Oil Futures Press Higher

  1. Oil prices move up, despite expanding U.S. production
  2. Global geopolitics outweigh price fundamentals
  3. Iran nuclear deal uncertain
  4. Natural gas stocks end heating season at lowest level since 2014


Al pic 2009_cropped

Alan Levine, Chairman of Powerhouse
(202) 333-5380

The Matrix

Expanding U.S. crude oil production has not been enough to halt the climb in futures prices. The week of April 13 drew to a close with WTI making a new, multi-year high at $67.56. The price set back afterwards, but remained positive on the day.

Product futures advanced as well. These advances seem inexorable, at least for now. Shifts in the conditions of trade discussed here before, like the growth in oil exports as an alternative drain on domestic supply, require new thinking about what things influence pricing and how they do it.

Geopolitical uncertainties abound – ironic because readily available stocks have been seen as protecting North America from the effects of foreign threats. The headline grabbers include the Iranian nuclear deal. A failure of the Iranian deal implies that sanctions could be re-imposed on oil exports, bullish for the market.

Talks with North Korea on denuclearization are on the schedule. This is not directly an oil issue, but calming the Korean hot zone could enhance demand as a function of expanding trade.

OPEC has announced its expectation that global markets will achieve a rough balance in mid-2018. This includes less supply from the group and estimates for higher levels of demand.

More directly oil related are Saudi Arabian activities on the Arabian Peninsula. The Kingdom has invited Qatar to an Arab League summit on April 15, 2018. This could help renew working relationships following a blockade on Qatar imposed by Saudi Arabia, the UAE, Egypt and Bahrain. The blockade was imposed to counter alleged support for terrorism and ties to Iran. It caused the Gulf Cooperation Council to fragment.

Bahrain has announced discovery of Khaleej Al Bahrain, the largest field ever found in the nation. It holds an estimated 81.5 billion barrels of oil and 390 Bcf of associated gas in place.

Closer to home, economic distress finds its footing in Venezuela. The Lima Group, several nations established to assist the U.S. in pressuring Venezuela toward free and fair elections has little to show just yet. The impact on national production and demand has already influenced regional balances.


Supply/Demand Balances

Supply/demand data in the United States for the week ending April 6, 2018 were released by the Energy Information Administration.

Total commercial stocks of petroleum rose 6.0 million barrels during the week ending April 6, 2018.

There were draws in stocks of fuel ethanol, K-jet fuel, distillates, residual fuel oil, and propane. There were builds in stocks of gasoline and other oils.

Commercial crude oil supplies in the United States increased to 428.6 million barrels, a build of 3.3 million barrels.

Crude oil supplies increased in four of the five PAD Districts. PAD District 1 (East Coast) crude oil stocks rose 0.4 million barrels, PADD 2 (Midwest) crude stocks advanced 0.4 million barrels, PADD 3 (Gulf Coast) stocks expanded 2.7 million barrels, and PADD 4 (Rockies) stocks increased 0.4 million barrels. PADD 5 (West Coast) crude oil stocks declined 0.5 million barrels.

Cushing, Oklahoma inventories increased 1.1 million barrels from the previous report week to 36.0 million barrels.

Domestic crude oil production increased 65,000 barrels daily to 10.525 million barrels per day from the previous report week.

Crude oil imports averaged 8.650 million barrels per day, a daily increase of 752,000 barrels.  Exports fell 970,000 barrels daily to 1.205 million barrels per day.

Refineries used 93.5 per cent of capacity, an increase of 0.5 percentage points from the previous report week.

Crude oil inputs to refineries increased 83,000 barrels daily; there were 17.019 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 96,000 barrels daily to 17.355 million barrels daily.

Total petroleum product inventories saw an increase of 2.7 million barrels from the previous report week.

Gasoline stocks increased 0.5 million barrels from the previous report week; total stocks are 238.9 million barrels.

Demand for gasoline rose 70,000 barrels per day to 9.273 million barrels daily.

Total product demand decreased 1.405 million barrels daily to 19.812 million barrels per day.

Distillate fuel oil supply declined 1.0 million barrels from the previous report week to 128.4 million barrels. National distillate demand was reported at 4.170 million barrels per day during the report week. This was a weekly increase of 283,000 barrels daily.

Propane stocks decreased 0.4 million barrels from the previous report week to 35.8 million barrels. Current demand is estimated at 1.496 million barrels per day, an increase of 136,000 barrels daily from the previous report week.


Natural Gas

According to the Energy Information Administration:

Natural gas stocks end heating season at the lowest level since 2014. Working natural gas in storage in the Lower 48 states as of March 31, the traditional end of the heating season (November 1–March 31), totaled 1,351 billion cubic feet (Bcf) according to EIA’s Weekly Natural Gas Storage Report released on April 12.














As of March 31, working gas stocks were 29% lower than the five-year (2013-17) average for the end of the heating season. This heating season had the lowest level for working gas stocks for this time of year since 2014, when working gas stocks ended the 2013–14 heating season at 837 Bcf.


Futures trading involves significant risk and is not suitable for everyone. Transactions in securities futures, commodity and index futures and options on future markets carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily “leveraged”. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit. Past performance may not be indicative of future results. This is not an offer to invest in any investment program.

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