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MarketWatch

Refined Products
11.24.2014

Recap:  Oil markets started higher across the board Friday, continuing an intraday rollercoaster ride again. First, the oil complex moved higher on news that the People's Bank of China cut its benchmark one-year loan interest rate .4 percentage points to 5.6% and its one-year borrowing rate .25 percentage points to 2.75% in hopes of stimulating the Chinese economy . "A stimulus for the Chinese economy is something that brings macroeconomic investors into all kinds of commodity markets, oil included, said Andrew Lebow, senior vice president for energy derivatives at Jefferies Bache LLC. With lower interest rates, the Chinese could spend freely enough to support 100,000 barrels of oil demand growth in 2015 in a best-case scenario." (Dow Jones 11-21-14) With a potential demand increase from the world's second largest consumer of oil, oil bulls had an opportunity to push higher, with the crudes both gaining over $2.00. What popped had to drop as European Central Bank President Draghi pledged Friday to expand its version of quantitative easing leading to a strengthening of the dollar against the euro, and sending oil prices back down close to the previous day's settlements. But, alas a volatile Friday trading day heading into the weekend before the Thanksgiving holiday would not be complete without a huge push back up in the last 30 minutes of trading.   

Friday settlements: NYMEX ULSD (HO) crossed $2.40 to settle up 2.45 cents to $2.4045, NYMEX RBOB was up 2.89 cents to $2.0565, NYMEX (WTI) Crude settled up 66 cents to $76.51 while ICE Brent was up $1.03 to cross $80 at $80.36. 

Currently, oil markets are down across the board. NYMEX ULSD is down 1.30 cents to $2.3915, NYMEX RBOB is down 1.05 cents to $2.0460, NYMEX Crude is down 27 cents to $76.24, and ICE Brent is down 16 cents to $80.20.  For those petroleum participants trading during this shorter week, the results/status of an Iranian nuclear deal today will likely move oil markets followed by Thursday's OPEC meeting in Vienna, and then on Friday December NYMEX ULSD and RBOB futures contracts expire on a shorter NYMEX day as floor trading closes at 1:30pm. As of this writing, the Wall Street Journal is reporting that Iranian nuclear talks were looking to be extended.

Saudi Arabia talking with Russia on crude oil production cuts? Saudi Foreign Minister Prince Saud al-Faisal and his Russian counterpart Sergei Lavrov met Friday, and "'[t]he two sides expressed their willingness to cooperate on issues related to energy and oil markets,' a ministry statement said after the meeting." (Reuters 11-21-14) Perhaps this is an attempt for the largest OPEC producer to get cooperation from a non-OPEC producer, Russia, to help with production cuts to help support prices. Economically, it seems unlikely Russia would be in a position to entertain production cuts, but the fact that Saudi Arabia and Russia are talking may have more to do with the political aspect and implications of Iranian nuclear talks.

Speculator "Spec" Watch:  Net speculative length decreased for NYMEX (WTI) Crude, increased for NYMEX RBOB (Gasoline), and the net-short position for NYMEX ULSD (HO) got smaller.  According to the CFTC's Commitments of Traders Report released on Friday for reporting through Tuesday, November 18, 2014, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts) decreased 4% from the previous week of 182,490 down to 175,051 futures and options contracts.  NYMEX RBOB net speculative length jumped 21.5% to a four-month high from 32,362 futures and options contracts to 39,320!   NYMEX ULSD (HO) speculators decreased their net-short position 19% from the previous week of -29,128 futures and options contracts to -23,565 contracts. (Negative representing net-short position.) With ULSD speculators continuing to reduce their net-short positions and RBOB speculators increasing their long positions, are speculators changing the tide and now betting closer toward upward product pricing?
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Natural Gas
11.24.2014

On Friday, November 21st, the prompt-month NYMEX Natural Gas Futures Contracts opened at $4.342, almost fifteen cents short of Thursday’s closing price of $4.489.  December burst forth at the bell in high volatility, trending upwards to spike the intraday high of $4.361 at 9:40AM.  With slightly decreasing volatility edging the bounds inward, prices nonetheless continued on a net upward path for just shy of forty minutes.  By 11:00AM, however, December began to show signs of fatigue and collapsed to $4.282 at 11:10AM.  Recuperating quickly, prices then buoyed up to tally the intraday high once more at 11:50AM, but met the bearish noon weather update beneath the $4.33 level.  Trading uncertainly sideways for almost an hour and a half after midday, December briefly declined below the $4.29 mark at 1:30PM, but then bubbled up beyond the $4.34 rim for the balance of the one o’clock hour.  From there prices plunged briskly to the intraday low of $4.259 (2:20PM), closing down at $4.266 on Friday.    

This morning in Globex, WTI Crude was down 18 cents; Natural Gas was down 22 cents; and, both Heating Oil and Gasoline were down slightly.

Both New England and New York basis values were up for the coming winter months and down for the next summer season.  Additionally, cash prices in both regions were down.

 

Natural Gas Glossary

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to natgas@spragueenergy.com or call 1-855-466-2842.

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