That realization hit oil markets as intermarket spreads between the front end of the West Tessa Intermediate WTI and the backend came in sharply and Brent Crude regained on WTI. Brent crude rose on news that Libya’s oil ports may be shut for some time. Bloomberg news reported that Libya’s oil output will keep dropping day by day if major ports remain closed, after clashes last month led to a political deadlock, the head of the country’s state energy producer said. “Today, production is 527,000 barrels a day, tomorrow it will be lower, and after tomorrow it will be even lower, and everyday it will keep falling,” In the U.S., WTI had been surging in the front end of the oil dated curve, on the Canadian Oil sands outage with Syncrude. The outage removed about 360,000 barrels of oil that flows into Cushing, Oklahoma, the delivery point for U.S. futures. Yet, the fact that the company gave us a start date of September and the fact that private forecaster Genscape saw a surprise increase in supply in Cushing Oklahoma, saw the backend of the futures curve really gain on the frontend. The frontend had soared on the Syncrude outage and now the backend will gain ground, as the market will have to price in lower for longer.
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The global AIS data providers face two main challenges – data volume and latency. Orbcomm, which works with the European Maritime Safety Agency said it receives 28M AIS position messages per day. This is a huge amount of data to process and the required processing time adds to the latency issue. Latency is the time between the broadcast of the AIS signal by the vessel and the time it is received by the data provider. Orbcomm reported 86% of the 28M daily messages have an average latency of less than 60 seconds. ExactEarth, which works with VesselTracker (acquired by oil movements specialist Genscape in 2013) quote a similar figure, but are somewhat coy about the number of transponders and the first pass detection rate. However, latency is the main comparison used in the marketing.
AccuWeather was predicting highs in the low 90s in New York City Tuesday, versus highs in the upper 70s and low 80s Friday and Saturday. Boston was similarly expected to see highs reach the low-90s for the first two days of the work week after seeing highs in the mid 70s and low 80s Saturday and Sunday, according to the forecaster. Algonquin Citygate added 40 cents to $2.93, while Transco Zone 6 New York added 68 cents to $3.07. Further upstream, Texas Eastern M2 30 Receipt added 13 cents to $2.25. In West Texas, a one-day Northern Natural Gas maintenance event scheduled for Thursday could restrict flows out of the Permian Basin, according to Genscape Inc. analyst Vanessa Witte. “Operational capacity will be restricted to 440 MMcf/d from Brownfield and 445 MMcf/d from Mitchell to Gaines” during the event, Witte said Monday. Similar maintenance was done last Thursday and Friday, “where scheduled capacity reduced by around 170 MMcf/d day/day cumulatively between Brownfield and Mitchell, which was a similar reduction in operational capacity. Despite the reduction in northbound flows, nominations at Field to Demarc remained steady during this time.” Prices in West Texas were mixed Monday. Waha fell 4 cents to $2.12 as El Paso Permian added 4 cents to $2.18.
The 360,000-barrel-per-day (bpd) facility in northern Alberta has been shut since late June, cutting oil flows into Cushing, Oklahoma, the delivery point for U.S. crude futures. Stocks in Cushing rose slightly between Tuesday and Friday, according to market intelligence firm Genscape, according to analysts who saw the data. Cushing inventories hit a three-and-a-half-year low last week. The market has grown concerned that if the Saudis offset the losses from Iran, it will leave oil markets at risk of further production declines in countries like Venezuela and Libya. "If the Saudis and others replace the losses from Iran, there will be basically no spare capacity left," Societe Generale oil analyst Michael Wittner said. Saudi Arabia, fellow members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia agreed last month to increase output to dampen price gains and offset global production losses in countries including Libya.
Phillips 66 (PSX) on Friday said it began an unscheduled shutdown of its 249,700-barrel-per-day (bpd) Alliance, Louisiana refinery on Thursday as part an on-site emergency response involving a plant worker. * "Phillips 66 continues to work with local emergency responders, including the Plaquemines Parish Sheriff’s Office, to safely respond to the ongoing incident," the company said in an email. * The initial incident occurred at about 9:30 p.m. on Wednesday (0130 on Thursday GMT), it added, without giving further details on the nature of the incident. * Energy intelligence service Genscape previously reported the shutdown of a gulfiner unit, and also decreased activity from a vacuum distillation unit and diesel hydrotreater at the refinery. Reporting by Arpan Varghese in Bengaluru
This would put US oil production some 4 months ahead of schedule. Genscape also published this week noting that Permian is already close to the ~3.4 million b/d production mark, and we know that takeaway capacity only allows the Permian ~3.5 million b/d by the end of 2018. This means that there's a high likelihood that US oil production for the next 6 months could range right around the 11 million b/d mark.
