Crude oil futures US crude futures slide continues with WTI Crude oil settling at $76.66 just above lows, down $1.60 or 2.04% on the day after today’s EIA storage report. Total commercial stocks while flat last week the prior week confirmed an even larger build than the huge API build. The price action has dented bullish speculators hopes after it settled at $77.17 Friday, up $1.43 or 1.89% on the day rallying with a war premium into the weekend, but down -4.1% for the week. It was the third straight weekly decline and oil prices traded at the lowest since mid-July. this in a market with constant ongoing Saudi and Russian price manipulation and threats of an expanding Mid East war.
To that end the self-important delusion of Saudi energy minister Prince Abdulaziz bin Salman saying that people are just “pretending” oil demand is weak, claiming “it’s all a ploy” by speculators.
The energy complex closed last week with WTI oil futures down -4.15% after last week’s -5.88%, Brent crude down -3.84% after last week’s -4.52%. Gasoline down -0.82% after last week’s -4.26%, and heating oil down -6.18% after last week’s -1.51%. (Prices w/w at 16:00 ET close). The WTI price is well off its September 28 high of $94.99.
The move reminds investors the importance of the supply and demand matrix, derivative or paper positioning which includes hedging and speculation and the weighting of those positioning. Many forget that oil is a true commodity and as we say the rubber always meets the road. Timing matters, particularly when you play with margins.
January Brent crude fell -4.1% for the week after adding 1.7% Friday to $81.43/bbl. December gasoline fell -0.5% for the week to $2.19/gal, and December diesel fell -6.2% this week to $2.74/gal.
It is important to address the situation in diesel.
If you recall our colleague, legendary journalist Robert Gibbons mentioned months ago the reporting on it was incorrect and seemingly agenda based. The fundamental and technical basis did not match the constant fear reporting by analysts and reporters. That no doubt led to top heavy speculative positioning and explains much of the sell off. Throw in a sputtering, at best Chinese economy and declines in European industrial and economic activity has seen a sharp retreat in fuel consumption.
In addition, there is the overwhelming supply we spoke of month ago, this has expanded further. To quote Manish Raj, managing director at Velandera Energy Partners to MarketWatch that “smugglers, dark fleet operators, thieves and black-market dealers are working overtime washing and gushing oil produced or stolen from Russia, Iran, Kurdistan, and Nigeria.”
Energy prices have continued to sell off after they closed with their second straight weekly loss, much to the chagrin of the ‘blood speculators’ out there. The risk premium from the Israel-Hamas war has fallen off with a broader conflict with Iran not eventuating as of yet, though that remands a risk. The overhead speculator length in prices well above spot prices is pressuring margins and support. The options (LO) call skew for WTI and Brent has weakened as a result.
With that focus is on soft demand, stockpiles and China factory activity back into contraction last month. There is also Brazil’s rising oil production, with Petrobras announcing a new USD 100 billion capex 5-year plan. Oil had been soft all week amid lower refinery margins and seasonal demand weakness. The earnings reports Friday from Exxon, Chevron and Phillips 66 all confirmed the refinery margin weakness.
The Hamas attacks have nixed the US and Saudi Arabia muted deal to pump more oil and recognize Israel in exchange for US defense guarantees. Prior to Hamas WTI Oil futures had been pulling back with the weight of falling risk assets and higher rates threatening economic growth and therefore demand.
The energy stock sector, represented by the Energy Select Sector SPDR Fund (XLE), rose 1.1% Friday but was the week’s worst performer, -3.8%. The sector is this month’s only decliner, down 2.1% vs. a 4.8% month-to-date gain in the S&P 500.
This week’s top 5 gainers in energy and natural resources: Ramaco Resources (METC) +44%, Genie Energy (GNE) +19.5%, Ramaco Resources Class B (METCB) +14.8%, Permianville Royalty Trust (PVL) +13.3%, Excelerate Energy (EE) +11.7%.
