Energy Prospectus

From Dan Flynn at 11:15 AM ET: "On the Crude Oil front I expect a short covering rally going into tonight’s and tomorrow’s weekly inventory data and also a long Christmas weekend where investors will not risk being short. In the overnight electronic session the February Crude Oil is currently trading at 5753, which is 31 points higher. The trading range has been 5759 to 5720." < February becomes the front month contract tomorrow.

Since going below $55 for a few minutes on November 16, the price of WTI has been above $55 and is now forming a tight wedge that centers on $57.00. A close above $57.50 would be bullish and above $58.00 would be VERY BULLISH.

As supply and demand continue to tighten, geopolitical risk increases. One "unplanned" supply outage should push WTI over $60.00. Therefore I think Dan Flynn is right about speculators not wanting to be short oil over the holidays.

This is a BIG DEAL.

Forties pipeline out until January. Special parts are needed and it looks like the outage is much longer than expected. This means oil storage in Europe will fall FAST.

https://www.upi.com/Energy-News/2017/12 ... m_medium=1

Dec. 19 (UPI) -- Custom parts needed to fix the Forties pipeline system are being made, though it may be the second week in January before work is finished, the operator said.

Ineos, which owns the Forties pipeline system, shut down operations on a network catering to about 40 percent of North Sea oil production Dec. 11 after finding a hairline crack on infrastructure near Aberdeen.

In its latest formal update, the company said the crack is stabilized and the custom parts necessary to fix the issue are being made or are already on their way to site of the crack.

"At this stage, it is still too early to say exactly how long the repair will take to complete, and there is no change to the previously indicated timescale of two to four weeks from Dec. 11," the company stated. "We will work to complete this as quickly as possible but safety is our highest priority."

Ineos confirmed a formal declaration of force majeure last week on contracts for the system after a number of fields closed as a result of the disruption. Force majeure is a contractual condition related to circumstances beyond the control of the parties involved.

The closure of the system triggered a 2 percent spike in the price for Brent crude oil, the global benchmark for the price of oil and component of the basket of oils fed into the Forties system. The price for Brent was up slightly from Monday's close to $63.60 per barrel. That's down about $2 per barrel since the pipeline was closed.

The Forties system carries Brent, Forties, Oseberg and Ekofisk oils, which account for a basket that make up the global benchmark. Commodity pricing group S&P Global Platts changed up the basket of what constitutes the benchmark by adding Forties, Oseberg and Ekofisk grades from the North Sea as production from the Brent field itself started to decline. In January, Platts announced plans to add oil from the Troll field, operated by Norwegian energy major Statoil, to the basket.

Ineos paid BP around a quarter billion dollars to acquire the 235-mile Forties pipeline system earlier this year.

Bloomberg:
Hedge funds boost bullish bets on oil. Hedge funds and other money managers boosted their bets on Brent crude to a record high, while WTI long bets were at a nine-month high. The increase in net speculative length is notable given that major investors had already amassed a rather bullish position on crude futures, and some analysts wondered whether a correction was just around the corner. The outage at the Forties pipeline likely contributed to the increase in net length.

Threat of supply outage in Venezuela larger than market thinks. Venezuela’s oil production could “plunge” in 2018, with losses likely to be much steeper than the market is expecting. "Given the severity of the crisis, we think market participants would be unwise to assume that Venezuelan production losses will simply mirror the several hundred-thousand barrels per day losses seen in 2014," Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote in a research note.