Around The Barrel – Crude Oil Market Recap and Outlook for The Week Ahead

EIA reported a US crude build of +1.233Mbbls. Gasoline stocks rose +2.102Mbbls. Distillates rose +3.197Mbbls in inventories. The WTI Futures Hub at Cushing stocks rose with a +0.854M build. Domestic US oil production was unchanged at 13.1mbpd just off the all-time high 13.3mbpd. Refinery demand rose with refinery utilization rising +1.10% to 94.1%. There was +0.900Mbbls added to SPR inventory WoW. The market has refocused on the delay of possible rate cuts by the federal Reserve this year as inflation lingers. The last FOMC communications struck a balance between ruling out nearer term easing, sticking to the line that the most likely next move is down, while pouring cool water on the risk of rate hikes.

Oil prices continue to churn lower following the OPEC+ decision to gradually unwind cuts and continuing worries about the US economy after a series of weak economic reports and the threat of stagflation. . Ahead of the EIA storage report Brent crude futures are trading around $77.43 a barrel and U.S. West Texas Intermediate crude (WTI) around $$73.09 a barrel suggesting the market is pricing in minimal geopolitical risk.

The higher interest rates depress consumer and industrial demand. The International Energy Agency (IEA) cut its forecast for 2024 oil demand growth last week by 140kbpd to 1.1 million bpd, largely citing weak demand in developed OECD nations.

Oil Outlook Messy

The geopolitical risk premiums related to Iran and the Israel-Hamas conflict have shrunk as both sides consider a ceasefire and Iran has been quiet since its recent attack on Israel.

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 had 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, enacted revenge against Israel. Israel then retaliated days later. It appears that has settled things for now, until next time if that is to be believed.

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.

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.

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. Soaring tensions between Iran & Israel continues to bubble along.

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.

Middle East

What now for Israel and Iran?

Iranian President Ebrahim Raisi dead, Saudi King’s Health

  • Raisi was a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash on Sunday.
  • Saudi Arabia’s Crown Prince Mohammed Bin Salman deferred a trip to Japan because of the health of his father, the king.
  • The death of the Iranian President and the Saudi king’s health issue don’t seem to be affecting the market much, as it is unclear whether they will have an immediate impact on energy policy.

Market Reaction to Mid-East War

Prices found some consolidation after a week that saw Iran bombing Israel, and Israel bombing Iran, the oil price moving lower, catching many “blood speculators” on the wrong side. West Texas Intermediate crude for May delivery high price $85.64 soon after the Israeli strike on Iran. The high price for that week was $86.18, low $81.06. The high price for April (and for 2024) was $87.67 on April 12. That was the highest level going back to October 23, 2023. Front-month WTI prices rose 6.3% in March and gained 16.1% for the quarter.

Previously Iran had launched covert attacks on Israel or relied on regional proxies to do its bidding. Israel in response last 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.

  • Israeli attack on an Iranian compound in Syria,
  • Iran launch an unprecedented assault against Israel.
  • Israel hit Iran with a missile in the early hours of Friday, in what appears to have been a retaliatory strike after weeks of escalating tensions between the two countries.

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.

Israel Attack on Iran

  • Israel hit Iran with a missile early Friday, in what appears to have been a retaliatory strike after weeks of escalating tensions between the two countries.
  • US sources say a missile was involved in the attack, while Iran says it involved small drones.
  • There are competing claims about the scale of the attack on the Isfahan region and the extent of any damage, with Iranian state media downplaying its significance. US officials say Israel hit Iran with a missile early Friday, in what appears to have been a retaliatory strike after weeks of escalating tensions between the two countries.
  • Iran’s government tightly controls access to the country.
  • US Secretary of State Antony Blinken refused to be drawn on the attack, saying only that the US had “not been involved in any offensive operations”.

Iran attack on Israel

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.

  • 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 is a 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 last 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 its 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.