This week’s top 10 decliners in energy and natural resources: Plug Power (PLUG) -46.7%, Montauk Renewables (MNTK) -39.9%, NuScale Power (SMR) -39.2%, Nine Energy Service (NINE) -36.1%, Ameresco (AMRC) -25.2%, Stem (STEM) -22.9%, BP Prudhoe Bay Royalty Trust (BPT) -18.8%, Comstock Resources (CRK) -18.4%, Coeur Mining (CDE) -18.2%, Riley Exploration Permian (REPX) -17.8%.
The aggressive move high two weeks ago was also helped by the sharp long-liquidation week which left the futures market exposed to a geopolitical risk such as the Israel-Hamas conflict potential to effect oil production and transportation in the Middle East. Note 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.
For perspective the Friday before the attacks West Texas Intermediate settled around $83 a barrel, down $8 this week to its lowest since August, erasing gains from the extension of production cuts by Saudi Arabia and Russia. Prices had risen over 30% with OPEC+ campaign to reduce supplies and raise prices. Sliding crack spreads for refined products are impacting. At one point this week, gasoline was trading less than $8 above crude, halving from two weeks prior. Diesel’s premium over crude fell to the lowest since July as Russia lifted an export ban for its oil producers.
The current WTI futures move began when it bounced off its 50-day moving average (71.29) through resistance from near its 200-day moving average (77.18).
Around The Barrel Contents
Click on the links below to navigate to the relevant section.
- DOE & API Petroleum Storage Forecast Matrix
- Crude Oil Quick Summary
- Weekly DoE US Petroleum Storage Report Breakdown
- API Crude Inventories
- Cushing Oil Stocks
- Crude Imports
- Crude Exports
- Gasoline
- Rig Watch
- Crude Oil Production
- Weather
- WTI Crude Oil Futures Technical Analysis
- DCOT Report
- Option Volatility and Gamma
- Key EIA and CME Dates
The risks of global recession threaten the demand picture and with higher rates push the likelihood of a meaningful recession higher. In 2023 the market has in the background the obtuse geopolitical framework framed by Russia’s Ukraine invasion, Germany’s inept energy policy, and Iran and China pursuing aggressive directions.
The Week Ahead
DOE Weekly Petroleum Status Report Forecast
- via TradersCommunity.com
- Report Date 11/2/23
- Release Date Wednesday Nov 15, 2023, at 10:30 A.M (Delayed for EIA Upgrade)
Highlights
- Crude EIA +M Exp +1.802 Prior +0.773M API +1.335M +11.900M
- Cushing EIA +M Exp +0.250M Prior +0.272M API +1.136M +1128M
- Gasoline EIA +M Exp -0.133M Prior +0.65M API +0.195M -0.400M
- Distillate EIA -M Exp -1.000M Prior -0.792M API -1.022M -2.00M
- Refinery Utilization -0.2% to 82.3% Exp -0.2%
- Production UNCH kbpd to 13,200kbpd (13.20 ATH)
- SPR added .000M (Recovering Off Lowest Since Aug 1983)
- NB: Crude oil supply adjustment 8/18/23 +509 day – EIA
- US petroleum inventories rose by 1.138mb over the last two weeks to 1,615.000mb – EIA
- US gasoline fell by 7.822mb, jet fuel by 3.770mb and distillate by 4.695mb while crude inventories rose by 17.433mb over the last two weeks – EIA
Note in bbls *exp = Reuters poll estimates adjusted for API shift, except Cushing
The WTI Futures Hub at Cushing stocks rose off the lowest level since October 2014 with a build of +1.900Mbbls. EIA reported a crude build of +3.600Mbbls. Domestic US oil production figures unchanged at an all-time high 13.2mbpd. Gasoline stocks fell -1.500Mbbls and distillate fell -1.400Mbbls in inventories. Refinery utilization rose 0.90% to 82.3%.
Energy Price Matrix
US Crude Oil Quick Look
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.
