Crude oil trading outlook: futures gain on OPEC comments, IEA Middle East warning

West Texas Intermediate and Brent crude rose on Tuesday after OPEC officials signaled optimism that the market will sustain its recent rebound, while the IEA warned of supply risks stemming from Islamic State’s rise in the Middle East.
US crude for delivery in April rose $0.22 to $53.89 per barrel by 8:02 GMT from Friday’s close at $53.67. Floor trading was suspended on Monday due to the Presidents’ Day holiday and transactions will be booked today for settlement purposes.
Meanwhile on the ICE, Brent for settlement in the same month traded 0.52% higher at $61.72 a barrel, having shifted between $62.15 and $61.53 during the day. The contract slid 0.20% on Monday to $61.40 a barrel. Brent traded at a premium of $7.83 to its US counterpart, close to Friday’s settlement at $7.85.
Mohammed bin Saleh Al Sada, Qatar’s Energy Minister, said yesterday that the oil market’s trend has changed over the past few weeks and there is a sense of optimism.
Prices rebounded from January’s six-year lows following a continued drop in the number of active US oil rigs. Drillers in the US idled 84 rigs last week, bringing the total count to 1 056, the fewest since August 2011. Their number has fallen by 519, or 33%, over the past ten weeks.
The global supply overhang is smaller than the previously estimated 1.8 million barrels per day, said Ali Al-Omair of Kuwait, OPEC’s third-biggest crude producer.

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Brent crude extends rally, but analysts warn prices could drop

SINGAPORE (Reuters) - Brent crude extended its rally on Tuesday, moving further away from six-year lows hit in January, but some analysts warned that prices had risen too far and could face a downward correction.
Benchmark Brent crude futures were trading up 50 cents at $61.90 a barrel by 0420 GMT (11.20 p.m. EST), while U.S. WTI crude had risen 26 cents to $53.04 a barrel.
"The recent bullishness is not heavily backed by technical and fundamental analysis, and so should not last," said Daniel Ang of Singapore-based Phillip Futures.
"The market is getting increasingly dubious as to this rally, with the CFTC showing that non-commercial net long positions are starting to fall," ANZ bank said in note.
Analysts also said that downward pressure may come from the refined products market in the next quarter.
"Consensus expects large inventory builds and pricing pressure for oil markets in 2015," Morgan Stanley (NYSE:MS) said on Monday.
Demand for refined oil products has been strong in Asia, which is structurally short, and producers have been taking advantage of low crude prices to cover themselves with fuel and build up product inventories.
With Brent prices outperforming U.S. contracts the spread between the two benchmarks has risen to almost $9 a barrel, the highest level since August last year, and the trend will continue, analysts said.
"Considerable pressure is likely to build on WTI as inventories approach the EIA's 71 million barrel working storage capacity figure and we would therefore expect a wider WTI/Brent spread (low double-digit territory)," said JBC Energy.
In commodities investment, Australia's Macquarie Group Ltd said it was considering acquisitions in futures, physical oil and refined products businesses.
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NYMEX crude eases in early Asia as Greece talks reach impasse on bailout

Crude oil prices eassed Tuesday in Asia ahead of U.S. supply data later in the week and as investors eyed talks between Greece and euro zone finance ministers that broke down overnight when Athens rejected a proposal to request a six-month extension of its international bailout as "unacceptable".
The unexpectedly rapid collapse raised doubts about Greece's future in the single currency area after a new leftist-led government vowed to scrap the 240 billion euro bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.

Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said Athens had until Friday to request an extension, otherwise the bailout would expire at the end of the month.
Greece’s current €240 billion bailout is due to expire on February 28 and the new Greek government does not want it extended, fuelling fears over a conflict with its creditors which could trigger the country’s exit from the euro zone.
Greece's Finance Minister Yiannis Varoufakis said Monday that he was ready to sign a document drafted by the European Commission, which outlined a deal between Greece and its partners.

