Energy Market Update February 21, 2018
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Energy Market Update February 21, 2018 NYMEX Prices Close April Crude Oil CrudeMarch Oil Gasoline March Heating Oil March Natural Gas
$61.68 60 $1.7573 $1.9323 $2.651
Wk. Change +1.08 +0.0443 +0.0479 -+0.047
MARKET COMMENTS: The inventory report is delayed a day because of Presidents’ Day on Monday. A docile oil market most of the day got jerked up a bit on the close. Fed minutes were released at 1 pm today, showing that there is an intention to raise interest rates three times this year. Some economists were predicting four rate raises with inflation moving higher lately. The U.S. dollar fell slightly then bounced back to higher, and the stock market rose on the release of the minutes. A sizeable decline is expected in refinery runs, and there are expectations that Cushing crude will fall by 2 million barrels with Canadian crude imports slowed by reduced rates on the Keystone pipeline in addition to crude exiting Cushing for the Gulf via the new Memphis pipeline. On Monday this week the very first fullyladen supertanker, a VLCC [very large crude carrier] loaded at the Louisiana Offshore Oil Port (LOOP) and is bound for China. The shipper is Shell and the chartered ship is the Shaden, owned by Saudi Arabia. The LOOP is the only U.S. port that can accommodate fully-laden VLCCs, but up until now, the port has only had the ability to offload. The LOOP now has three single-point mooring buoys that can accommodate VLCCs. Asian exports have grown since the ban on crude exports was lifted by Obama in 2015. A VLCC holds up to 2 million barrels (84 million gallons) of crude oil. Middle East geopolitical tensions have helped move energy markets this week as Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israel could act against Iran itself, not just its neighboring allies (Syria). “Israel will not allow Iran’s regime to put a noose of terror around our neck,” he continued. “We will act without hesitation to defend ourselves. And we will act if necessary not just against Iran’s proxies that are attacking us, but against Iran itself.” Iran openly engaged Israel by sending a drone into its territory. Israel launched a large-scale air raid in Syria to destroy twelve sites, including four Iranian targets. The Israeli F-16 fighter was shot down inside of Israel’s airspace. Both pilots ejected with one badly injured.
U.S. consumer sentiment increased more than expected in February, surpassing the recordhigh average in 2017. The University of Michigan’s mid-month report on consumer attitudes rose to 99.9 in February, which is the second highest level since 2004. This marks a 4.4 percent increase from last month’s figure of 95.7. Consumers appeared to be focused on positive economic news, rising incomes, and growing employment. The index measures 500 consumers’ attitudes on future economic prospects, in areas such as inflation, unemployment, government policies, interest rates, and personal finances. Saudi Arabia plans to keep its crude exports below 7 million barrels per day in March, despite a lower domestic need for crude. OPEC’s leader is pushing to completely eliminate the global surplus in oil, and combat worries about a new cycle of oil price weakness. Another story that has allowed oil to move a bit higher this week: Saudi Arabia, Russia, and other oil producers are looking to draft an agreement on a long term alliance by the end of this year, according to the United Arab Emirates energy minister. OPEC is urging its members to put in oil capacity buffers to help alleviate any wild upswings in price due to the weak U.S. dollar this year. The agreement for this long term alliance is a work in progress, but might be endorsed and signed by all 24 countries before the end of the year. On Wednesday U.S. lawmakers discussed raising the federal gasoline tax by 25 cents per gallon to possibly help fund U.S. infrastructure projects. The 18.4 cent per gallon tax on gasoline has not been increased since 1993. Many in Congress believe that such an increase has little or no chance for approval. In January the U.S. Chamber of Commerce backed increasing the fuel taxes by 25 cents a gallon, which it said would raise $394 billion over the next 10 years. On Thursday the average national price for gasoline was $2.55 per gallon, down from $2.61a week ago. This is still well above last year’s $2.28 per gallon, according to AAA.
Energy Market Update February 21, 2018 NYMEX Prices Close April Crude Oil CrudeMarch Oil Gasoline March Heating Oil March Natural Gas
$61.68 60 $1.7573 $1.9323 $2.651
Wk. Change +1.08 +0.0443 +0.0479 -+0.047
MARKET COMMENTS: The inventory report is delayed a day because of Presidents’ Day on Monday. A docile oil market most of the day got jerked up a bit on the close. Fed minutes were released at 1 pm today, showing that there is an intention to raise interest rates three times this year. Some economists were predicting four rate raises with inflation moving higher lately. The U.S. dollar fell slightly then bounced back to higher, and the stock market rose on the release of the minutes. A sizeable decline is expected in refinery runs, and there are expectations that Cushing crude will fall by 2 million barrels with Canadian crude imports slowed by reduced rates on the Keystone pipeline in addition to crude exiting Cushing for the Gulf via the new Memphis pipeline. On Monday this week the very first fullyladen supertanker, a VLCC [very large crude carrier] loaded at the Louisiana Offshore Oil Port (LOOP) and is bound for China. The shipper is Shell and the chartered ship is the Shaden, owned by Saudi Arabia. The LOOP is the only U.S. port that can accommodate fully-laden VLCCs, but up until now, the port has only had the ability to offload. The LOOP now has three single-point mooring buoys that can accommodate VLCCs. Asian exports have grown since the ban on crude exports was lifted by Obama in 2015. A VLCC holds up to 2 million barrels (84 million gallons) of crude oil. Middle East geopolitical tensions have helped move energy markets this week as Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israel could act against Iran itself, not just its neighboring allies (Syria). “Israel will not allow Iran’s regime to put a noose of terror around our neck,” he continued. “We will act without hesitation to defend ourselves. And we will act if necessary not just against Iran’s proxies that are attacking us, but against Iran itself.” Iran openly engaged Israel by sending a drone into its territory. Israel launched a large-scale air raid in Syria to destroy twelve sites, including four Iranian targets. The Israeli F-16 fighter was shot down inside of Israel’s airspace. Both pilots ejected with one badly injured.
U.S. consumer sentiment increased more than expected in February, surpassing the recordhigh average in 2017. The University of Michigan’s mid-month report on consumer attitudes rose to 99.9 in February, which is the second highest level since 2004. This marks a 4.4 percent increase from last month’s figure of 95.7. Consumers appeared to be focused on positive economic news, rising incomes, and growing employment. The index measures 500 consumers’ attitudes on future economic prospects, in areas such as inflation, unemployment, government policies, interest rates, and personal finances. Saudi Arabia plans to keep its crude exports below 7 million barrels per day in March, despite a lower domestic need for crude. OPEC’s leader is pushing to completely eliminate the global surplus in oil, and combat worries about a new cycle of oil price weakness. Another story that has allowed oil to move a bit higher this week: Saudi Arabia, Russia, and other oil producers are looking to draft an agreement on a long term alliance by the end of this year, according to the United Arab Emirates energy minister. OPEC is urging its members to put in oil capacity buffers to help alleviate any wild upswings in price due to the weak U.S. dollar this year. The agreement for this long term alliance is a work in progress, but might be endorsed and signed by all 24 countries before the end of the year. On Wednesday U.S. lawmakers discussed raising the federal gasoline tax by 25 cents per gallon to possibly help fund U.S. infrastructure projects. The 18.4 cent per gallon tax on gasoline has not been increased since 1993. Many in Congress believe that such an increase has little or no chance for approval. In January the U.S. Chamber of Commerce backed increasing the fuel taxes by 25 cents a gallon, which it said would raise $394 billion over the next 10 years. On Thursday the average national price for gasoline was $2.55 per gallon, down from $2.61a week ago. This is still well above last year’s $2.28 per gallon, according to AAA.
