Crude Oil Market

The International Energy Agency (IEA) released its monthly oil report this morning. As expected and as the EIA did, they lowered their forecast for oil demand growth versus last month’s report. They lowered their forecast for 2012 oil demand growth by 200,000 bpd compared to the November report. Following are the main highlights from the report. OPEC will also be releasing its report today one day ahead of the OPEC meeting.

Crude futures prices moved higher in November and early-December on seasonal demand strength and tight supply. Bullish impetus also came from news of a potential EU ban on Iranian crude imports. These factors outweighed escalating economic risks, but resulted in uneven price gains among the key benchmarks. At writing, Brent stood near $107/bbl, with WTI around $98/bbl.

  • A more precarious economic backdrop and weaker 4Q11 data – particularly for OECD Europe – curb oil demand projections for 2011 and 2012 by around 0.2 mb/d. Global oil demand is expected to average 89.0 mb/d by 2011, a rise of 0.7 mb/d on 2010, before gaining a further 1.3 mb/d in 2012 to reach 90.3 mb/d.
  • Global oil supply rose by 0.9 mb/d to 90.0 mb/d in November from October, driven by lower non-OPEC supply outages. A yearly comparison shows similar growth, with OPEC supplies standing well above year-ago levels. Non-OPEC supply growth averages 0.1 mb/d for 2011 but rebounds to 1.0 mb/d in 2012, with strong gains expected from the Americas.
  • OPEC crude oil supply in November rose to the highest level in more than three years, up by 620 kb/d to 30.68 mb/d, with Saudi Arabia and Libya accounting for 80% of the increase. OPEC ministers will meet on 14 December in Vienna to review the market outlook. The ‘call on OPEC crude and stock change’ for 2012 stands at 30.2 mb/d, near recent OPEC output levels.
  • Global refinery crude throughputs fell by close to 1 mb/d in October, as OECD autumn maintenance hit its seasonal peak and Chinese runs remained weak. Preliminary data show runs rebounding sharply in November, despite poor margins, to meet higher winter demand. 4Q11 estimates are largely unchanged at 75.1 mb/d, rising to 75.8 mb/d in 1Q12.
  • OECD industry oil stocks declined in October by a steep 36.3 mb to 2 630 mb, or 57.2 days of forward cover. The inventory deficit versus the five-year average widened to 61.9 mb, from 40.0 mb in September, and crude and middle distillates dominated the October decline. November preliminary data show a counter-seasonal, 6.9 mb build in OECD industry stocks.
  • Updated medium-term projections show global oil demand rising from 88.3 mb/d in 2010 to 95.0 mb/d in 2016, growth of 1.1 mb/d per year on average. A stronger global liquids supply outlook now sees upstream capacity attain 101.5 mb/d by 2016, average yearly growth of 1.3 mb/d, with the outlook for Iraq, Libya and the Americas stronger than in June. Meanwhile, global crude distillation capacity additions for 2010-2016 are trimmed by 0.9 mb/d, but remain a substantial 8.7 mb/d.
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Market Outlook Today

The natural gas market is maintaining its neutral view and bias, but could get more bullish if the near term futures contract closes above the $3.51/MMBtu level. The gas storage surplus that is building is going to get harder to work off until we see cold weather over a major portion of the U.S. In the medium term, many are skeptical about the ability of natural gas prices to muster any kind of strong upside rally absent some very cold weather for an extended period of time.

WTI crude oil is still trading above the key technical support level of the mid- $94’s/bbl and along with the changing fundamentals and geopolitics, the market is keeping its view and bias at cautiously bullish. The economic outcome in Europe this week will certainly influence the outlook for economic growth and the need for oil in the near term. WTI and Brent are once again back to being in sync with the direction of the U.S. dollar and euro, but are also being driven by the ongoing geopolitical situations in the Middle East.

Earlier most risk asset prices were higher, as shown on the chart below.

Description: Description: http://www.advancedenergycommerce.com/PubImages/16/chart10.gif

Market Outlook Today

The natural gas market is maintaining its neutral view and bias, but could get more bullish if the near term futures contract closes above the $3.51/MMBtu level. The gas storage surplus that is building is going to get harder to work off until we see cold weather over a major portion of the U.S. In the medium term, many are skeptical about the ability of natural gas prices to muster any kind of strong upside rally absent some very cold weather for an extended period of time.

