. It said Lebanese militant group Hizbollah, Iraqi militants and Houthi rebels in Yemen had participated in the attacks against Israel.

Israel thwarted the attack with its multilayered air-defense network that includes systems capable of intercepting a variety of threats including long-range missiles, cruise missiles, drones and short-range rockets. Iran had vowed revenge since the April 1 airstrike in Syria, which Tehran accused Israel of being responsible for. Israel has not commented on it.

  • Iran by warning sees this choreographed attack as a means to restore deterrence against Israel that that stops short of triggering all-out war with Israel and saves face with Iranians. Netanyahu may sit back and ponder his next move or launch an in-kind response in which Israel carries out air strikes on Iranian military bases, government buildings or on the Islamic Revolutionary Guard headquarters or its bases around Iran. This may be enough to call even, and the two sides cease hostilities, with both feeling they have made their stand.
  • Should Iran escalate and overwhelm Israeli missile defenses and see larges deaths and casualties in cities such as Tel Aviv, which hosts the Kirya, the Israeli military headquarters Netanyahu will be hard pressed to not take much more drastic action in response. It gives Israel a reason to attack Iran’s nuclear program.
  • The region isa powder keg and there exists possibility of a full-scale war between Iran and Israel, and probably drag the United States in. US President Joe Biden reportedly warned Netanyahu on Sunday morning that the US will not participate in any attack by Israel on Iran. In a Presidential election year Biden will most likely take the route that gets him the most votes.

The prices continue to pump and fail on continuing Middle East supply disruption threats. U.S. forces have launched strikes against Iran-backed Houthi militants who continue to target Red Sea shipping with missile and drone attacks. The Iranian attack on Israel turns the risk factor up tenfold. The Houthis and friends are adding a bigger risk factor to Mid-Eastern oil which is making energy exports from the U.S., Norway and Australia more attractive.

The geopolitical risk from the Israel-Hamas conflict to effect oil production and transportation in the Middle East had been moved to shipping lanes. The Levant is not a significant oil producing region and is unlikely to impact oil supply in the short term, it the ally risk and possible flow on. Traders’ eyes are on Iran with their backing of Hamas and the Biden’ Administration softening stance there prior to the attack.

Russia and Ukraine energy tit for tat

  • Russia attacked two state-run Naftogaz Ukrainy Ukrainian underground gas storage facilities this week. The facilities are still operating while specialists assess the impact of the shelling, according to Naftogaz Ukrainy. Russian missile strikes also destroyed the largest power-generating plant in the Kyiv region.
  • The attacks were the fourth assault on Ukraine’s gas storage sites, which so far haven’t affected operations.
  • DTEK, Ukraine’s largest energy producer, is running at 50% capacity, forcing it to suspend electricity exports, according to Ukraine’s energy ministry.
  • The incidents highlight the potential risk for storing gas in the country, should Europe’s stockpiles become full this summer. Ukraine has more storage capacity than any nation on the continent west of Russia, and it’s actively courting traders to hold supplies there. European gas futures rose as much as 9.5% to the highest price level in more than three weeks before falling back.
  • Ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15% of Russian capacity, a NATO official said on Thursday, hitting the country’s fuel output.
  • A Ukrainian drone attack on Russia’s Kuibyshev oil refinery in Samara, gutted one refining unit reducing capacity by half Reuters reported. According to Reuters in the first quarter of this year, Ukraine attacked seven Russian refineries, taking nearly 400,000 barrels per day of capacity offline.

Baltimore Bridge Collapse

The F. S. Key bridge collapse over the port of Baltimore after a ship ran into it has blocked all of the terminals within the harbor, this adds another element to oil and product pricing, mainly limited to transportation costs at first glance.   

The port is a significant distribution hub for petroleum products in the Central Atlantic (PADD1B) via articulated tug-barges, not large tankers arriving from overseas. Baltimore has connections to Colonial Pipeline, which carries motor gasoline, diesel, and jet fuel to New York Harbor from the Gulf Coast. It is also connected to refineries in the Philadelphia area via the Chesapeake and Delaware Canal.

