Commodity prices as measured by the Total Return Bloomberg Commodities Index reaches new five-year lows, hit by a strengthening dollar, the prospect of a record grain harvest in the U.S. and concerns over weakening economic growth in China.
The index has dropped more than 12% since the end of June amid falling prices for commodities such as crude oil, soybeans and gold.
Even industrial metals, one of this year’s best performers in commodities, have started to come under pressure; nickel has dropped 10% since the end of June, copper prices are at three-month lows, and iron ore trades below $80/ton for the first time since 2009.
Condensate exports from the U.S. are continuing for the third straight month, following the easing of a 40-year crude export ban in June.
As U.S. condensate supply continues to surge due to the shale boom, oil producers are looking to export a growing surplus, while consumers, such as refiners, have lobbied to keep exports forbidden to ensure lower energy costs in the U.S.
Washington has still held back on issuing more permits to export the minimally refined oil, despite growing international pressure to soften the ban,
The IEA now foresees global oil demand growth of 900K bbl/day in 2014, a decrease of 65K bbl/day vs. last month's forecast and down by 300K bbl/day since July.
Oil demand growth in Q2 was at its lowest in two and a half years due to economic weakness in Europe and China, a trend the IEA expects will continue to hurt demand; the agency now expects oil demand to rise by 1.2M bbl/day next year, but that's 100K bbl/day less than it forecast last month.
Saudi Arabia finally appears to be responding to the lower demand outlook, as it cut its oil output by 330K bbl/day last month and appears to have run below 7M bbl/day for the last four months, its lowest level since Sept. 2011.
Energy stocks, especially refiners, are taking a beating following the latest EIA inventory report that said gasoline stockpiles rose by 2.4M barrels last week, helping send U.S. crude oil futures to 16-month lows (-1.2% to $91.61/bbl) and Brent crude to 17-month lows (-1.1% to $98.02).
The report is bearish given the large increases in refined product inventories; "even though the crude drawdown was close to expectations, it seemed to disappoint," Again Capital's John Kilduff says.
The EIA report followed the agency’s updated demand growth report issued yesterday and this morning’s release of OPEC’s report on the oil market; both see lower demand growth this year and next.
Oil majors are mostly lower: XOM -0.6%, CVX -1.4%, COP -0.3%, but BP (+2.9%) and RDS.A (+1%) are higher.
OPEC's latest monthly report adds to the bearish outlook for crude oil, as it cuts forecasts for the amount of crude it will need to supply as surging North American shale output reduces reliance on its supplies.
OPEC now expects it will need to pump an average of 29.2M bbl/day of crude next year, 200K bbl/day less than it forecast just a month ago.
OPEC could respond by restricting oil supply to keep prices up in the face of weakened demand, but there's no sign of that happening; output actually rose by 231K bbl/day in August, thanks in part to the reopening of some Libyan oil fields.
Production has resumed at Britain's North Sea Buzzard oil field, according to field operator Nexen (NYSE:CEO), the latest phase of the on-again off-again return of one of the key streams underpinning Brent oil futures.
Since returning from summer maintenance in late August, the 200K bbl/day field has gone through several shutdowns and restarts.
Brent crude dropped $1.12, or 1.1%, to $99.70/bbl after falling to as low as $99.36, a 16-month low, while U.S. crude slipped more than a percent to below $92 after settling at $93.29 on Friday for its sixth weekly drop in seven.
Traders are concerned crude demand won't keep up, with data from the U.S. and China, the world's top oil consumers, suggesting their economies aren't growing as quickly as had been hoped.
Known as the God of Crude Oil in the business, trader Andrew Hall's bet that oil prices would continue to rise has run into the shale revolution. Has the man who bagged a $98M bonus in 2008 first riding oil higher than going short ahead of the crash lost his touch?
Based on his investor letters, Hall is unfazed by recent losses and makes a sport of mocking those who think the shale boom means cheap energy over the long term. "When you believe something, facts become inconvenient obstacles," wrote Hall in April about an analyst who saw oil going to $75 per barrel over the next five years.
Hall instead sees a rise to $150 and is making his bet by buying up cheap call options for oil to be delivered as far out as 2019, reports Bloomberg.
“You can’t play the game without bumping into the wall every now and then,” says chairman of PBF Energy Tom O’Malley (who recruited Hall to a trading job 32 years ago). “Anybody who bets against Andy Hall might be making a poor bet."
"He has three gears: long, longer, and really long," says an energy consultant and economist.
Cnooc's (CEO -2.1%) Nexen subsidiary says production at the North Sea Buzzard oil field may be shut for another week as it works to demobilize a drilling rig during a window of good weather.
Industry sources had said earlier the operator of the field was hoping for a possible restart later today.
Buzzard is closely watched by oil traders worldwide as it is the biggest contributor to the Forties oil stream, the largest of the four crudes underpinning the price of benchmark Brent crude oil futures.
The energy sector (XLE -1.3%) is lit up bright red this session as WTI crude oil for October delivery dives 3% to $93.04 per barrel, within a dollar or so of 2014's low price. Also headed south is natural gas, -4.1% to $3.89 per MBtu.
Satellite tracking from the AIS ship tracking system used by the U.S. Coast Guard showed no known position for the United Kalavrvta, the tanker carrying $100M worth of Kurdish crude near Texas.
Many tankers loaded with the controversial oil have recently gone dark by switching off their transponders, including a Kamari tanker which disappeared days ago north of Egypt's Sinai and reappeared empty two days later.
Baghdad and the Kurdistan Regional Government still have a long way to go to settle claims over who has the sole right to export the oil.
OPEC's oil production has advanced in August from July, according to a Reuters survey, as a 100K bbl surge in Libyan supply held up and Angola and Iran boosted supplies, outweighing a further decline in Iraq.
The survey also found Saudi Arabia and other core Persian Gulf producers kept output largely flat and have not cut back to prop up prices, which this month slipped to a 14-month low near $101/bbl.
OPEC supply has averaged 30.15M bbl/day in August, up from 30.06M in July, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.
The tanker carrying $100M worth of Kurdish crude off the shores of Texas, looks like it will not be able to deliver its oil anytime soon, despite Tuesday's ruling from Judge Gray Miller.
Miller threw out an order yesterday to seize the cargo aboard the tanker, but did not settle the broader dispute between Iraq and the Kurdistan Regional Government over who has the sole right to export the crude.
Buyers of the oil could face lawsuits from Baghdad if the crude moves inland.
Seems most technicians see a low of 75 in USODBOOIL and a possible premium now the sanctions took effect July 1st HDGE on options GLDSLV
View all 0 replies
USO vs. ETF Alternatives
The United States Oil Fund, LP ("USO") is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate").
See more details on sponsor's website