Comerica Bank’s Texas Economic Activity Index improved by 0.2 percentage points in December to a level of 91.8. December’s index reading is 19 points, or 26 percent, above the index cyclical low of 72.8. The index averaged 91.4 points for all of 2016, six and one-tenth points below the average for full-year 2015. November’s index reading was 91.6.“The Comerica Bank Texas Economic Activity Index increased for the fourth consecutive month in December. This is the longest expansion streak for the Texas Index since mid-2014. Improving oil prices, more active oil fields and a stronger U.S. economy are the keys to better performance for the Texas economy this year. With oil prices firm through February we expect the Texas Index to continue to climb through early 2017. Even through the December increase in the Texas Index was small, most index components were positive for the month, including nonfarm employment, state exports, unemployment insurance claims (inverted), housing starts, drilling rig count, home prices and state sales tax. Only hotel occupancy declined for the month,” said Robert Dye, Chief Economist at Comerica Bank. “North Texas continues to grow strongly. As the year progresses, we expect oil-producing areas to turn the corner and join in.”
Source: Comerica Bank’s Texas Index Advances | Comerica Economic Insights
The figure exceeded the 942,000-barrel build reported by the American Petroleum Institute yesterday, which rattled markets yet again.Refineries last week processed an average of 16.6 million barrels daily, down by 64,000 barrels on the week. Gasoline production averaged 10 million barrels, basically flat on the week. The stockpiles of the most popular fuel went down by 700,000 barrels, still remaining considerably above the average for the season.xGasoline prices have been climbing up over the last three weeks, according to the EIA. This, however, may very well change next week, as Labor Day marks the end of the driving season and higher demand. This year’s driving season saw the lowest gasoline prices for the last 12 years, reflecting the glut in crude and fuels.
Source: Oil Slammed After EIA Reports Significant Crude Build | OilPrice.com
Saudi Arabia’s oil minister said Tuesday that production cuts to boost oil prices won’t work, and that instead the market should be allowed to work even if that forces some operators out of business.Ali Al-Naimi said production cuts by big, low-cost producers like Saudi Arabia would amount to subsidizing higher-cost ones — an apparent reference to U.S. shale oil drillers.Booming U.S. production effectively ended oil trades at more than $100 per barrel that were taking place less than two years ago. A barrel of U.S. crude is now hovering around $30, a price at which many shale operators are assumed to be losing money.”The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate,” Naimi said. “It sounds harsh, and unfortunately it is, but it is the more efficient way to rebalance markets.”Naimi disputed a common view in the industry: that Saudi Arabia has kept pumping oil to protect its market share and undercut shale producers. “We have not declared war on shale or on production from any given country or company,” he said.
Source: Saudi Oil Minister Says Market Should Handle Low Prices – ABC News
Oil prices have continued to decline over the past few months, dropping to nearly $30 per barrel by last December. This drop coincided with a fall in breakeven inflation expectations, as measured using the premium paid for Treasury inflation-protected securities (TIPS) over standard Treasury bonds.
Oil prices may drop to near $20 a barrel this year as the global glut of crude persists into 2017, Abu Dhabi’s largest lender said.
U.S. benchmark West Texas Intermediate crude should trade in a range between $25 a barrel and $45 a barrel for the rest of the year, “although a very brief spike down towards $20 is possible,” the National Bank of Abu Dhabi PJSC wrote in its Global Investment Outlook 2016 report on Sunday. Prices at the lower end of the range will stimulate demand growth, it said.
“For at least the next few years there do appear to be solid fundamental reasons why oil prices are likely to remain in a trading range,” NBAD analysts wrote in the report. Producers have sold less of their crude this year through forward transactions than in past years, and forward-selling would likely accelerate if prices rallied much above $40 a barrel, the bank said.