The port of Baltimore is the 22nd largest “import” port for petroleum products. The port of Baltimore primarily “imports” asphalt and biodiesel. The asphalt primarily from Canada, and the biodiesel primarily from Europe. 

The geopolitical framework for Crude Oil remains volatile as Russia, Germany, Iran and China pursue aggressive directions. Germany in an attempt to achieve some energy independence seized the German unit of Russian oil major Rosneft PJSC a few months ago. Readdressing the dependance to Russia and the disaster that has come since the Ukraine invasion has been a slow and indecisive one by Germany. Geopolitical risks remain after President Vladimir Putin said Russia would immediately stop oil supply to countries that support the G7 members o price cap on exports of Russian oil.

DOE Weekly Petroleum Status Report Forecast

  • via TradersCommunity.com
  • Report Date: 4/10/24.
  • Release Time: Wednesday, April 17, 2024, at 9:30 A.M. (ET)
  • Crude EIA +2.735M Exp +2.415M Prior +5.841M API +4.09M
  • Cushing EIA +0.33M Exp -0.13M Prior -0.170M API -.0.169M
  • Gasoline EIA -1.154M Exp M Prior +0.715M API -2.51M
  • Distillate EIA -2.760M Exp M Prior +1.659M API -0.427M
  • Refinery Utilization -0.20% to 88.1% Exp -0.2%
  • Production UNCH kbpd at 13.01mbpd (13.10 ATH)
  • SPR rose by ~+0.648mb w/w to 370.2mb last week
  • US petroleum inventories (crude, refined products, SPR) rose by 1,602.406mb w/w to mb last week – EIA

Note in bbls *exp = Reuters poll est  adjusted for API shift, except Cushing

EIA reported a crude build of +2.735Mbbls offset with draws in gasoline and diesel. Gasoline stocks fell -1.154Mbbls. Distillate fell -2.760Mbbls in inventories. The WTI Futures Hub at Cushing stocks rose with a +0.33Mbbls build. Domestic US oil production was unchanged at 13.1mbpd just off the all-time high 13.3mbpd. Refinery demand unexpectedly slowed. Refinery utilization fell -0.2% to 88.1%. There was +0.648Mbbls added to SPR inventory WoW.


US Crude Oil Quick Look

EIA crude oil stocks build by 2.7m bbl despite a 2m b/d recovery in exports, while gasoline and distillates both see declines while implied demand of both (4-wk avg) see declines. SPR built by 0.7m bbl and has now risen 17.9m bbl since last July. Data somewhat muddled by biggest adjustment since Nov via
@Ole_S_Hansen

Crude Oil Futures Performance

It has been a year highlighted by repeated efforts by OPEC+ to ram prices higher via production cuts. The US and specifically Texas ramped up production to record highs to gain valuable customers, export income and energy security for the U.S.

March Quarter Recap

  • West Texas Intermediate crude on the last trading day for the quarter saw May delivery futures rise $1.82, or 2.2%, to settle at $83.17 a barrel on the New York Mercantile Exchange heading into Easter. Front-month prices rose 6.3% in March and gained 16.1% for the quarter.
  • May Brent crude rose $1.39, or 1.6%, to $87.48 a barrel on ICE Futures Europe Thursday, prices were up 4.6% for the month and 13.6% for the first quarter. June Brent, the most actively traded contract, rose $1.59, or 1.9%, to $87 a barrel.
  • April gasoline on Thursday rose 2.9% to $2.76 a gallon, a quarterly rise of 31.3%.
  • April heating oil added 0.7% Thursday to $2.62 a gallon, up nearly 2.5% for the quarter. The April contracts expired at the end of the session.

