Tag Archives: crude oil updates

Three factors weighing on prompt month Crude Oil futures

18 May

Crude Oil refining margins remain lacklustre (weighed down by light product cracks in particular), with a few run cuts materialising in Europe. Refineries that have returned from maintenance are refraining from boosting utilisation rates, limiting the need to actively bid at the prompt.

—Asian refineries are at the height of their maintenance schedule, and with the prevailing compressed margins, Bank does not expect utilisation rates to surge as the maintenance season fades.

–A general reduction in non-OPEC shortfalls, with volumes from Sudan coming back, has helped relieve significant sources of stress in the supply system for now. However, other sources of geopolitical and technical challenges are emerging through the supply system.

The three factors mentioned above are weighing on the prompt month crude oil futures and should continue to do so, at least until the tail end of Q2; Barclays has noted in a report.

“At the prompt, we continue to see very few constructive elements across the demand-supply equation for crude oil. The OPEC basket price is also reflecting this weakness, briefly falling below the $100/bbl mark this week,” the bank report noted.

Overall, Barclays maintans its view that the short-term weakness in fundamentals is likely to fade as
the tail end of Q2 approaches.

On the demand side, the first indication to watch out for would be a recovery in petrochemicals in Asia.

However, such a pick-up is unlikely to be a straight line, in Barclays’ view. The naphtha market faces weight from oversupply and mild end-user consumption (in February and March, Chinese demand for the product fell by an average 3% y/y).

The supply side in Asia continues to be buoyed by incoming arbitrage volumes from Europe and the US on favourable east-west spreads. Around 1mt of heavy naphtha is expected to arrive in May for delivery in June (compared to typical flows of 0.6mt).

Compounding the weakness for naphtha cracks in the region, more supply is expected to come from Indian refiners as they boost exports as they emerge from maintenance season.

“The above factors will, in our view, be closely watched by other refineries in Asia as they emerge from maintenance, and a fair degree of tentativeness is likely to be exercised in boosting utilisation rates,” the Bank said.

“In our view, end-consumption for the olefins market (polyethylene, polypropylene, and styrenic resins) should pick up in June, buoyed by attractive prices and an improvement in manufacturing activity,” it added.

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Brent crude drops below $100 on weak data from China, US

2 May

Oil fell more than 2 percent to settle below USD 100 a barrel on Wednesday as soft economic data from China stoked pessimism about the global demand outlook and as US crude oil inventory rose to a record level.

Brent crude futures fell USD 2.42 to settle at USD 99.95 a barrel, after dipping below USD 99 during the session for the first time since April 23.

Crude stocks in the United States rose by 6.7 million barrels last week to a record 395.3 million barrels, data from the Energy Information Administration showed, far exceeding forecasts of a 1 million-barrel build and pressuring US oil prices.

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US oil settled down USD 2.43 at USD 91.03 a barrel. It hit a session low of USD 90.11, falling through its 50-day, 100-day, and 200-day moving averages.

“The market reared its head after we saw oil stocks jump to a three-decade high, and gasoline demand basically dropped to a decade low,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

Trading volumes were high, with Brent 14 percent above its 30-day moving average and US crude over 20 percent higher.

During the session, the spread between Brent and US crude narrowed to $8.39, the lowest since June 2012. It closed just below USD 9 for the second straight day.

The Brent contract slid 7 percent in April, its biggest monthly drop in 11 months, on the back of a series of indicators suggesting the global economy remains fragile.

Products prices also fell.

June RBOB fell 3 percent, or 8.3 cents, to settle at USD 2.72 a gallon, touching a session low of USD 2.69. June heating oil fell 5 cents, or nearly 2 percent, to settle at USD 2.79 a gallon, with a session low of USD 2.76.

DOUBTS ABOUT GROWTH

Growth in China’s manufacturing sector unexpectedly slowed in April as new export orders fell, raising new doubts about the strength of the economy after a disappointing first quarter.

“China’s manufacturing data was a big miss, and obviously when China speaks, we listen,” said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

In the United States, the pace of manufacturing growth slowed in April as the sector expanded only modestly, an industry report showed, adding to signs the economy cooled as the second quarter got underway.

Figures on US private-sector jobs growth also came in below market expectations, two days before the government’s closely watched non-farm payrolls data.

“The combination of ample supply and weak fuel demand levels with disappointing economic data wiped out USD 4 of market rebound in a couple of days,” said McGillian.

The US Federal Reserve said it will keep buying USD 85 billion in bonds each month to keep interest rates low and spur growth, but added it could lift or taper this pace of purchases depending on the economy’s path.

The European Central Bank is widely expected to cut interest rates to a record low of 0.5 percent after data showed inflation in the euro zone had fallen to a three-year low and unemployment had hit a record of 12.1 percent.

Oil market fundamentals showed plentiful supplies, which also pressured prices.

Supply from the Organization of the Petroleum Exporting Countries is forecast to average 30.46 million barrels per day (bpd)in April, up from 30.18 million bpd in March, a Reuters survey showed.

The Buzzard oilfield in the North Sea, an important contributor to the Brent crude benchmark, was on schedule to restart later on Wednesday, trade sources said, after a steam release caused the field to be shut down on Monday.

Source: Moneycontrol