Source: Abu Dhabi’s Biggest Bank Says U.S. Oil Prices May Drop to $20
BP is planning for oil prices to stay low for the first six months of the year and expects surplus production to only start diminishing when storage tanks fill up in the second half. “We are very bearish for the first half of the year,” Chief Executive Officer Robert Dudley said at the IP Week conference in London Wednesday. “In the second half, every tank and swimming pool in the world is going to fill and fundamentals are going to kick in. The market will start balancing in the second half of this year.”
Source: BP CEO ‘Very Bearish’ on Oil as Storage Tanks Are Filling Up – Bloomberg Business
Fuel producers from India to South Korea are finding that rising refined products from China are cutting the profit margins they’ve enjoyed from cheap oil to the lowest in more than a year. Worse may be coming. China’s total net exports of oil products — a measure that strips out imports — will rise 31 percent this year to 25 million metric tons, China National Petroleum Corp., the country’s biggest energy company, said in its annual research report last month. That comes after diesel exports jumped almost 75 percent last year. “If China dumps more fuel into the market, international prices will crash,” said B.K. Namdeo, director of refineries at India’s state-run Hindustan Petroleum Corp. “It will be similar to what happened to crude prices due to the oversupply. If international prices of oil products come down, then it will hurt margins of all refiners.”
Source: China Turns a Glut of Oil Into a Flood of Diesel Swamping Asia – Bloomberg Business
Wednesday, September 16, 2015 03:52 PM
by Robert Tuttle
(Bloomberg) — “Very high probability” prices will stay low through end of next decade, Jeff Currie, head of commodities research at Goldman Sachs, says in interview in Lake Louise, Alberta.
Goldman’s official forecast extends to 2020, sees longer term oil price at $50/bbl,
“Risks are to the down side given what’s going on in other commodity markets”
World shifting from “investment phase” of ~30 yr commodity cycle to “exploitation phase” with shale as main source of output
Lower iron ore, copper, steel prices and weaker currencies in commodity-producing countries have reduced costs for oil producers
“The question becomes, how long will this resource base last? History says 10 to 15 years, however there is a lot of uncertainty”
Oil has >50% chance of drop to $20/bbl, most likely when refineries shut in Oct. or March
The possibility of a U.S. interest-rate increase is roiling oil markets.Federal Reserve leaders will meet later this week to consider the first rate increase since the early days of the financial crisis, ending seven years of record-low interest rates that kept credit flowing to borrowers in the aftermath of the collapse of Lehman Brothers in September 2008.Analysts say it’s unclear whether the U.S. central bank will tighten the nation’s money supply after its two-day meeting concludes on Thursday or sometime before the end of the year, or after that. But when it does, it will be a sign that policymakers believe the U.S. economy has improved enough to withstand higher borrowing costs.Higher interest rates, though, would come at a bad time for U.S. oil companies, which have taken out more than $200 billion in high-risk loans to fuel a domestic shale oil bonanza, only to send away hundreds of drilling rigs and lay off thousands of workers this year.”The last thing energy companies need is higher costs,” said James D’Agostino Jr., former chairman of Encore Bancshares in Houston. “They’re trying to conserve cash.”
There is a great, unspoken “what if” in the stand-off between Opec’s strategists and the rest of the world’s oil producers — what if no-one blinks?What if Arab Mideast Gulf Opec producers’ pockets are deep enough and their zest for domestic subsidy reforms is strong enough to ride out the storm? What if the US shale industry continues on its downward cost trajectory to a point where $40/bl oil is as A-ok in North Dakota and Texas as it is in Saudi Arabia? What if none of the Opec troupe falls into chaos, bankruptcy and plunging production? (Libya’s demise pre-dated the price crash, so its perdition is already a given.)In other words, what if there is no supply response, or not enough of a response from producers to rebalance the market, at least in the way the market has come to expect over the last 15 years? Supply has to play a part, because demand alone cannot absorb all of the oversupply in world oil markets.
Source: Crude supply — what if no-one blinks? | Argus Blog – Argus Media