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: 5/31/24.
  • Release Time: Wednesday, June 5, 2024, at 9:30 A.M. (ET)
  • Crude EIA +1.233M Exp -1.915M Prior -2.508M API +4.052M
  • Cushing EIA +0.854M Exp +1.643M Prior -0.341M API +0.983M
  • Gasoline EIA +2.102M Exp -1.437M Prior -0.235M API +4.026M
  • Distillate EIA +3.197M Exp -1.750M Prior -0.045M API +1.975M
  • Refinery Utilization rose +1.10% to 94.1% Exp +0.8%
  • Production UNCH kbpd at 13.10mbpd (13.10 ATH)
  • SPR rose by ~+0.898mb w/w to 370.2mb last week
  • US petroleum inventories (crude, refined products, SPR) fell by 1.183mb w/w to 1,606.700mb last week – EIA

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

EIA reported a US crude build of +1.233Mbbls. Gasoline stocks rose +2.102Mbbls. Distillates rose +3.197Mbbls in inventories. The WTI Futures Hub at Cushing stocks rose with a +0.854M build. Domestic US oil production was unchanged at 13.1mbpd just off the all-time high 13.3mbpd. Refinery demand rose with refinery utilization rising +1.10% to 94.1%. There was +0.900Mbbls added to SPR inventory WoW.


US Crude Oil Quick Look

Crude oil reversing earlier losses after the EIA reported a 1.4m bbl draw while gasoline and distillate stocks rose by less than expected. Production held steady at 13.1mb/d with export rising 550kb/d. Gains held by back by a 1.9 mbbl increase at Cushing and nearly 1mbbl going into SPR. Implied gasoline demand rose for the first time in five weeks but the 4-wk avg stays close to a 10-year seasonal low. @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.

1 Month at w/e 5/3 24

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

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

Weekly Storage via DOE

with RonH Data ‏@Ronh

  Via RonH at Ron H Public Tableau Link

API Crude Oil Inventories

US SPR Stocks

SPR Cancellation

The US government has flipped to buying back some of the SPR. Oil prices continue to trade back and forth between geopolitical risks and storage builds. Concerns grow that more aggressive from the Federal Reserve would dent economic growth and curb demand. Decreasing oil consumption in the US and Europe could threaten the market.

US Strategic Petroleum Reserves has now increased by 20.2 mn barrels since the July 2023 low point @Ole_S_Hansen May 8

Furthermore, the next OPEC+ meeting scheduled for June 1 may extend its voluntary output cuts, should oil demand does not increase, this weighs up with the Biden administration’s SPR cancellation decision amidst concerns over market conditions and global production cuts impacting oil prices ahead of an election.

The cancellation raises questions about the U.S. energy strategy and the future of the Strategic Petroleum Reserve’s replenishment efforts. The DOE cited rising oil prices as the reason for canceling the solicitations for oil deliveries to the Bayou Choctaw SPR site.

Citing rising oil prices, the DOE said, “We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow.” Three million barrels of oil had been slated for delivery to the Bayou Choctaw SPR site in August and September.

May 28, 24. US SPR crude inventories rose by ~0.5mb w/w to 369.3mb last week #oott
Sour up by ~0.5mb to 225.0mb
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

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. 

Imports

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

  • Canada -188 to 3,659
  • Mexico +346 to 805
  • Saudi Arabia -47 to 355
  • Colombia -180 to 183
  • Iraq +19 to 326
  • Ecuador +129 to 129
  • Nigeria +233 to 322
  • Brazil +217 to 217
  • Libya -97 to 1
  • May 8, 2024

Exports

US crude and refined product exports were at record 12.094mbpd last week – EIA 4/24/2004

US Gasoline Consumers

Input to Refineries

Refinery utilization rate in % in PADD3 – EIA

US consumers bought 369.5 million gallons of gasoline per day last week. That is -21.3 mil YoY.

US consumers spent $1,346.0 million dollars per day for gasoline last week. That is $-34.4 mil YoY.