WTI crude oil is still trading above the key technical support level of the mid- $94’s/bbl and along with the changing fundamentals and geopolitics, the market is keeping its view and bias at cautiously bullish. The economic outcome in Europe this week will certainly influence the outlook for economic growth and the need for oil in the near term. WTI and Brent are once again back to being in sync with the direction of the U.S. dollar and euro, but are also being driven by the ongoing geopolitical situations in the Middle East.

Earlier most risk asset prices were higher, as shown on the chart below.

Description: Description: http://www.advancedenergycommerce.com/PubImages/16/chart3.gif

Market Outlook Today

The natural gas market is maintaining its neutral view and bias, but could get more bullish if the near term futures contract closes above the $3.51/MMBtu level. The gas storage surplus that is building is going to get harder to work off until we see cold over a major portion of the U.S. In the medium term, many are skeptical about the ability of natural gas prices to muster any kind of strong upside rally absent some very cold weather for an extended period of time.

WTI crude oil is still trading above the key technical support level of the mid- $94’s/bbl and along with the changing fundamentals and geopolitics, the market is keeping its view and bias at cautiously bullish. The economic outcome in Europe this week will certainly influence the outlook for economic growth and the need for oil in the near term. WTI and Brent are once again back to being in sync with the direction of the U.S. dollar and euro, but are also being driven by the ongoing geopolitical situations in the Middle East.

Earlier as a new day of trading gets underway in the U.S., markets are mixed.

Description: Description: http://www.advancedenergycommerce.com/PubImages/16/chart5.gif

 

Crude Oil Commentary

Oil futures prices edged lower Tuesday, but remained north of $100 a barrel, as traders awaited further word on Europe’s debt crisis ahead of a key summit later this week. Light, sweet crude for January delivery on the NYMEX settled up $.29 at $101.28/bbl. Brent crude on ICE Futures Europe traded up 32 cents, or 0.3%, to $110.13 a barrel.

Trading remained cautious following an announcement from Standard & Poor’s late Monday that the ratings agency had placed 15 euro-zone nations on review for credit downgrades due to the deepening political and economic crisis. Reports of the announcement surfaced shortly before Monday’s close and squelched a rally that had earlier sent NYMEX futures surging above $102 a barrel.

Headlines out of the euro zone have been dominating trading in the oil market for the last several months, amid worries that the currency zone’s sovereign-debt crisis could trigger a broader economic slowdown that would curb demand for crude oil.
NYMEX crude futures have climbed from lows at less than $80 a barrel since early October, while Brent has surfaced from below $100 a barrel, largely on optimism that Europe will find a way to save the single currency zone from collapse.

Outlook Today

The natural gas market view and bias is cautiously bullish, but watchful of how price activity plays out over the next several trading sessions from Thursday’s bullish gas storage report and last Friday’s monthly jobs report. The market appears to be slowly moving into a mild uptrend and will remain in that pattern as long as the weather moves toward more normal conditions.

WTI crude oil is still trading above the key technical support level of the mid- $94’s/bbl and along with the changing fundamentals and geopolitics, the market is moving its view and bias back to cautiously bullish. The cloud of uncertainty got slightly smaller in Europe, but support is now coming from the ongoing geopolitical risk in the Middle East.

Earlier risk asset prices were mixed, as shown on the chart below.

Description: Description: http://www.advancedenergycommerce.com/PubImages/16/chart8.gif

Outlook Today

The natural gas market view and bias is cautiously bullish, but watchful of how price activity plays out over the next several trading sessions from today’s expected bearish gas storage report and Friday’s monthly jobs report.  The market appears to be slowly moving into a mild uptrend and will remain in that pattern as long as the weather moves toward more normal conditions.

WTI crude oil is still trading above the key technical support level of the mid- $94’s/bbl and along with the changing fundamentals and geopolitics, the market is moving its view and bias back to cautiously bullish.  The cloud of uncertainty got slightly smaller in Europe, but support is now coming from the ongoing geopolitical risk in the Middle East.

Earlier risk asset prices were mixed, as shown on the chart below.

Description: Description: http://www.advancedenergycommerce.com/PubImages/16/chart5.gif