Follow by Email

Tuesday, April 21, 2015

Price changes for Thursday, April 23, 2015

Hi to all,

Here's what I have for price changes for this week:

Heating and stove oils add 2.47 cents a litre.
Diesel adds 2.9 cents a litre, and...
Gasoline shows upwards by 3.1 cents a litre.

Refined product prices were driven upwards this week as a result of, not just the increase in crude oil prices, but also by the fact that last week saw only a modest build in overall US inventories.

Gasoline demand also shows signs of picking up in the face of higher refinery capacity coming back online. With capacity up, and numbers showing a draw against gasoline inventories, it was seen as "natural" that speculators would take advantage.

But how long can the markets follow the snow job of rising world crude supplies that still shows a glut in supply? Saudi Arabia produces a near record of an added 650,000 barrels per day in March month, well ahead of what was the norm. To add to the false reading from the markets, news this morning that storage capacity continues to be taken up in the markets. With another 158 million barrels in floating storage, it makes one wonder how long speculators can go before the truth in the markets is realised.

To add to the Saudi storage concerns and the building of false demand picture worldwide, you can also add another factor that no one is talking about...Yet!

With oil rising, it's only a matter of time before smaller producers start playing with the thought of getting back into the market of selling and pumping crude oil. With US domestic production now reaching a record 9.3 million barrels a day, almost 13% more than the same time period last year, speculators surely can see that this latest round of crude oil increases may be very well short-lived.

Regards to all, and if you have a thought, be sure to leave a comment!

George Murphy
Twitter @GeorgeMurphyMHA

Monday, April 20, 2015

What I'm watching in the oil markets, and what you should too.(Part one)

People are often asking me where I think oil prices are going, and what factors I'm watching out in the markets. I guess sometimes some want to build evidence on where oil prices are going because of a vested interest, or they're simply concerned with provincial finances.

...and right they should be on the last point...

It's obvious that right from "day one", we made the mistake of simply relying on revenues gained from the sales of crude oil off our shores. It's easy to say we got lazy over economy building because we had lots of cash in the coffers. This year will prove our folly over over our dependence on the price of oil, rather than the "traditional way" of building a sustainable economy.

Even easier to say that all was misdirected in the past and that not enough was invested in our future here. Either point has validity and each point may itself be wrong.

Either way, "dependence" on oil money has gotten us into some troubles with really no one answer on how to get ourselves out of the situation we now find ourselves in. If we are to get out of the situation, we're still going to have to depend on the growth of our oil sector to do it. That, my friends, is not an easy sell, although it is a sale that can be made...IF prices remain where they are today.

Let me explain:

Factor 1
A lot has been said of the effect that smaller oil companies have made on US domestic production. Some may argue with validity that "small oil" can't keep it's head out of the water without prices being higher. With the parking of drilling rigs, it seems that their case may have some valid evidence to back the fact that $55 US would be a "boil over" point to where frackers may explore and produce to overall US domestic production again, and with Brent oil prices now starting to push $63 US a barrel and West Texas Intermediate producing sales at $50 US, we may again be on the edge of seeing smaller producers re-entering the markets. Important factor to watch is the US rig count. Published pretty much on a weekly basis, watching this number start to show stability will probably coincide with oil prices that will also do the same.

Any increase in the overall rig count will, in all likelihood, start to show another drop in WTI prices, thus dragging down Brent prices again.

Factor 2:
US demand: First, for gasoline may increase the value of some oil, but in all likelihood affect gasoline spot prices first. While refiners are making a fortune right now with oil at present levels, those profits in this sector start to diminish with increasing crude oil acquisition costs. Either way, with prices somewhat lower, any company that is fully immersed in the oil industry, from the initial search to the final product, becomes a winner under the present market conditions. I don't believe that "Big Oil" even wants to see prices high, if they can make it financially further down the food chain! Summarily, demand for both gasoline and distillate products remains tepid at best, and that's not going to be a real motivator to bring prices up.

Factor 3:
Conservation efforts/Consumer outcry: While arguments for global warming persist with a lot of evidence to back it up, even more disconcerting for increasing oil prices has been conservation efforts. Don't ever doubt that consumer outcry has also been a positive motivating factor in the efforts behind conservation and protection of the environment as well! The simple fact is that, not so long ago, consumers were upset with higher oil and gasoline prices, and that spurred on efforts of government to answer back for their constituents. Consumers wanted relief and protection from higher energy costs that influenced decision-making. has had a huge effect on world consumption of oil products, and will continue to do so in the future. Witness higher automotive mileage claims and home retrofit programs worldwide, and locally, look no further to the supposed reasoning and the justifications around the Muskrat Falls hydro-electricity project.

