The relative value between cl HO and rb. It may end up being short term but we actually are long some deltas in cl today. Qtr A down plus rbob crack action today changed up our posture on inters. I think fundamentally its supported too. Keep on keeping crude cheap so they'll refine it and keep the distillate builds up. How many more ships gonna leave corpus and Houston with differentials this low?
The ACD Method
- Thread starter sbrowne126
- Start date
The relative value between cl HO and rb. It may end up being short term but we actually are long some deltas in cl today. Qtr A down plus rbob crack action today changed up our posture on inters. I think fundamentally its supported too. Keep on keeping crude cheap so they'll refine it and keep the distillate builds up. How many more ships gonna leave corpus and Houston with differentials this low?
By John Kemp
LONDON, Jan 12 (Reuters) - El Nino and the warm winter
weather are being blamed for the weak demand for distillate fuel
oil in the United States, but the slump in oil production is
probably having a bigger impact.
The oil industry was the fastest-growing customer for middle
distillates like diesel between 2009 and 2014, according to the
U.S. Energy Information Administration (EIA).
The oil industry itself accounted for 20 percent of all the
increase in diesel consumption during the five-year drilling
boom.
Businesses engaged in oil drilling, pipelines and refining
consumed 2.1 billion gallons of diesel in 2014, the most recent
data available, up from just 760 million gallons in 2009.
By 2014, oil producers accounted for 3.5 percent of all
distillate fuel oil sales in the United States, up from 1.4
percent in 2009.
Drilling rigs and the massive pumps employed for hydraulic
fracturing all use high-horsepower engines which run 24 hours
per day and consume prodigious quantities of fuel.
The heavy trucks used to haul drill pipe, frac sand and
water to well sites, and carry away crude before the well is
hooked up to gathering pipelines, are all diesel powered.
And since many oil fields are in remote rural areas with
little or no electricity supply from the main power grid, most
of the electricity used for heating and lighting also comes from
diesel generators.
So as the number of active drilling rigs and crews rose
five-fold from around 300 in 2009 to more than 1500 in 2014,
diesel consumption surged as well.
Direct diesel sales to customers in the oil industry rose
from 50,000 barrels per day to almost 140,000 barrels per day
(bpd).
For comparison, in 2014, around 2.5 million bpd of
distillate was were sold as road fuel, while 250,000 bpd were
sold to residential customers, 240,000 bpd to the railroads and
200,000 bpd to farms.
But as drilling activity has plummeted in 2015, the big
increase in diesel consumption in the oil fields has unwound.
Nationwide distillate consumption was flat in the first ten
months of 2015, after growing by more than 5 percent in 2014.
The slowdown started long before unusually warm weather arrived
in the autumn and winter.
The slump in oil and gas drilling, as well as a general
slowdown in freight shipments, some of which is linked to the
drilling slowdown, likely explains much of the weakness in
diesel consumption in 2015.
With no end in sight to the drilling slump, weak diesel
demand looks set to continue through at least the first half of
2016, which will continue to depress refining margins in the
middle of the barrel.
LONDON, Jan 12 (Reuters) - El Nino and the warm winter
weather are being blamed for the weak demand for distillate fuel
oil in the United States, but the slump in oil production is
probably having a bigger impact.
The oil industry was the fastest-growing customer for middle
distillates like diesel between 2009 and 2014, according to the
U.S. Energy Information Administration (EIA).
The oil industry itself accounted for 20 percent of all the
increase in diesel consumption during the five-year drilling
boom.
Businesses engaged in oil drilling, pipelines and refining
consumed 2.1 billion gallons of diesel in 2014, the most recent
data available, up from just 760 million gallons in 2009.
By 2014, oil producers accounted for 3.5 percent of all
distillate fuel oil sales in the United States, up from 1.4
percent in 2009.
Drilling rigs and the massive pumps employed for hydraulic
fracturing all use high-horsepower engines which run 24 hours
per day and consume prodigious quantities of fuel.
The heavy trucks used to haul drill pipe, frac sand and
water to well sites, and carry away crude before the well is
hooked up to gathering pipelines, are all diesel powered.
And since many oil fields are in remote rural areas with
little or no electricity supply from the main power grid, most
of the electricity used for heating and lighting also comes from
diesel generators.
So as the number of active drilling rigs and crews rose
five-fold from around 300 in 2009 to more than 1500 in 2014,
diesel consumption surged as well.
Direct diesel sales to customers in the oil industry rose
from 50,000 barrels per day to almost 140,000 barrels per day
(bpd).
For comparison, in 2014, around 2.5 million bpd of
distillate was were sold as road fuel, while 250,000 bpd were
sold to residential customers, 240,000 bpd to the railroads and
200,000 bpd to farms.
But as drilling activity has plummeted in 2015, the big
increase in diesel consumption in the oil fields has unwound.
Nationwide distillate consumption was flat in the first ten
months of 2015, after growing by more than 5 percent in 2014.
The slowdown started long before unusually warm weather arrived
in the autumn and winter.
The slump in oil and gas drilling, as well as a general
slowdown in freight shipments, some of which is linked to the
drilling slowdown, likely explains much of the weakness in
diesel consumption in 2015.
With no end in sight to the drilling slump, weak diesel
demand looks set to continue through at least the first half of
2016, which will continue to depress refining margins in the
middle of the barrel.
I'm also confused by the "switch". All three WTI, HO and RB are deeply negatively confirmed for me and I wouldn't touch them long with even King's money although vol might be a good buy which synthetically will get you long WTI. I have found when trying to value spreads that they work best for me when one product is confirmed and at least the other is choppy. When all three are confirmed I think the spreads are going to be very vulnerable to squeezes but at random times. Kind of hard to trade.
Historically the gasoline cracks will hold up better then heating oil since winter demand is non existent. I just don't even think the cracks are good buys here, I mean there is no demand out there. Could they go higher? Sure. I just can't make a quantitative argument for it.
I agree they are all deeply negative on the NLs....but that doesn't mean you stop looking for the best one to "press". Gas cracks and heat oil calendars have been the only bullish thing in energies for past couple weeks. Crude is s dog and everyone was waiting for a 2 to print and then it was a race to put out the lowest price projection. Qtr a down around that level too. Not saying counter trend it when it's that deeply neg, but when it gets down there an you also get cracks starting to flounder in a big way, the better press may be rbob, or remove some shorts in cl. That's where our slight long deltas in cl came from. Not saying its a bottom, and we may switch back tomorrow, but I also lived through some of the violence at the top in 2008 and 2012 wheat markets. There is risk in the squeeze, even if you are ultimately right. Even when it all looks like hell there is still management involved. I don't want to distract from the thread though as this isn't strictly ACD, so I'll leave it with that.
hey steve...thanks for the concept, gonna take a look...way easier than having to create a whole second numberline
Well, the problem is most people are trading China through oil. When people see oil drop they interpret that to mean there are serious issues in China which there are. As pointed out on this thread earlier, most retail folks don't have direct access to anything in China so they use oil as a way to trade it.
I understand what you are saying I'm just trying to double check my data here. I don't have anything remotely bullish on the cracks on my number lines so I want to see what I'm missing. I get they may have gone up the past few weeks but I'm specifically looking for number line data. Are you saying you have one or both cracks in a positive number line confirmation?