US avg retail price for gasoline was $3.643 last week. That is +0.110 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 10-May: 603 (prev 605)
  • Rotary Gas Rigs: 103 (prev 102)
  • Rotary Oil Rigs: 496 (prev 499)
  • Off Recent Highest level since Sept. 15, 2023, when it reached 515.
  • 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 oil rigs changes in key shale basins

  • Permian -2 to 311
  • Eagle Ford +1 to 49
  • Williston unchanged at 34
  • Cana Woodford +1 to 22
  • DJ Niobrara unchanged at 9

Baker Hughes 5/10/24

Canada Rigs

  • Canada’s active rig count 123 for April 26, 2024, 12 rigs more than last Friday.
  • Albertan rig activity grew to 97, an increase of 10 rigs compared to last week.
  • Saskatchewan’s rig count was unchanged through the week, remaining at 3,
  • BC’s active rig count grew from 21 to 22.
  • This week’s modest rig count increase may suggest that an end to the spring breakup could be on the horizon.
  • Number of oil rigs increased from 54 to 58 between April 19 and April 26.
  • Number of gas rigs increased by 8. The number of rigs classified as “Other” or “Unknown” held steady at 3.
  • Today’s rig utilization rate is 32.9%, a slight increase from 31.8% at last week’s end. The total number of rigs increased by 25, settling at 374.
  • BOE Report

Talking About the Weather

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

It has been 4 months since the announcement of the OPEC+ voluntary production cuts and since then, compliance is virtually nonexistent.

Repeat After Me, This Is Not A Real OPEC+ Cut @HFI_Research

“Looking at Kpler’s month-to-date data, the m-o-m drop is ~800, but when you dig a bit deeper, the entirety of the drop comes from lower crude exports from Iran and Venezuela. Both are under sanctions from the US, so there are shadow fleets that are not being accurately tracked. If we adjust it for the shadow fleets, we have OPEC+ crude exports higher m-o-m. Since the Saudis and Russians maintained their production cuts from 2023 to 2024, the additional voluntary production cuts from the other OPEC+ members should have shown up. Instead, overall crude export volumes are flat.” Source: HFIR

Russian and Iranian Sanctions

The U.S. it seems to be adding new sanctions on Russia weekly, the problem is they are not effectively enforced or effective. You just need to look at the Russian energy revenues to grasp that fact. EU sanctions on Russian refined products were implemented Feb. 5 last year. The ban followed a similar price cap on crude shipments introduced in 2022. European countries pushed to lower the crude price cap ($60) on Moscow even further, but the Biden administration said it was inclined to oppose the move. Moving on along that decision by the U.S. and the infective enforcement draws one to make many conclusions about the U.S. administration.

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 2022 to a record 1.2mbd and risen ever since. Russian Exports to China were 70kbd in December 2022, down nearly 27%m/m. We saw Malaysia increase exports well beyond its own output to China. In turn China has exported products such as distillates back to Europe. Where did that oil come from? Wink, Wink.

Only the Saudis are visibly reducing supplies, while Russia continues to export near all-time highs.

Russian crude export Q4 2023 – 4.839 million b/d
YTD – 5.082 million b/d
At some point, the market will realize what we are saying is right and as for the market implications, this is important to understand. @HFI_Research

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 24,942 contracts to 320,773 in the week ending April 30 via ICE

  • Long-only positions rose by 18,962
    Short-only positions fell by 5,980
  • other reportables net-length fell by 19,222

Money managers reduced their net-length in WTI crude oil futures and options by 6,956 contracts to 172,689 in the week ending April 30 via CFTC

  • Long-only positions rose by 2,749
    Short-only positions rose by 9,705
  • other reportables net-length rose by 4,173

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 16 @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

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.

Around The Barrel Contents

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

  1. DOE & API Petroleum Storage Forecast Matrix
  2. Crude Oil Quick Summary
  3. Weekly DoE US Petroleum Storage Report Breakdown
  4. API Crude Inventories
  5. Cushing Oil Stocks
  6. Crude Imports
  7. Crude Exports
  8. Gasoline
  9. Rig Watch
  10. Crude Oil Production
  11. Weather
  12. WTI Crude Oil Futures Technical Analysis
  13. DCOT Report
  14. Option Volatility and Gamma
  15. 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 soaring US dollar had a significant impact on commodity futures which has since reversed with the USD back at 7-month lows. Through it all demand and supply issues are the underlying guide.