However, Varoufakis said, Eurogroup President Jeroen Dijsselbloem presented him with another document, which referred to past policies and was vague in key issues such as "flexibility", which he could not accept.
Data normally released Tuesday on U.S. supplies of crude and refined products will be delayed by a day because of a U.S. public holiday on Monday. Related U.S. Department of Energy figures normally released on Wednesday will be issued on Thursday this week.
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Gold prices dip in early Asia with Greece talks in focus, U.S. shut

Gold prices eased mildly on Monday in early Asia with Greece talks in focus later in the day and U.S. markets shut.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery eased 0.10% to $1,228.30 a troy ounce.
Elsewhere on the Comex, silver futures for March delivery fell 0.10% at $17.315 a troy ounce.
Meanwhile, copper for March delivery rose 0.12% at $2.606 a pound.
Last week, gold edged higher on Friday, as a broadly weaker U.S. dollar and ongoing uncertainty over developments in Greece boosted the appeal of the precious metal.
The drop in the dollar came after data on Friday showed that U.S. consumer sentiment unexpectedly deteriorated in February.
The preliminary reading of the University of Michigan’s consumer sentiment index fell to 93.6, down from January’s final reading of 98.1. Economists had forecast an unchanged figure.

The report came a day after data showing that U.S. retail sales unexpectedly fell 0.8% last month after dropping 0.9% in December, indicating that consumer spending remained sluggish at the start of the year.
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Natural gas futures - weekly outlook: February 16 - 20

U.S. natural gas futures rallied more than 3% on Friday, amid expectations cooler weather in the next ten days will result in increased demand for the heating fuel.
On the New York Mercantile Exchange, natural gas for delivery in March surged 9.1 cents, or 3.35%, on Friday to settle at $2.804 per million British thermal units by close of trade.
Futures were likely to find support at $2.609 per million British thermal units, the low from February 9, and resistance at $2.883, the high from February 12.
For the week, Nymex natural gas prices rallied 14.5 cents, or 8.72%, the first weekly gain in four weeks and just the second in the past 12 weeks.
Updated weather forecasting models pointed to frigid weather spanning from the Great Lakes-region to the Northeast through February 19.
Colder-than-normal weather will then linger in the mid-Atlantic states through the Ohio Valley from February 20 through the end of the month.
Bullish speculators are betting on the cold weather boosting winter demand for the heating fuel.
The heating season from November through March is the peak demand period for U.S. gas consumption.
On Thursday, natural gas lost 8.4 cents, or 3.0%, after a government report showed that U.S. natural gas supplies fell less than forecast last week, underlining concerns over weak demand.
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NYMEX crude gains in early Asia as shaky cease fire in Ukraine holds

Crude oil prices gained in early Asia on Monday as investors eyed a shaky cease fire in Ukraine

On the New York Mercantile Exchange, crude oil for delivery in March gained 0.56% at $53.97 a barrel.
Last week, crude oil futures rallied sharply on Friday, with prices continuing to recover from recent lows amid speculation productions cuts by drillers in the U.S and global oil companies will alleviate a glut in supplies.

Industry research group Baker Hughes said Friday that the number of rigs drilling for oil in the U.S. fell by another 84 in the past week to 1,056, the lowest since August 2011.
The number of oil rigs has declined in 15 of the last 18 weeks since hitting an all-time high of 1,609 in mid-October.
A day earlier, Nymex oil soared $2.37, or 4.85%, to end at $51.21 a barrel, after Russian President Vladimir Putin confirmed that a cease fire deal with Ukraine starting February 15 had been reached, following months of violence.
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Crude oil futures - weekly outlook: February 16 - 20

Crude oil futures rallied sharply on Friday, with prices continuing to recover from recent lows amid speculation productions cuts by drillers in the U.S and global oil companies will alleviate a glut in supplies.

On the New York Mercantile Exchange, crude oil for delivery in March surged $1.57, or 3.07%, on Friday to end the week at $52.78 a barrel.

Industry research group Baker Hughes said Friday that the number of rigs drilling for oil in the U.S. fell by another 84 in the past week to 1,056, the lowest since August 2011.

The number of oil rigs has declined in 15 of the last 18 weeks since hitting an all-time high of 1,609 in mid-October.

A day earlier, Nymex oil soared $2.37, or 4.85%, to end at $51.21 a barrel, after Russian President Vladimir Putin confirmed that a cease fire deal with Ukraine starting February 15 had been reached, following months of violence.

