- US crude oil inventories showed an increase of 3.7 MMBbl last week, according to the weekly EIA report. Gasoline inventories decreased 1.5 MMBbl, and distillate inventories also decreased 1.5 MMBbl. The total petroleum inventories decreased 2.5 MMBbl. US crude oil production increased 100 MBbl/d last week, and imports were up 1.3 MMBbl/d – to an average of 7.5 MMBbl/d versus the week prior.
- WTI prices continued the tandem trade with news of the China-US trade negotiations. Prices rallied at the end of the week when news came out that the Chinese contingent was staying over the weekend to continue the negotiations.
- The fundamental aspect to the trade continues to focus on the Venezuelan production declines and the supply cuts by the OPEC and non-OPEC countries. The commitment of the Kingdom to reduce global supplies got another boost last week when Saudi Energy Minister Khalid al-Falih announced that they can reduce beyond the pledged levels in March. He went on to state that the oil market would be balanced in April and that there would be no gap in supply due to the US sanctions on Iran and Venezuela. Reduced output from the Safaniyah oil field in Saudi Arabia, maintenance at the Yanbu (Saudi Arabia) refinery, and the Libyan El Sharara production halt will support prices near term.
- The CFTC report continues to catch up with the current market, and last week brought the reporting up through February 5. No major shift has occurred, but the trend of late January has the managed-money long speculators increasing positions gradually, while the managed-money short position has been reducing positions at a slow pace.
- Prices at Friday close (highest close since early November 2018) suggest that additional gains may occur this week, as the market has developed a bullish bias during 2019. Weekly prices have set a series of higher highs each week except for one. It is concerning that the market internals had volume declining and ongoing declines in open interest during last week’s gains. WTI shouldn’t be described as a bull market, but instead as a market forming a base from which a bull market could develop. It is also a market that is susceptible to substantial declines, depending on the outcome of the long-awaited trade negotiations. The last month, WTI has shown a positive correlation to supportive news about the negotiations, while detrimental news has emboldened selling. A deal would signal to world markets that global demand may have a chance to rebound, with China leading the way. If failure in the negotiations occurs, then the expectation of further weakness in the Chinese and global economies is likely to lead to price declines.
- Last week took prices just below the resistance level from last November, which was at $57.96/Bbl. Should prices have a daily close above that level, expect $60/Bbl in a quick period of time. Recent comments from President Trump have taken some of the bullish momentum away, meaning that a first target in retracement will be around the commonly watched 50-day moving average ($54.51/Bbl currently). A breakdown of this level will lead prices to the consolidation area around $50/Bbl.
- Natural gas dry production increased 0.30 Bcf/d. Canadian imports increased 0.34 Bcf/d.
- Res/Com demand gained 1.72 Bcf/d week over week, while Power and Industrial demand increased 0.90 Bcf/d and 0.31 Bcf/d, respectively. LNG exports gained 0.74 Bcf/d with Corpus Christi ramping exports back up. Mexican exports increased 0.02 Bcf/d. Totals for the week have the market gaining 0.64 Bcf/d in supply and demand increasing 3.80 Bcf/d.
- The storage report last week came in with a withdrawal of 177 Bcf, leaving total inventories 73 Bcf below last year and 362 Bcf below the five-year average.
- Prices opened the week without a gap and showed strength during the week. Prices formed a potential double-bottom with the rebound off the February 7 lows ($2.549) and then a retest and failure on February 15 ($2.543). Both declines represent tests of the lows established in 2016 between $2.522 and $2.568/MMBtu.
- The CFTC report was released showing positions as of February 5 and confirmed the declines from liquidation of the last winter speculative long positions during the price declines during late January. However, more interesting is the lack of participation by the managed-money short positions not increasing substantively as prices declined. The CFTC data release this week should bring the data within a week and establish any trends during the last two weeks of consolidation.
- The stronger prices last week confirmed the gas market will continue to trade in relation to weather forecast changes. Drastic price swings like those we experienced in early winter are unlikely; we’re more likely to see incremental price gains as forecasts remain colder for the coming couple of weeks.
- The trade around forecasts will likely keep the market in range during the coming weeks, similar to 2018 when it traded between $2.53 and $2.84/MMBtu between February and April. There may be weather-driven spikes with prices probing higher, but the range should remain barring any substantive winter demand extension into late March. Due to the recent changes in the forecasts, it is unlikely for the bears to garner the support to break below the three-year lows. Total open interest remains historically low and the gas market will be defined by lighter volume, as there is limited interest in trading without a meaningful price bias.
- Prices were mostly up again last week. Propane was up $0.05 to $0.70, normal butane up $0.03 to $0.88, isobutane up $0.04 to $0.92, and natural gasoline up $0.06 to $1.20. Ethane was the only price reduction week over week, falling $0.01 to $0.30.
- US propane stocks decreased ~3.6 MMBbl for the week ending February 15. Stocks now sit at 54.6 MMBbl, roughly 11.5 MMBbl and 4.8 MMBbl higher than the same week for February 2018 and February 2017, respectively.
- The DOE reported crude imports to the US Gulf Coast rebounded last week after hitting an all-time low the week of February 8. While US waterborne imports have been falling overall, PADD 3, home to growing local production and increasing imports of Canadian crude, has been seeing the biggest declines in waterborne imports.
- Looking ahead to this week and the EIA report release on Wednesday, waterborne crude imports to PADD 3 appear to have fallen again on lower imports with bills of lading. This is the second-lowest level for such imports on record, behind only the week of February 8.
- Imports into PADD 1 and PADD 5 appear to have fallen as well. While Venezuela is obviously a major factor in these declines, Saudi Arabian crude imports have virtually disappeared from the Gulf Coast, with zero imports for three of the past four weeks. Saudi Arabia, which owns the largest refinery on the Gulf Coast, had been a major source of crude, but its share of imports has fallen considerably in 2019.
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