The Week Ahead

DOE Weekly Petroleum Status Report Forecast

  • via TradersCommunity.com
  • Report Date 3/1/23
  • Release Time: Wednesday, March 8, 2023, at 10:30 A.M. (ET)

Highlights

  • Crude EIA -1.694M Exp +0.400M Prior +1.166M API -3.835M
  • Cushing EIA -0.890M Exp -0.473M Prior +0.307M API +0.024M
  • Gasoline EIA -1.134M Exp +0.700M Prior -0.874M API +1.840M
  • Distillate EIA +0.138M Exp -0.500M Prior +0.179M API +1.927M
  • Refinery Utilization +0.20% to 86.0% Exp -0.3%
  • Production -100kbbls to 12,200kbpd (13.10 ATH)
  • SPR release No Change (Lowest Since 1983)
  • NB: Crude oil supply adjustment fell -2.650mbpd w/w to -0.384mbpd last week – EIA
  • US petroleum inventories (crude, SPR, refined products) rose by 1.851mb w/w to 1,631.927mb last week

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

Stocks have been building rather stoically in 2023, specifically at the Cushing WTI futures Hub.

Energy Price Matrix

Energy Market Performance

Update: PADD 3 Refinery Utilization


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.

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via Ole S Hansen @Ole_S_Hansen

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 and The Fundamental Angle ‏@BrynneKKelly

  Via RonH at Ron H Public Tableau Link

The Fundamental Angle with Brynne Kelly ‏@BrynneKKelly

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API Crude Oil Inventories

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

US petroleum inventories (crude, SPR, refined products) rose by 1.851mb w/w to 1,631.927mb last week

US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001 via Bloomberg

  • US crude stocks In SPR fell to lowest since Dec 1983.
  • We saw -0.000Mbbls taken from the SPR into the crude oil market.
  • US petroleum (crude, SPR, refined products) inventories fell by 2.982mb w/w to 1,630.076mb last week – EIA
  • US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001.

US SPR crude inventories unchanged w/w at 371.6mb Jan 13, 2023. Sour unchanged w/w at 203.0mb Sweet unchanged w/w at 168.6mb

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

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Cushing OK Crude Oil Storage Stocks

Closer Look at Cushing with DigStic Data @DigStic

US Oil Import Export

Imports

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

  • Canada +175 to 3780
  • Mexico -169 to 556
  • Saudi Arabia +166 to 476
  • Colombia +79 to 222
  • Iraq -25 to 265
  • Ecuador -42 to 55
  • Nigeria +145 to 243
  • Brazil -4 to 71
The US was a net-petroleum exporter in October – export of crude and refined products exceeded imports by record 1.629mbpd – EIA

Exports

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US crude exports 5.629mbpd last week, a record high the prior week (on a gross basis). A decade ago, America barely exported any oil.

US exports of crude and refined products in mbpd (EIA) – Record High ~11.776 million b/d.
US crude exports rose to record 4.146mbpd in October – EIA

Top buyers of US crude in October in kbpd (total exports 4.146mbpd)

  • India 509
  • South Korea 430
  • UK 401
  • Netherland 413
  • Canada 383
  • Singapore 346
  • China 332
  • Italy 187
  • Germany 164
  • Taiwan 135
  • Spain 117

US Gasoline Consumers

Input to Refineries

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US consumers bought 359.6 million gallons of gasoline per day last week. That is -16.8 mil YoY

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US consumers spent $1,218.7 million dollars per day for gasoline last week. That is $-325.3 mil YoY.

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US avg retail price for gasoline was $3.389 last week. That is -0.713 YoY.

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Rig Watch

Baker Hughes Weekly North American Rigs Report

  • US Baker Hughes Rig Count 03-Feb: 749 (prev 753)
  • Rotary Gas Rigs: 154 (est 153; prev 151)
  • Rotary Oil Rigs: 592 (est 602; prev 600)

US Oil Rigs w/w changes by key shale basins

  • Permian -3 to 345
  • Eagle Ford unchanged at 68
  • Williston unchanged at 42
  • Cana Woodford +1 to 31
  • DJ Niobrara unchanged at 15
via @staunovo

US oil rigs and frac spread (Baker Hughes/Primary Vision)

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US oil rigs and frac spread (Baker Hughes/Primary Vision)