WTI Crude Oil Futures Technical Analysis

via KnovaWave @KnovaWave

US Crude Oil (WTI)

Daily: WTI Crude Oil has continued to rally since retesting the pennant breakout last December after completing the correction in 3 waves. From there it broke the pennant and retested to continue to retest the breakdown last October to break above those descending levels for higher. We are in a completive mode for bulls with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. Completing a C or IV? Support is previous lows and the bull flag. The bear case is the high was a complete 5.

Weekly: WTI crude oil futures held the support line from July 2021, having plunged around 50% off 2022 highs. It has broken to the topside of its sphere of influence to close out the quarter over Kijun and Tenkan which are now support. WTI completed 3 waves and powered through the tenkan and 50wma, h and held the retest. Risk support is the grid. Resistance weekly channel, Murrey Math levels and previous breaks (off monthly). Bear case is Wave 5 complete.

What we broke……. Crude Oil in the past quarter built a huge bull flag. We watch if the recent break was false, or we fail. Very clear pattern.

The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations.

These are special times, recall the long-term pattern formation: “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all-time lows to negative pricing we have seen mirror replications.” Above we have Murrey Math time and price.

The focus remains 85.61-88.01 a region defined by the 2013 low, the 100% extension of the March decline and the 61.8.% retracement of the November advance. We successfully spat a break below the 2020 yearly open and 2018 high at 75.35-76.87. This became an area of interest for downside exhaustion and price inflection. Above is the 38.2% Fibonacci retracement of the June decline at 100.21. Broader bearish invalidation now lowered to the June high-week close / 61.8% retracement at 109.16-110.

Weekly DoE US Petroleum Storage Report Breakdown

Weekly Storage via DOE

with RonH Data ‏@Ronh

  Via RonH at Ron H Public Tableau Link

API Crude Oil Inventories

US petroleum (Crude, SPR, oil products) inventories in million barrels (EIA)

March 25, 2024, US SPR crude inventories rose by ~0.7mb w/w to 363.0mb last week
Sour up by ~0.8mb to 219.3mb
Sweet unchanged at 143.8mb

Cushing Oil Stocks

Cushing, OK is the hub for the most heavily traded US oil Futures contract – West Intermediate Crude – WTI so for that reason we pay special attention to the storage there.

Cushing Storage Tanks
Cushing Storage Tanks

API Cushing Stocks

API Cushing

Weekly Update via RonH Data ‏@Ronh999

US Oil Import Export

Imports

US crude imports by origin in kbpd (incl w/w change)

  • Canada -88 to 3458
  • Mexico -1 to 208
  • Saudi Arabia -302 to 229
  • Colombia +132 to 246
  • Iraq +166 to 308
  • Ecuador -231 to 0
  • Nigeria +130 to 173
  • Brazil -68 to 189
  • Libya -3 to 21
  • April 17, 2024

Exports

US Gasoline Consumers

Input to Refineries

Refinery utilization rate in % in PADD3 – EIA

US consumers bought 363.8 million gallons of gasoline per day last week. That is +6.0 mil YoY.

US consumers spent $1,319.9 million dollars per day for gasoline last week. That is $+9.3 mil YoY.

US avg retail price for gasoline was $3.628 last week. That is -0.035 YoY.


Rig Watch

Baker Hughes Weekly North American Rigs Report

Baker Hughes active rigs total in the U.S. onshore and Gulf of Mexico (GOM)

  • US Baker Hughes Rig Count 12-Apr: 617 (prev 620)
  • Rotary Gas Rigs: 109 (prev 110)
  • Rotary Oil Rigs: 506 (prev 508)
  • Baker Hughes reported the number of active U.S. natural gas drilling rigs in the week ended Apr 12, 2024, was down 1 at 109 rigs at their lowest since January 2022. Below the 19-month low of 113 rigs posted September 8, 2023. Active rigs last year fell back after climbing to a 4-year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
  • Last month the total rig count fell by five, with the oil count rising by three, and gas down by eight, the biggest monthly decline since August.
  • In the first quarter, the total rig count fell by one in its fifth quarterly loss in a row. The oil rig count rose by six, the first quarterly increase since the fourth quarter of 2022, while gas was down by eight.
  • The oil and gas rig count dropped about 20% in 2023 after rising by 33% in 2022 and 67% in 2021, due to a decline in oil and gas prices, higher labor and equipment costs from soaring inflation and as companies focused on paying down debt and boosting shareholder returns instead of raising utput.