Nov 15 US petroleum inventories in million barrels – EIA via @staunovo
Crack Spreads Matter
Final 2022 Inventory
- Commercial crude oil inventories were up ~2.8m bbls
- SPR inventories were down ~ 221.3m bbls
- Gasoline inventories were down ~10.1m bbls
- Distillates were down ~6.5m bbls
- Jet Fuel inventories were down ~0.9m bbls
- Propane was up ~14.5m bbls
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)
US petroleum inventories(crude, SPR, refined products) fell by 0.493mb w/w to 1,616.887mb last week- EIA
US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) had fallen to a 36-year low, dropping below the previous bottom set in 2001 via Bloomberg
- US crude stocks In SPR lowest since August 1983.
- US SPR crude inventories unchanged at 351.3mb last week
- Sour unchanged at 207.7mb
- Sweet unchanged w/w at 143.5mb
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.
API Cushing Stocks
Weekly Update via RonH Data @Ronh999
US stocks of distillate fuel (diesel and heating oil)
·
US Oil Import Export
Imports
US crude imports by origin in kbpd (incl. w/w changes)
- Canada +98 to 3485
- Mexico +390 to 1004
- Saudi Arabia -142 to 294
- Colombia -72 to 74
- Iraq +169 to 351
- Ecuador +41 to 133
- Nigeria -59 to 30
- Brazil -53 to 168
- Libya +20 to 106
- 11/1/23
Exports
US crude exports
Top buyers of US crude in July in kbpd (total exports 3.835mbd) – EIA
- Netherlands 873
- Canada 376
- UK 326
- China 322
- South Korea 261
- Italy 225
- Singapore 202
The Russia, India and China mix
Russia said they would cut production by 500kbbls in March just as Russia launched its heaviest bombardment on southern Ukraine since the start of the war, as officials warned Moscow’s major offensive had ‘definitely’ started. There is a clear use of oil as a weapon by Putin. India and China being Russia’s main customers are not filling the demand void. Not hard to join the dots.
EU’s sanctions on Russian refined products were implemented Feb. 5. The ban follows a similar price cap on crude shipments introduced last year. European countries have pushed to lower the crude price cap ($60) on Moscow even further, but the Biden administration said it was inclined to oppose the move.
Futures have been ignoring large US builds and have chosen hope with China opening up rather than negative morose from China’s economic implosion and the Central Bank maelstrom. Europe has been addressing energy dependance on Russia since the Ukraine invasion. President Vladimir Putin said Russia would immediately stop oil supply to countries that support the G7 members price cap on exports of Russian oil.
Since the cap, if not before Russian exports have been redirected to India and China in particular. Russian crude exports into India rose by 260kbd m/m in December to a record 1.2mbd. January exports are on-track to nearly 1.3mbd of Russian crude. Russian Exports to China were 70kbd in December, down nearly 27%m/m. We have seen Malaysia increase exports well beyond its own output to China. In turn China has exported products such as distillates back to Europe.
US Gasoline Consumers
Input to Refineries
Update: PADD 3 Refinery Utilization
US consumers spent $1,258.7 million dollars per day for gasoline last week. That is $-122.5 mil YoY.
US consumers bought 375.9 million gallons of gasoline per day last week. That is +8.7 mil YoY.
US avg retail price for gasoline was $3.349 last week. That is -0.413 YoY.
Rig Watch
Baker Hughes Weekly North American Rigs Report
The Baker Hughes U.S. oil and gas rig count, fell by seven to 623 in the week to Sept. 29, the lowest since February 2022. The total rig count fell by 51 in the third quarter, the cuts have slowed compared with a reduction of 81 in the second quarter as oil prices rebounded.
- US Baker Hughes Rig Count Nov 3 2023
- 616 (prev 618)
- Rotary Gas Rigs: 118 (prev 118)
- Rotary Oil Rigs: 494 (prev 496)
US Oil Rigs w/w changes by key shale basins
- Permian unchanged at 302
- Eagle Ford unchanged at 47
- Williston unchanged at 32
- DJ Niobrara unchanged at 14
- Cana Woodford unchanged at 13
US oil rigs and frac spread (Baker Hughes/Primary Vision)
Nov 3. 2023
- Permian Basin rigs pulled off at the fastest pace in three years amid consolidation and slow return in oil demand.
