Rally the Coup

There’s buzz on Twitter that there’s a plan to stage a coup in the Ukraine.  I’m not sure how this affects oil, but the Russia/Ukraine gas pipeline has been in dispute many times over the years.  It should be noted that although we’re talking oil and not gas, the oil markets rallied during these nat gas conflicts too.  I suppose the thinking is that as the Ukraine loses it’s “gateway” for Russian nat gas, it increases the alternative; gasoil.

The other implications could be a backlash from Russia and a tightening of supply to the EU.

We’re waiting on FaceBook to confirm the Twitter rumor.  Then we know for sure it’s true.

Thanks for Coming

I suppose all of those Commodity funds couldn’t last forever, but Jim Rogers was a pioneer.  Not saying he was always right.

Rogers Commodity Index Cuts Oil Exposure: Long-time commodity bull Jim Rogers is trimming the exposure of his commodity index to both Brent (by 1 percent to 13 percent of the index) and WTI (by 5 percent to 16 percent of the index) for 2014, while increasing its exposure to natural gas, gold, and silver.

Could be part of the reason we’re seeing all of this dumping in oil.  There were stops expected as we broke down key support in the 9325 area, but with a lot of people on holiday, might as well flush it out as low as we can go.

Trading talk

If anyone was expecting an update today on why the market dropped so hard and rebounded so far, we’re scratching our heads too.

  • We saw some Fed bond buying and thought the purchases were lower, but no change there.
  • We heard talk that China is backing out buying crude and products because of a pipeline explosion last night.  We can understand the not buying crude as they can’t offload and ship it up the line, they would in turn need to buy more products.
  • There’s been fog issues all week in the Houston Ship Channel, but the fog is clearing today.  We are hearing that there’s more weather issues like heavy rains and winds keeping ships delayed, but nothing that is going to move prices like this.
  • A lot of talk about funds getting burned on WTI/Brent arbs…again.  We have to think that they call this “smart money” for a reason and they aren’t getting caught on the wrong side, again.
  • Considering the extreme volume, we have to give it up to the algo crowd.  They knocked out weak length and probably took home some good profits as everyone followed the move down.

Of course we’re almost back to where we started this whole debacle so let’s shoot for sharply unchanged and get to some serious business.  Like holiday grocery shopping.

Platts T-Bird Holiday

Let it be known that here at Oil Outlooks we cater to both kinds of oil traders; Financial and Physical.  Actually, these days we see a lot of financial traders trying to play the Platts window no matter how sill y it seems.

Houston (Platts)–14Nov2013/1051 am EST/1551 GMT On November 27, Platts Americas oil and petroleum assessment processes will reflect Market on Close of 12:30 pm Central Time/1:30 pm Eastern Time. The cut-off for bids and offers for the MOC process on November 27 is as follows: barges and pipeline markets — 12:00 pm CT, cargo markets — 11:45 am CT, and swaps — 12:15 pm CT. Platts will not assess the Americas oil and petrochemical markets on November 28 and 29 because of the Thanksgiving holidays. For oil, The Latin American Wire, the North American Crude Wire, Refiner and US Marketscan will not be published, while there will be no Americas assessments published in the Asia-Pacific/Arab Gulf Marketscan, Bunkerwire, Crude Oil Marketwire, LPGaswire and European Marketscan on November 28 and 29. For petrochemicals, Americas assessments in the Europe & Americas Petrochemicalscan and Olefinscan will reflect the market as of Wednesday, November 27. Weekly intermediate assessments will reflect the market as of Wednesday, November 27. Platts will not publish any daily petrochemical or biofuels assessments on November 28 and 29.

EU refinery woes…continue

It’s not as if these European refiners have to deal with enough like the high cost of Brent crude ruining margins, but we have another refinery fire out there.  This time it’s Exxon Mobil Rotterdam (195K).  As with the Total Antwerp (360K) refinery earlier this week, it’s coming from the gasoline making unit.  Exxon is quick to say that output is not affected.

Our question is, why are these gasoline making units even under such duress?  Supply in gasoline is backing up in the EU and margins should be weak enough that these units should be idle.  It raises suspicion that some of these refineries are trying to get a head start on maintenance which is scheduled in the next few weeks.

Despite what Exxon is saying about output not being affected, we think that it probably wasn’t that big anyway.  This gives more room for US exports to continue to grow.  Look for a rally in RB and HO/ULSD on this news.

Iraq…really?

Per Reuters this morning:

IRAQI SHI’ITE MILITIA COMMANDER SAYS HIS GROUP FIRED MORTAR BOMBS INTO SAUDI ARABIA AS A “WARNING MESSAGE”

An Iraqi Shi’ite militia said on Thursday it had fired six mortar bombs into Saudi Arabia’s desert as a “warning message” to the kingdom to stop “interfering” in Iraqi affairs.

“The goal was to send a warning message to Saudis to tell them that their border stations and patrol are within our range of fire,” Wathiq al-Batat, commander of al-Mukhtar Army militia, told Reuters by telephone. Batat said the militia had also been angered by Saudis and Kuwaitis who he said had insulted the daughter of the Prophet Mohammad.

Live by the sword, die by the sword

After the strong economic data this morning, we’re taking a hit here on the Existing Home Sales (-3.2% to 5.12M).  We were looking for a push to the 5.15M mark, but the market is more inclined to sell bearish news than it is to buy bullish news ahead of the EIA stats in about 30 minutes.

Nothing to do here but ride the storm out.  We’re still thinking an afternoon rally here.

Holiday Cheer

Of course Wal-Mart is worried about holiday sales, everyone that has a job is not bothering to go shopping there.  If these Retail Sales numbers (+0.4%) are to be believed, we’re going to see a lot better demand from shoppers.  More shopping demand means more drivers to the stores and more stores getting deliveries.

Expect a good bounce this morning in RB/gasoline and HO/ULSD

Refinery Trouble

There was an explosion at Total’s Antwerp refinery that processes about 300K b/d 360K b/d  This has a lot of layers to complicate the already woeful state of European refining.  Obviously the tragedy of losing lives (3 possible), but it will surely put this large refinery on the sideline.  With Brent costs still much higher than in the US, we could see prices of HO/ULSD rise on the expectation of more exports to make up for these losses, but also a rally in Gasoil over there.

We’re not 100% on a decline in Brent as supply would increase, we still think that the geopolitical issues at hand in the Middle East will keep that crude elevated.

UPDATE – Now hearing that it was the gasoline making unit over at the Antwerp refinery that had the explosion.  Not a huge deal for US pump prices, since we hardly import gasoline anymore, but it’s a saving grace for the refiners coming back from maintenance here to start shipping more gasoline volumes out.  Obviously we’re seeing this affect our gasoline markets here, but if demand comes out strong tomorrow in gasoline, we are going to pump up the RB spreads as well as the RB cracks.

Algo…we all go

Without anything solid behind this move lower on the CL (WTI) futures, we are following the path to algorithmic trading.  Simple enough as the Fed’s Dudley talking about a stronger economy, the US Dollar getting stronger and CL futures taking a hit on the chin as some computer program is putting all of that together.  Not that any of it makes any real sense and definitely not worth a $1 move.

Welcome to the wonderful world of electronic trading.