For the week, New York-traded oil futures climbed 77 cents, or 2.11%, the third straight weekly gain.
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WTI and Brent Crude Oil pressured after IEA warning

The oil markets sustained losses yesterday afternoon following the International Energy Agency (IEA) warning that global inventories are set to continue to rise before any possible cut in production. This provided a gentle reminder to traders that the supply and demand equation is still very much present, with the aggressive supply surplus going to remain for some time. While the recent bounce back has provided evidence that traders remain interested in purchasing the commodity and likely ready to pounce on any indications of slowing production, less production needs to be seen. This will provide the bulls with a stumbling block, while also limiting how high the price of oil can jump in the meantime.
Unless production is definitively cut to lower levels, there will always be a risk of a pullback in the price – like we saw yesterday afternoon. In regards to what will likely next dictate the price action in WTI and Brent Crude, it might be worth paying attention to this afternoon’s US Crude Inventories report. Oil bulls will be hoping for production levels to miss forecasts and provide optimism of slowing oil production  but if inventories continue to rise beyond expectations, the commodity will be at risk to extending yesterday’s losses.
The GBPUSD was an interesting pair to watch yesterday, with the Cable at times seen alternating between bullish and bearish momentum, before concluding trading up on the day at 1.5252. Monthly industrial production did miss forecasts slightly, but this has been partly attributed to maintenance work in some oil and gas fields. The manufacturing production figures provided another surprise to the upside, following a trend set last week when a hat trick of PMIs were revealed above expectations and provided optimism that the UK economy has begun the year on the right track.

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TSX up slightly, but held back by resource stocks

TORONTO -- The Toronto stock market closed slightly higher Tuesday amid hope that Greece's new government and its eurozone creditors will come to a speedy agreement.
The S&P/TSX composite index gained 11.82 points to 15,112.52, held back falling resource stocks as oil prices backed off following a sharp run-up and mining stocks declined amid another round of weak data from China.
The Canadian dollar tumbled 0.69 of a cent to 79.53 cents US as gold and copper prices also retreated and the American currency strengthened across the board.
New York indexes were positive as the Dow Jones industrials jumped 139.55 points to 17,868.76, the Nasdaq was up 61.63 points at 4,787.64 and the S&P 500 index was ahead 21.85 points at 2,068.59.
The TSX energy sector fell 2.5 cent as March oil in New York lost $2.84 to US$50.02 a barrel after running ahead nine per cent since last Wednesday. Oil prices seemed to find support around the $50 a barrel level after having dropped sharply since the end of November as markets cope with a huge supply/demand imbalance.
But analysts warn that there is still plenty of potential for prices to head lower in the short term.
"There's the risk that the oil price really gets sloppy and inventory levels fill up as seasonal demand slows down into the spring and you have refineries go down for maintenance," said Craig Jerusalim, portfolio manager at CIBC Asset Management.

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Stocks, currencies count down to Greek meetings

SYDNEY (Reuters) - Asian stock markets were subdued on Wednesday while major currencies barely budged as looming euro zone meetings to discuss the Greek debt crisis overshadowed a firmer finish on Wall Street.
Euro zone finance ministers meet later on Wednesday and EU leaders on Thursday, but officials are already downplaying the chance of a breakthrough.
Moves were modest with trade thinned by a holiday in Tokyo, leaving MSCI's broadest index of Asia-Pacific shares outside Japan off a slight 0.03 percent.
Shares in Shanghai edged up 0.2 percent as pressure grew for more stimulus after a very low reading on inflation stirred fears of deflation.
China's central bank on Tuesday said it was ready to fight a downturn, while not taking excessive risks with credit creation.
Australia's main index slipped 0.6 percent even as a survey showing consumer confidence had surged to 13-month peaks in the wake of last week's cut in domestic interest rates.
The Dow had ended up 0.79 percent, while the S&P 500 gained 1.07 percent and the Nasdaq 1.3 percent.
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Brent holds above $56 after U.S. crude stocks rise less than expected

BEIJING (Reuters) - Brent crude held steady above $56 a barrel on Wednesday, and U.S. crude rose briefly more than $1, after a smaller than expected rise in U.S. crude stocks were viewed by some as a sign that a supply glut was starting to abate.
The gains in futures, however, were capped by a warning from the International Energy Agency (IEA) that ample global production would still swell world inventories before investment cuts begin to significantly dent output.
"The supply growth in 2015 is likely to continue unabated, albeit at a somewhat lower rate," Fereidun Fesharaki at Facts Global Energy said in a note on Wednesday.
"This all means a weak market in 2015 and even lower oil prices. Demand rebound will not save the oil market," he said.
Brent March crude futures had ticked down 13 cent to $56.30 by 0334 GMT, after losing $1.91 during the previous session on the IEA expectations.
U.S. March crude futures were trading up 30 cents at$50.32, after falling $2.84 in the previous session.
Oil prices are expected to test support levels, with Brent crude showing a good chance of breaking below $56.21, while U.S. crude could potentially break below $49.88, according to Wang Tao, a Reuters market analyst.
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Fuel price, foreign exchange volatility temper WEX's earnings