- Rigs targeting both crude and natural gas in the West Texas and southeast New Mexico region declined by 7 to 320 this week, according to data released Friday by Baker Hughes Co.
- It’s the biggest weekly drop in the Permian since June 2020. – Bloomberg
Canada Rigs
- Canada’s active rig count reached 187 on October 27, an increase of 1 rig compared to last Friday. Alberta’s active rig count decreased from 134 last Friday to 133 this morning, while Saskatchewan’s rig count decreased by 3.3%. BC’s active rig count rose slightly, reaching 20 rigs today.
- Oil rigs decreased by 4 between October 20 and October 27, settling at 111 active oil rigs.
- Gas rigs increased by 5, settling at 68.
- The number of rigs classified as “Other” or “Unknown” held fast at 8 rigs.29dk2902l
- Today’s rig utilization rate is 44.8%, a modest drop from 45.8% at last week’s end. The total number of rigs increased from 406 to 417, a 2.7% jump. This suggests that, compared to last week, a larger pool of rigs is being deployed less efficiently.
- BOE Report
International oil rigs ex North America
International oil rigs ex North America +7 m/m to 729 in August via Baker Hughes
- Abu Dhabi, Colombia +6
- Norway, Nigeria +4
- Saudi Arabia +2
- Argentina -2
- Turkey -3
- Mexico -4
- Kuwait -5
Ministry of Energy: Saudi Arabia will extend the voluntary cut of one million barrels per day for another month to include September that can be extended or extended and deepened.
Riyadh, August 03, 2023, SPA — An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened. In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day. The source also noted that this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.
KSA Ministry of Energy 15:51 LOCAL TIME 12:51 GMT
The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.
–SPA
US Oil Production
US crude production: US crude production: This week’s domestic crude oil production estimate incorporates a re-benchmarking that increased estimated volumes by 370,000 barrels per day, which is about 2.8% of this week’s estimated production total. – EIA. 10/12/23
US Oil Field Production +UNCHkbpd at 13.20mbpd (New Benchmark adj)
EIA New Production Calculation
Below is a summary via HFI Research
The formula is simple: US crude oil production + transfers to crude oil + adjustment.
Now there are still major flaws in the weekly oil storage reports that require the modified adjustment. For example, EIA does not take into account real-time US crude exports or imports. So the variance between these two figures could explain large differences in the adjustment. If you took this week for example, the reported adjustment came in at +512k b/d, while our modified adjustment showed +95k b/d. This is because EIA overstated both crude exports and crude imports to the tune of 417k b/d.
So going forward, there will be times when the adjustment comes in massively positive or massively negative, but over time, the adjustment should start to revert back to zero or possibly negative, while transfers to crude oil remain positively around ~+700k b/d.
If you look at our modified adjustment since the start of 2021, our dataset averaged ~750k b/d. We used ~750k b/d as our “plant condensate” figure to derive our weekly US crude estimates.
Now, in reality, this is an average, so week-to-week volatility will usually be elevated. But over time, this figure almost always goes back to the mean. In other words, if EIA over-reports crude draws or crude builds, they almost always revert back over the coming weeks.
US crude production was at 12.991mpbd in July vs 12.900 in June (revised up 12.844mbpd)
New post-COVID record, only 90 kbpd below the all-time crude production record set in November 2019.
m/m changes in kbpd
- Texas +72
- Gulf of Mexico +73
- North Dakota +14
- New Mexico +11
- Ohio -5
- West Virgina -5
- Wyoming -5
- Utah -6
- Kentucky -8
- Colorado -9
- Alaska -26
OPEC Crude Oil Production
OPEC+
Ministry of Energy: Saudi Arabia will extend the voluntary cut of one million barrels per day for another month to include September that can be extended or extended and deepened
Riyadh, August 03, 2023, SPA — An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened. In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day. The source also noted that this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.