In part two, I'll have more factors that I use in everyday life to balance my reasonings behind energy costs, and what I watch to determine further direction in oil prices. If you have any comments, feel free to drop me a line!

I will be back tomorrow night with the final numbers for this week's price adjustments!

Regards for now!

George Murphy
Twitter @GeorgeMurphyMHA


Tuesday, April 14, 2015

Price changes for Thursday, April 16, 2015

Hi to all,
 
Here's what I have for this week's price changes:

Heating and stove oils show an added 2.21 cents a litre.
Diesel shows up by 1.6 cents a litre, and...
Gasoline shows a very modest drop of 8/10ths of a cent.


While oil prices started off this week at a modest $55.16 a US barrel (Brent), prices gradually started an increase after the US Energy Information Administration stated that we should start to see a drop in production coming from some of the US fracking fields where oil drilling rigs have been "parked" since prices retreated from historic highs. The EIA is predicting a drop of 57,000 barrels a day in May month as a result of a halt in further production because of higher prices.

Don't look for a surprise spike in prices, unless something extraordinary happens though. If prices do increase, look for rigs to go back to work and bring prices lower again.

Surprisingly, against all this, there are still strong signs and, indeed questions that need further research as to how come oil prices haven't retreated further based on other evidence out there. Over the last week, for example, crude oil in floating storage (in tankers being used for such) has risen dramatically to count at 152 million barrels. That's an added 20 million barrels of crude oil stored away over the last three weeks. As well, the prospects of Saudi Arabia increasing production this summer to a record 11 million barrels a day has yet to hit the markets.

Needless to say, if I was trading in the markets, I would be worried over the two notes here. The prospect of Saudi Arabia waving the production stick should really be enough to keep Brent prices lower again for the coming future. That prospect on the futures markets still shows little growth in crude prices. Numbers show a mere $63 US a barrel in the middle of 2016 and $68 US a barrel for the full year of 2017.

Might as well get used to lower oil for a while...

That's it for now!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Tuesday, April 07, 2015

Price changes for Thursday, April 9, 2015

Hi to all,

I hope Easter was good for everyone and that for some it was a time of rest. At my place, between the twins, it was "chocolate madness"...

Either way, here's what I have for this week's price changes:

Heating and stove oils show a slight drop of 7/10ths of a cent a litre.
Diesel drops by 9/10ths of a cent, and...
Gasoline shows up by 1.8 cents a litre.


No doubt about it, but speculators know the start of the summer driving season is on the way, and that right now is about their only hope of scraping together any kind of a profit on their fare. April month has always been the month where we have historically seen that run-up to the US Memorial Day weekend (our May 24) that marks the start of the heavy demand gas guzzling season.

Or, at least that's what investors are hoping for!

The Canadian dollar increased slightly on news of rising oil. Earlier in this session saw skeptics balk at talk of the lifting of sanctions in Iran that would lift world crude stocks up by another one million barrels a day. They think that it will take some time to bring Iranian crude back to the markets, as the sanction agreement talks about removing sanctions as Iran conforms to the agreement, rather than immediate. The deal comes into full effect by June 30th.

Talk in the markets also reflected on Saudi Arabia increasing prices to its Asian customers, probably in a move over concerns of war costs as the drama in Yemen continues to unfold, and not because of any shortage in product availability. The Saudi's have to be careful about losing market share to other sources of oil out there. At this point, they really can't afford to lose any, now that they have a war of their very own!

"Man's inhumanity to man..."

That's it for this week!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA 

Price changes for Thursday, April 9, 2015

Hi to all,

I hope Easter was good for everyone and that for some it was a time of rest. At my place, between the twins, it was "chocolate madness"...

Either way, here's what I have for this week's price changes:

Heating and stove oils show a slight drop of 7/10ths of a cent a litre.
Diesel drops by 9/10ths of a cent, and...
Gasoline shows up by 1.8 cents a litre.


No doubt about it, but speculators know the start of the summer driving season is on the way, and that right now is about their only hope of scraping together any kind of a profit on their fare. April month has always been the month where we have historically seen that run-up to the US Memorial Day weekend (our May 24) that marks the start of the heavy demand gas guzzling season.

Or, at least that's what investors are hoping for!

The Canadian dollar increased slightly on news of rising oil. Earlier in this session saw skeptics balk at talk of the lifting of sanctions in Iran that would lift world crude stocks up by another one million barrels a day. They think that it will take some time to bring Iranian crude back to the markets, as the sanction agreement talks about removing sanctions as Iran conforms to the agreement, rather than immediate. The deal comes into full effect by June 30th.