WEX Inc. (NYSE: WEX) on Monday reported a 16% increase in total revenue for the fourth quarter of 2014 compared to the same period in 2013, which enabled the company to end the year with $817.6 million in total revenue, up 14% from $717.5 million in 2013.
The South Portland-based company reported total revenue of $211.9 million for the quarter that ended Dec. 31, compared to $182.3 million for the fourth quarter of 2013. Net income to common shareholders on a generally accepted accounting principles (GAAP) basis was $47.9 million, or $1.23 per diluted share, compared with $34.5 million, or $0.88 per diluted share, for the fourth quarter of 2013.
For the full year, net income to common shareholders on a GAAP basis was $5.18 per diluted share compared to $3.82 per diluted share in 2013.
On a non-GAAP basis, the company's adjusted net income for the fourth quarter of 2014 decreased 18% to $37.2 million, or $0.96 per diluted share, from $45.7 million, or $1.17 per diluted share, for the same period a year ago.

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U.S. Crude Oil Production, Where Are We?

Record high US crude oil production! No wonder oil prices are dropping! This chart uses EIA's weekly US crude oil production data from January 7, 1983 to January 30, 2015. Look at the exponential production ramp up after the Great Recession and how we exceeded the previous production high in 1985.

Source: US Energy Information Administration (EIA)

I have integrated the latest production data into my Energy Industry Investment Model with results shown below.

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Oil ‘God’ sees rebound

A rapid slowdown in production could quickly swing oil prices, according to oil trading Andrew John Hall.
Hall was dubbed the "God" of crude oil trading after making more than $100 million in 2009. He's now the head of Astenbeck Capital Management but set to wind down the fund in a few months.
He's been bullish before and has touted spread trades so his stance isn't a surprise. "Prices at current levels (or lower) are not sustainable for very long," Hall said in the letter. "The current surplus could thus easily set the stage for a future deficit." In early January, he said $40 was close to "an absolute price floor."
In his latest letter, obtained by Bloomberg, he says the surplus in the market is only 2 percent higher than global oil consumption, "and it will have dissipated by the end of the year, if not sooner."

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Crop markets moved mostly higher Thursday night

Crop traders seemed optimistic Thursday night. Little pertinent news emerged overnight. The financial markets were largely unchanged, while crude oil built on Thursday’s advance. Thus, general optimism about the outlook, particularly on the demand side, seemed to boost the grain and soy complexes. Nearby corn futures seem set to test technical resistance associate with their 40-day moving averages in the near future. March corn rose 1.75 cents to $3.87/bushel early Friday morning, while July added 1.75 to $4.0225.

Crude and vegetable oil news apparently boosted the sow complex. Asian palm oil prices continued rising overnight in response to yesterday’s Indonesian announcement of increased subsidies for biodiesel producers. Given the concurrent crude oil strength, the bullish reaction in soyoil futures was hardly surprising. Beans tagged along despite huge South American production prospects, while meal edged upward. March soybean futures gained 3.75 cents to $9.85/bushel Thursday night and March soyoil rallied 0.28 cents to 31.99 cents/pound, while March meal inched $1.0 higher to $332.4/ton.

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Oil E&P stocks advance along with crude oil prices

Key benchmark indices extended decline in morning trade albeit amid intense volatility. The barometer index, the S&P BSE Sensex was currently off 27.55 points or 0.1% at 28,823.42. The market breadth indicating the overall health of the market turned negative from positive.
As a measure to incentivise long term investors, the Reserve Bank of India (RBI) yesterday, 5 February 2015, allowed foreign portfolio investors (FPIs) to invest in government securities the coupons received on their existing investments in government securities.
Shares of firms engaged in oil exploration & production (E&P) advanced along with crude oil prices. Tata Communications advanced after the company said that it has won a multi-year contract with the KION Group, the second largest global manufacturer of forklift trucks and warehouse technology. PTC India tumbled after poor Q3 earnings.