KSA Ministry of Energy 15:51 LOCAL TIME 12:51 GMT
The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.
–SPA
Weather Watch
Gulf of Mexico
WTI Crude Oil Futures Technical Analysis
via KnovaWave @KnovaWave
US Crude Oil (WTI)
Daily: WTI Crude Oil continues to trade in the long channel from last year’s panic high and bounced last month around the 38% zone around 64 and option confluence back through the minor pennant resistance. From there we had a sharp spillover emotive wave up creating a clear break over the 50 dma, Kijun and Tenkan kiss of life. The move up came after completing the correction in 3 wave from gap fill and fail of the daily bull flag back in Oct/Nov. Through the Hamas/Israel spike higher we spat the outer channel and are working through that overhead speculative supply. For bulls needs to break above those descending levels for higher.
We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. From there down in 3 waves, completing a C or IV? Support is previous lows. The bear case is the high was a complete 5.
Weekly: WTI crude Oil futures simply reversed downside momentum near the key 61.8% with impulse, having plunged more than $60 off the June highs. WTI was never able to take on its sphere of influence which is causing resistance now as it has bounced off the double bottom through Kijun. The support is 50wma for the upside. Recall WTI completed 3 waves and spat the 50wma after the since filled OPEC+ gap up underscoring its weakness prior to the Hamas attack. Near lows underscore the support, no less than 5 times since April 2021. Risk support is the grid. Long term 61.8% target fueled the spit of a spit by after rebalanced Chikou sated. Support Weekly Kijun, tenkan, cloud and Murrey Math levels and previous breaks (off monthly). Bear case is Wave 5 complete.
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 “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
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 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. A break below opened up the objective 2020 yearly open and 2018 high at 75.35-76.87 which gave away and has held on to attempts to get above. This is an area of interest for downside exhaustion and price inflection potentially.
Crude Oil Futures Commitment of Traders
Latest ICE and CFTC Open Interest Data:
CTFC and ICE open interest:
Money managers reduced their net-length in Brent crude oil futures and options by 24,245 contracts to 176,038 in the week ending November 7 via ICE
- Long-only positions fell by 20,576
- Short-only positions rose by 3,669
- other reportables net-length rose by 20,842
Money managers reduced their net-length in WTI crude oil futures and options by 60,795 contracts to 153,474 in the week ending October 31 via CFTC
- Long-only positions fell by 26,649
- Short-only positions rose by 34,146
- other reportables net-length rose by 16,904
Aggregated open interest in Brent and WTI in million contracts
COT on Commodities
COT on commodities in week to Oct 31: A mixed week with selling of energy and ags being partly offset by broad demand for metals. Selling was led by WTI, Brent, corn, wheat and sugar while buyers focused on natgas, gold, platinum, soybeans and coffee via Ole S Hansen @Ole_S_Hansen
via Ole S Hansen @Ole_S_Hansen
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
The sharp move in WTI to $63 in May and then rebound came after ten-day volatility in oil rose the highest level since October as crude sank for a third week. It gives a good indicator of complacency and optionality out there in slow price ranges. API reported big product draws which is supportive for the cracks. The contango structure and inflation having cooled from its recent peak, but remaining stubbornly elevated adds a volatile dynamic around settlements. The US regional banking disaster filtered through to commodities such as oil, copper and natural gas.
Ten-day volatility in oil jumped to the highest level since October as crude sank for a third week.
via commodityvol.com
NYMEX LO = Crude Oil Options First 3 Months (Live Link)
NYMEX LO & ICE North Sea Brent BRN Crude Oil Options (Live Link)
NYMEX LO NYMEX OH NYMEX OB Options (Live Link)
NYMEX LO NYMEX OB Options (Live Link)
Energy Earnings Highlights for Q2 2023
Major oil companies reported Q3 earnings:
Lower earnings have been across the big oil board.
The three major oil services companies all reported Q3 earnings:
Key EIA and CME Dates for WTI Crude Oil
Key EIA and CME Dates For WTI Crude Oil
From The TradersCommunity US Research Desk