In South Texas, volumes have recovered from a force majeure declared June 14 that restricted Tennessee Gas Pipeline (TGP) flows to Mexico, according to Genscape Inc. “Two weeks prior to the decrease in flows, exports averaged 455 MMcf/d, and beginning June 19, exports dipped to an average 278 MMcf/d through June 29, a drop of 177 MMcf/d,” Genscape analyst Esteban Trejo said. “These same exports have now averaged 458 MMcf/d since June 30. Flows through Station 1 and Station 9 (the locations affected by the force majeure) have remained above their stated operational capacity. “On June 27, TGP posted an update to the force majeure stating that repairs would be delayed to July 9 due to ‘wet conditions’ and that these repairs would last through July 23,” Trejo noted. Trejo estimated limited impact on TGP exports to Mexico through July 23 based on pipeline outage reports, but “these repairs will partially coincide with downstream pig runs on Sistrangas. In multiple Sistrangas notices posted Wednesday, Sistrangas stated that they will be performing pig runs” on Thursday, Friday and next Wednesday “that could affect imports from TGP” and Texas Eastern.
On July 3, the API (American Petroleum Institute) released its oil inventory report after the crude oil futures settlement for that day on NYMEX. The API reported that US crude oil inventories fell by 4.5 MMbbls (million barrels) to 416.9 MMbbls on June 22–29. A Bloomberg survey estimates that US oil inventories could have declined by 5 MMbbls during the same period. Genscape estimates that Cushing crude oil inventories could have declined by 2 MMbbls on June 22–29. The EIA (U.S. Energy Information Administration) is scheduled to release its oil inventory report on July 5.August WTI crude oil prices hit an intraday high of $75.27 per barrel on July 3—the highest level since November 2014. A drop in the US Dollar Index, supply outages in Libya and Canada, sanctions on Iran, and the expectation of a decline in crude oil, gasoline, and distillate inventories supported crude oil prices. However, the rise in crude oil production from OPEC, Russia, and the US could pressure oil prices. Saudi Arabia is expected to pump up to 11 MMbpd (million barrels per day) of crude oil in July, which is up from 10.7 MMbpd in June—the highest level in its history if the projections are achieved. Active WTI crude oil futures rose ~0.3% on July 3. The Energy Select Sector SPDR ETF (XLE) rose ~0.63% the same day. The companies in XLE produce crude oil and natural gas and provide other energy-related services.
The Tuesday tumult, comprised of the sudden $2+/bbl sell-off in WTI crude in a matter of minutes and an 8 percent downdraft in Micron shares, sets up opportunities Thursday as the thin and whippy market may have led to a touch extra choppiness. The oil market Wednesday had a chance to process the coincidentally timely reports from Genscape and the Saudi press, which alluded to bearish supply indications. Energy stocks had outperformed Tuesday as WTI hovered above $75 (highest since Nov. 2014), and will look to DOE figures Thursday to confirm key Cushing stockpiles for any follow-through above that level. The apparent surprise China court ruling banning sales of certain Micron Technology chips to China reverberated far and wide, dragging the Nasdaq lower right into the close. Details are scant, but the collateral damage was not. European peers underperformed Wednesday on fears this could escalate worldwide trade tensions. Also caught up in mix were some of Micron’s key suppliers, which, according to data compiled by Bloomberg, may include Lam Research, Applied Materials and KLA-Tencor, to name a few. With approximately 50 percent of Micron’s sales last year coming from China, it may be fair to say shares in some of those suppliers may see some additional volatility as trade gets under way. NXP Semiconductors, a frequent trade tension proxy given its pending deal with Qualcomm, could see some read-through. Many large cap technology names are in the green in the pre-market while Micron looks set to open lower.
Natural gas prices plunged on Monday as investors reacted to reports of increased production and forecasts of cooler temperatures starting at mid-July. As we mentioned about two weeks ago, the price action strongly suggested that we were no longer in a weather market because a lingering heat dome was not in the picture and that rising production would eventually overcome normal demand. Essentially, prices fell and could continue to retreat because data showing record-level production combined with expectations for more seasonal weather later in the month offset the large storage deficits and bullish near-term forecasts. According to NatGasWeather, “production is just too strong for the markets to ignore, aided by reports of weekend production at or exceeding all-time highs, thereby weighing more heavily on prices than hefty deficits and hotter than normal temperatures.” Genscape, Inc. data showed that lower 48 production appears to have cracked the 80 Bcf/d mark. Following pipeline reported revisions to nominations data, its production team showed volumes hit around 80.05 Bcf/d on June 28 and June 29.