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Natural gas futures hit 32-month low after bearish storage data

Natural gas futures plunged to a 32-month low on Thursday, after data showed that U.S. natural gas supplies fell less than forecast last week, underlining concerns over weak demand.
On the New York Mercantile Exchange, natural gas for delivery in March tumbled to a session low of $2.584 per million British thermal units, a level not seen since June 2012, before trading at $2.598 during U.S. morning hours, down 6.5 cents, or 2.42%. Prices were at $2.625 prior to the release of the supply data.
Futures were likely to find support at $2.575 per million British thermal units, the low from June 22, 2012, and resistance at $2.779, the high from February 4.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 30 fell by 115 billion cubic feet, compared to expectations for a decline of 121 billion. Natural gas storage in the U.S. fell by 94 billion cubic feet in the preceding week.
Inventories fell by a whopping 259 billion cubic feet in the same week a year earlier, while the five-year average change is a drop of 165 billion cubic feet.
Total U.S. natural gas storage stood at 2.428 trillion cubic feet. Stocks were 468 billion cubic feet higher than last year at this time and 29 billion cubic feet below the five-year average of 2.457 trillion cubic feet for this time of year.
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NYMEX crude jumps in Asia as market eyes U.S. jobs data, demand outlook

Crude oil prices carried gains into Asia on Friday with U.S. jobs data in focus as well as the latest developments as Greece tries to reach new terms with reluctant creditors.

Traders now looked ahead to the release of the latest U.S. nonfarm payrolls report on Friday, for further indications on the strength of the recovery in the labor market.

Market analysts expect the data to show that the U.S. economy added 234,000 jobs in January, slowing from a gain of 252,000 in December, while the unemployment rate was forecast to hold steady at 5.6%.

On the New York Mercantile Exchange, crude oil for delivery in March rose 1.39% to $51.39 a barrel.

Overnight, crude oil futures rallied sharply on Thursday, one day after plunging almost 9%, as investors returned to the market to seek cheap valuations.

A day earlier, New York-traded oil futures plunged $4.60, or 8.67%, to settle at $48.45 after data showed that oil supplies in the U.S. rose to the highest level on record last week.
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UPDATE 1-UAE's Dana Gas blames oil prices, Egypt charge for Q4 loss

* Q4 loss 15 mln dirhams vs 128 mln profit a year earlier
* Company took $22 mln charge on Egyptian oil and gas assets
* 2014 profit 457 mln dirhams, down from 571 mln in 2013. (Adds details on impairment, production, CEO quote)
DUBAI, Feb 5 (Reuters) - Abu Dhabi-listed Dana Gas reported a fourth-quarter loss on Thursday that the company blamed on lower oil prices and a fall in the value of its oil and gas assets in Egypt.
The Sharjah-based company, which operates in Egypt, the United Arab Emirates (UAE) and Iraq's Kurdistan region, made a net loss of 15 million dirhams ($4 million) in the three months to Dec. 31, down from a profit of 128 million a year earlier.
 
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Oil firm after two-day rally, but China demand outlook caps gains

SINGAPORE (Reuters) - Oil futures continued to firm on Tuesday adding to gains of more than 11 percent in the prior two sessions, but persistent worries over China's demand outlook capped prices.
Some investors are betting a bottom has formed to the seven-month long rout on the market, with signs that a fall-off in drilling activity into U.S. shale deposits has raised concerns about future production.
OPEC delegates, though, said prices may stay depressed until summer due to weak seasonal demand even as Saudi Arabia's strategy of curbing the output growth of rival producers shows results.
Brent crude oil futures were 34 cents higher at $55.09 a barrel by 0508 GMT. U.S. WTI futures were at $49.88 a barrel, up 31 cents.
Prices jumped in the past two days after data showed the number of U.S. oil drilling rigs had fallen the most in a week in nearly 30 years. Month-end covering by traders taking profits on earlier short positions added to the rally.
"The seeds of an oil price recovery are being sown," Bernstein analysts said in a note, warning of further downside risk to oil supply in places such as the Gulf of Mexico, the North Sea and Brazil as companies cut costs in response to the up to 60 percent fall in oil prices since mid-June.
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