US Rigs w/w changes by key shale basins (prior Week)

  • Permian +1 to 310
  • Eagle Ford unchanged at 50
  • Williston unchanged at 34
  • Cana Woodford unchanged at 21
  • DJ Niobrara -1 to 11
  • Mar 28, 2024

Canada Rigs

  • Canada’s active rig count came in at 139 Thursday, 9 rigs more than last Friday.
  • Alberta rig activity increased, with the province’s active rig count jumping from 96 to 106. Saskatchewan’s rig count fell by 2 (from 7 to 5), BC’s active rig count held steady at 27.
  • Oil rigs increased from 67 to 72 between March 22 and March 28.
  • Gas rigs increased by 5 as well.
  • The number of rigs classified as “Other” or “Unknown” decreased from 5 to 4.2
  • Today’s rig utilization rate is 38.1%, a decrease from 42.6% at last week’s end. The total number of rigs increased by 59, settling at 364.
  • BOE Report

International oil rigs ex North America

International oil rigs ex North America +12 m/m to 741 in March – Baker Hughes, m/m changes:

  • Saudi Arabia, India, Indonesia +4
  • Nigeria, Brazil +3
  • Norway, Gabon, Mexico +2
  • Egypt -2
  • Qatar, Argentina -3
  • Ecuador -4

US Oil Production

EIA Note Apr 10 US crude production: This week’s domestic crude oil production estimate incorporates a re-benchmarking that affected estimated volumes by less than 50,000 barrels per day, which is about 0.4% of this week’s estimated production total.

US Oil Field Production UNCH kbpd 13.10 mbpd (New Benchmark adj)

OPEC Crude Oil Production

Weather Watch

Gulf of Mexico



Crude Oil Futures Commitment of Traders

Latest ICE and CFTC Open Interest Data:

CTFC and ICE open interest:

Money managers increased their net-length in Brent crude oil futures and options by 4,100 contracts to 303,935 in the week ending April 9 via ICE

  • Long-only positions rose by 15,448
  • Short-only positions rose by 11,348
  • other reportables net-length fell by 1,721

Money managers increased their net-length in WTI crude oil futures and options by 8,666 contracts to 238,150 in the week ending April 9 via CFTC

  • Long-only positions rose by 9,207
  • Short-only positions rose by 541
  • other reportables net-length fell by 11,797

Chart: Crude net-positioning of non-commercial accounts (=managed money and other reportables) in Brent and WTI futures and options combined latest value is April 2 @staunovo

COT on Commodities

via Ole S Hansen @Ole_S_Hansen

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Understanding DCOT Reports

Read Understanding Commitments of Traders Reports – COT, TFF and DCOT  to help understand the disaggregated reports (DCOT) and how they break down the reportable open interest positions into four classifications:

1. Producer/Merchant/Processor/User 2. Swap Dealers 3. Managed Money 4. Other Reportables


Crude Oil Option Volatility Watch

via commodityvol.com

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NYMEX LO = Crude Oil Options First 3 Months (Live Link)

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NYMEX LO & ICE North Sea Brent BRN Crude Oil Options (Live Link)

NYMEX LO NYMEX OH NYMEX OB Options (Live Link)

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NYMEX LO NYMEX OB Options (Live Link)

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Key EIA and CME Dates for WTI Crude Oil

Key EIA and CME Dates for WTI Crude Oil

From The TradersCommunity US Research Desk