Contango is back

ogarbitrage · Oct 9, 2014

Hey bone, that's news to me. Thanks for sharing.

Curve took quite a hit today. Every z/z spread beyond the front z4/z5 is negative.

ogarbitrage · Oct 13, 2014

The Saldanha traffic starting to pick up. One currently unloading and three waiting.

ogarbitrage · Nov 5, 2014

Oil swoons as oversupply fears extend losses

Reuters said:
"The Saudis have basically declared war on the U.S. oil producers," said Phil Flynn at Price Futures Group. "I think they believe that the only way they're going to survive in the long term is to break the market in the short term."

...

The United Arab Emirates oil minister said the country is "not panicking". Venezuela and Ecuador have said they are working on a joint proposal to defend oil prices.

"I can see OPEC and Saudi Arabia playing the long game. A low price for a period of time may actually play into the hands of people with a lot of reserves in the ground at cheap cost," Pierre Lorinet, chief financial officer of Trafigura, said at the Reuters Global Commodities Summit.

Saudi Oil Minister Ali al-Naimi has not commented publicly on the oil market since September. On Wednesday, he will meet Venezuela's foreign minister Rafael Ramirez, also the head of its OPEC delegation, according to a person close to the Saudi delegation.

xandman · Nov 18, 2014

Any opinion of the CL Jan - March. The spread has settled settled down to an extreme low of -0.14.

Doesn't this contango seem too exteme considering the seasonal weakness at the end of the 1st Qtr? Seems like a good risk.

ogarbitrage · Nov 18, 2014

What seems too low can often go lower. F/H Brent spread is trading -1.20 / -1.17.

If you wanted to get into a bull spread here, I wouldn't risk more than a nickle.

ogarbitrage · Dec 15, 2014

Time to weigh in.

I think we are witnessing an incredible event in the energy complex. What does everyone think about price action, geopolitics, term structure, volatility, predictions?

<Go>

xandman · Dec 15, 2014

Armchair economist here:

It is very hard to make a bullish case. We are late in the business cycle. Cheap oil is now a subsidy to a late stage US economy. Europe has been slowing down. The US Army is refocusing on African deployments because there is no forsable action in the Middle East. Arabs are complacent about oil prices.

I think we are looking to see the previous lows made in the 40s. How long will it stay there? I couldn't even guess.

ogarbitrage · Dec 16, 2014

The market is expecting a supply surplus of ~1.25-1.5mm bpd by the end of 1H15 and 1.75-2.0mm bpd by the end of 2H15. Russia will lower their export tax on crude and product beginning in Jan. This should build more Urals and product supply in the Baltic and Black Sea depressing ARA and Med cracks. China is the current bid in the Dubai/Oman and Brent markets as they quadruple their SPR. Huge refineries coming online in the Middle East should depress Asian products and cracks further. Buyers are renegging or cancelling LNG contracts as the oil-linked spot prices plunge. All the US supply is putting pressure on the US export ban which won't survive a GOP administration.

There really is no bullish fundamental argument in this environment: strong dollar, huge supply, weakening demand.

ogarbitrage · Dec 16, 2014

Russia, Arab oil producers in no-cut chorus as price dive deepens

Reuters said:
Russia has said it would not cut production even if oil prices fell below $60 per barrel - far below some $100 a barrel it needs to balance its budget - a message reinforced on Tuesday by energy minister Alexander Novak arriving at a gas producers summit in Qatar.

"If we cut, the importer countries will increase their production and this will mean a loss of our niche market," he told reporters, speaking through an interpreter.

"We plan to preserve the plan for 2014 production without any increase or decrease," he said.

Russia to boost Q1 daily oil exports by 6.6 pct, q/q - sources

Reuters said:
Russia plans to boost daily oil exports in the first quarter of 2015 by 6.6 percent to 52.32 million tonnes, quarter-on-quarter, trading sources told Reuters on Tuesday.

The race to zero.

ogarbitrage · Dec 16, 2014

Nigerian January crude oil cargoes struggle to clear on weak demand: sources

Platts said:
Nigerian crude cargoes for January loading are struggling to sell with almost half of the program still available due to very weak demand with an oversupply of sweet crudes, market sources said Friday.

Asian and European demand for Nigeria and other West African cargoes has been slow so far, exacerbated by high freight rates and the availability of cheaper sweet crudes in both regions.
...
Traders said there were still more than 30 Nigerian January loading cargoes unsold, and with the Nigerian February program expected later in the day, differentials were expected to fall steadily if demand did not materialize.
...
A second trader said: "The Angolan January program is sold out thanks to the Chinese but on Nigeria, we still have almost 40 million barrels left [including] some December barrels on storage. The market is very long, in WAF and in the Med."