Oil Price - March 26

[dan_s]

Phil Flynn at 9AM ET on 3/26/2018

Oil has rallied as it is becoming obvious to even the most battled hardened bears that the global market seems to be in balance. Even as we see U.S. production rising, inventories are going the other way. The Trump tax cuts has helped spur the economy, lift poor out of poverty and has improved demand expectations from the retail and commercial side. Consumer confidence which is at the highest level since 2004 has lifted expectations of lower incomes that have finally seen some hope and an uptick in wages.

This has led to record demand for gasoline and is driving up retail prices. Trilby Lundberg, the Princess of Petro, says that the average U.S. price of regular-grade gasoline increased by 7 cents a gallon over the past two weeks to $2.66. That put prices 32 cents a gallon higher than it was at this time last year. The highest average price in the contiguous 48 states was $3.54 in the San Francisco Bay area. The lowest was $2.22 in St. Louis according to Lundberg. The average price for diesel fuel rose a penny, to $3.01.

Oil gas and diesel are in major bull markets. Oil suppliers have fallen behind the demand curve and oil is on a tear. We continue to see upside risks. If you have not taken our advice and hedged your needs, we still feel strongly that you should. We are in a mode where refiners are going to be playing catch up.

Shale oil is not helping because it is too light for many U.S. refiners. Reuters is reporting that Plains All American (PAA) told shippers on Friday that crude moving through its West Texas and New Mexico pipeline systems is surpassing pressure limits, according to a notice reviewed by Reuters. It was the latest sign of how pipeline companies are struggling with higher volumes of very light crude from domestic shale plays when refiners have a limited appetite for it. Plains' notice said crude at some Permian Basin connection points is reaching or exceeding limits for Reid Vapor Pressure (RVP), a measure of volatility in oil or refined fuels. The connection points affected included the Delaware Basin in the far west part of the Permian.

Trade sources indicated the problem could stem from more ultra-light crude known as condensate, entering the mixed stream. The lighter the crude, the higher its RVP. "We want to make all shippers aware of the issue," Plains' notice said.

EBW AnalyticsGroup Andrew Weissman says that despite bullish weather, the April natural gas contract finally broke through support last week, setting the stage for further declines. Weather forecasts Sunday morning were bearish, shedding significant demand at a time when cash market demand has started to slide daily. If the forecast verifies, the May natural gas contract, which becomes the front-month Tuesday, could quickly test support at $2.47-2.53/MMBtu. Modeling runs Sunday night suggested a smaller shift. Either way, continued price declines are likely. Total US electricity demand is likely to continue lower this week as Northeastern cold moderates and warmth spreads.

[dan_s]

Ed Morse, Citibank’s Global Head of Commodities Research, warned that OPEC may be pumping at maximum capacity and that there is a risk of a market squeeze due to under-investment by OPEC countries: “Fear in the market has been that OPEC production will rise dramatically, however, there could be a supply gap emerging, which could point to a tighter market. We’re seeing more and more evidence that it’s not the international oil companies, it’s not the independent oil companies that are lagging new investments, but it’s OPEC countries lagging, particularly those five [Libya, Nigeria, Venezuela, Iran and Iraq].”

[dan_s]

Let this sink in: In 2018 this world will consume over 35 Billion barrels of refined hydrocarbon based liquid fuels and feedstock. Most of them are made from crude oil.

Now read this: https://www.forbes.com/sites/rrapier/20 ... cdbbb544cf