Canada Rigs

  • Canada Rotary Drilling Rigs 24 February 24, 2023
  • Canada averaged 248 active drilling rigs this week according to data from the Canadian Association of Energy Contractors. Of those rigs, 32% are drilling for natural gas, 52% are drilling for oil, 6% for other (helium, hydrogen, geothermal, lithium, or potash), and 10% are moving.
  • Drilling activity by province is 76% in Alberta, 15% in Saskatchewan, 8% in BC, and 1% in Manitoba. Precision Drilling holds the majority of the Canadian market share with 30%, Ensign Drilling with 20%, Savanna Drilling with 12%, Horizon Drilling with 7%, and Stampede Drilling with 6%.
  • BOE Report

International oil rigs ex North America

International oil rigs ex North America +7 m/m to 696 in January via Baker Hughes

  • Indonesia +4
  • Libya, Vietnam +3
  • Abu Dhabi, Kuwait +2
  • Algeria, Argentina, Ecuador, Mexico -2
  • Colombia -3
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US Oil Production

US crude production changed benchmark March 8, 2023: This week’s domestic crude oil production estimate incorporates a re-benchmarking that lowered estimated volumes by 51,000 barrels per day, which is about 0.4% of this week’s estimated production total. EIA

US Oil Field Production Unchanged =100kbpd 12.20 mbpd (New Benchmark adj)

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“North Dakota’s Bakken shale field — once the largest and busiest American shale patch — is showing signs of age, threatening to hold back US oil production as the world thirsts for more crude. Mature wells that are producing more gas than expected are hurting crude output from the Bakken, the Energy Information Administration said… The deteriorating performance was a main reason the agency cut its estimate for 2024 US oil output to 12.65 million barrels a day from an earlier projection of 12.8 million… Even at the lowered estimate for next year, US output would still set a record, surpassing the 12.3 million barrels a day produced in 2019.”

February 7 – Bloomberg (Sheela Tobben)
EIA reported that US crude oil production fell 276Kbpd In December to 12.101Mbpd.

OPEC Crude Oil Production

OPEC’s crudeoil output rose 120k b/d last month: 40kbd drops in Angola and Iran being more than offset by increases from Nigeria (+80kbp), Libya (40kbp), UAE (40kbp) and Venezuela (30kbp). Minor if any adjustments seen by the others, incl. KSA via @Ole_S_Hansen – Bloomberg Survey

via Ole Hansen/Bloomberg 3/1/23

Weather Watch

Gulf of Mexico


WTI Crude Oil Futures Technical Analysis

via KnovaWave @KnovaWave

US Crude Oil (WTI)

Daily: WTI Crude Oil still chopping after completing the correction in 3 waves, C at the breakup level broke out of its daily bull flag through tenkan, kijun and 50dma right to the bottom of the cloud such was the impulse. From there it has been held back & needs 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. From there down in 3 waves, 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 spat the key 61.8% last month with impulse, having plunged more than 30% off the June highs. It has however been stuck in its sphere of influence since other than a peek this week. WTI completed 3 waves and powered through the tenkan and 50wma, however they both failed to hold the retest. Risk support is the grid. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated. Resistance Weekly Kijun, 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 opens up the objective 2020 yearly open and 2018 high at 75.35-76.87. This would become an area of interest for downside exhaustion and price inflection potentially. Initial weekly 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


Crude Oil Futures Commitment of Traders

Latest ICE and CFTC Open Interest Data:

CTFC and ICE open interest:

Brent:

Money managers reduced their net-length in Brent crude oil futures and options by 53,341 contracts to 260,648 in the week ending May 7 via ICE Futures Europe.

  • Long-only positions fell by 53,341
  • Short-only positions rose by 6,784
  • other reportables net-length rose by 24,301

Money managers reduced their Brent long-only positions by 53,341 to 341,835 over the week ending May 7, lowest in about eight weeks. Additionally, hedge funds decreased their bullish gasoline bets to the lowest in six months as demand has remained lackluster.

WTI:

Money managers reduced their net-length in WTI crude oil futures and options by 55,038 contracts to 117,651 in the week ending May 7 via CFTC

  • Long-only positions fell by 37,172
  • Short-only positions rose by 17,866

Chart: Crude net-positioning of non-commercial accounts (=managed money and other reportables) in barrels and in US dollars (Brent and WTI futures and options combined) latest value is May 7, 2024

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