Talk in the markets also reflected on Saudi Arabia increasing prices to its Asian customers, probably in a move over concerns of war costs as the drama in Yemen continues to unfold, and not because of any shortage in product availability. The Saudi's have to be careful about losing market share to other sources of oil out there. At this point, they really can't afford to lose any, now that they have a war of their very own!

"Man's inhumanity to man..."

That's it for this week!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Tuesday, March 31, 2015

Price changes for Thursday, April 2, 2015

Hi to all,

With operation "Decisive Storm" underway in Yemen, crude oil prices immediately increased early in the regulatory session with Brent prices mostly affected. But with a less likely threat to shipments of oil leaving the area, it was seen to retreat again by Monday. Only question now for the Saudi's and the ten nations forming their forces in the area is: How long can they go before they affect their own bottom line? Wars cost money...

Refined product prices also showed a retreat from their weekly high. Numbers started high as a result of the Saudi Arabian incursion, but are again in retreat.

Here's what I have for this week:

Heating and stove oils show an added 1.75 cents a litre.
Diesel shows a drop of just 6/10ths of a cent, and...
Gasoline shows an added 7/10ths of a cent.
*Don't forget winter blending may throw off the Heating and Diesel fuel numbers somewhat!

Crude oil shows an increase in overall "floating storage" again this week with crude oil stored in tankers ready for sailing. It amounts to an extra 139 million barrels that has nowhere to go. That's up from 134 million barrels in the previous week.

Look for an immediate downwards track for oil if Iran nuclear talks result in Iranian crude entering the markets. Analysts say that an added 1 million barrels a day could enter the world markets if sanctions are lifted. We'll find out later if indeed talks were successful.

That's it from me this week for your update on fuel prices!

Feel free to drop a note if you have any questions.

Regards and make it a good week!

George Murphy
Twitter @GeorgeMurphyMHA

Tuesday, March 24, 2015

Price changes for Thursday, March 26, 2015

Hi to all,

In what was a sleeper of a week on the markets, very little of anything was happening, including moves to any prices. I can't remember the last time they moved as little as this. But here they are:

Heating and stove oils to drop an even penny.
Diesel prices down by 1.6 cents a litre, and...
Gasoline up just 9/10ths of a cent.

All eyes focused on the challenges that are coming to US storage capacity this week as the oil markets are struggling with the fact that US domestic production has literally taken up available storage space, just another reason why analysts are talking about another possible slide in prices to come. It is estimated that, if production maintains itself and export and consumption of oil don't weigh in, we could be looking at all capacity taken up in the Cushing, Oklahoma storage and pricing facility. Some are predicting that prices could bottom out at $20 US a barrel if that happens!

The second possible threat to lower oil prices comes from what are called "teapot" producers out of Russia, who are faced with crude oil runs and nowhere to export except markets that compete with OPEC. Interestingly, Russian exports add another 800K barrels a day to worldwide production, adding to the glut.

There's lot's of downward fundamentals playing on oil, but the only upside to any increase in oil prices lately has been the thought that the US will soon begin to raise interest rates. Speculation over any increase in rates has dropped the US dollar against the Canadian dollar in the last few days. Speculators have been adding oil and gold to their portfolio's in answer to any possible rate increase.

The Canadian dollar has increased against its US counterpart by close on 2.5 cents this last week as a result, almost negating any price increases to refined product prices as a result.
That's it for this week!

...and I said nothing was happening!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Tuesday, March 17, 2015

Price changes for Thursday, March 19, 2015

..and here's the final numbers for Thursday's price changes:

Heating and stove oils show a drop of 4.65 cents a litre.
Diesel shows down by 5.6 cents a litre, and...
Gasoline shows a drop of 3 cents even.

Just a quick note here on winter pricing that throws the Heating and Diesel numbers out of kilter sometimes. I usually tell everyone that these numbers can be used as just a "guide" on which direction prices will be going due to the use of "anti-freeze" agents such as kerosene and jet fuels in the various blends. That usually carries until the end of April month.

In other news, the US may be running out of storage room. They're actually pumping that much, they expect to see the coffers filled by June month if production keeps growing from domestic sources. That could sell trouble for oil prices. No sense producing if you can't store the stuff, let alone sell it.

I'll leave it at that for now. I'm going to be watching the US inventory data tomorrow when it is released. It should be an interesting play tomorrow as we get to see if stocks will still show an increase to crude oil reserves that will probably keep those oil prices low.

Feel free to pass this note on!

Regards,

George Murphy
Twitter @GeorgeMurphyMHA