Recap: Oil prices rose on Friday, ending five straight sessions of losses for Brent and three for WTI. Propping up prices was Saudi Arabia’s reiteration of its support for extending OPEC-led production cuts and the shut-in, due to a leak, at TransCanada Corp’s 590,000 barrel per day Keystone Pipeline located in South Dakota. December WTI settled at $56.44 a barrel, up $1.41 or 2.56%, while January Brent tacked on $1.36, or 2.22%, to settle at $62.72 a barrel.
December RBOB settled at $1.74447 a gallon, up 3.10 cents, while December heating oil tacked on 4.45 cents to settle at $1.9466 a gallon.
Fundamental News: Saudi Arabia’s Energy Minister, Khalid al-Falih, said the world will still have a surplus of oil by the end of March next year, signaling a willingness to extend output cuts well into 2018 when OPEC meets at the end of November. He also said he did not want oil prices to rise too fast and too soon to shock consumers, adding that the exit from production cuts would need to be gradual to make sure market reaction is smooth.
Baker Hughes reported that the number of rigs searching for oil in the week ending November 17th was unchanged at 738.
Iran’s oil production capacity is forecast at 5.4 million bpd by 2022-23, with crude capacity reaching 4.4 million bpd and condensate capacity reaching 1 million bpd.
Iraqi crude exports fell to a 20-month low in the first half of November as the dispute between the federal government and the semi-autonomous Kurdish region halted exports from disputed areas of Kirkuk province. Iraq’s total exports fell by about 1% to 3.67 million bpd in the first 15 days of November compared with 3.72 million bpd during the entire month of October.
Bank of America Merrill Lynch sees the average WTI price at $49/barrel in 2017 and $50/barrel in 2018. It forecast the price of Brent at $53/barrels for 2017 and $54/barrel for 2018.
Energy Aspects stated that oil backwardation should steepen as supplies are absorbed. It stated that a pullback in prices may be good for the market to ensure a smooth rollover of the current OPEC production deal.
IIR reported that US oil refiners are expected to shut in 586,000 bpd of capacity in the week ending November 17th, increasing available refining capacity by 443,000 bpd from the previous week. IIR expects offline capacity to fall to 321,000 bpd in the week ending November 24th and 307,000 bpd in the subsequent week.
Bloomberg reported that global refinery outages reached 1.57 million bpd in the week ending November 16th. It was down from 2.65 million bpd during the previous week.
US refineries are struggling to meet increasing demand for distillate fuel domestically and abroad, which is expected to tighten the distillate market in 2018. Even if the northern hemisphere winter temperatures are average, the distillate market looks set to enter 2018 with lower than average stocks and increasing demand, which should keep prices and refining margins firm. The gross refining margin for turning Brent into US heating oil has increased to almost $19/barrel from a recent low of less than $11/barrel in May, despite record US refinery production of distillate. Distillate stocks have fallen by 38 million barrels since the start of the year compared with a seasonal decline of less than 10 million barrels in 2016 and a ten-year average of just 5 million barrels. Stocks are now 24 million barrels below the previous year’s level and 9 million barrels below the decade average.
Early Market Call - as of 9:00 AM EDT
WTI - Dec $56.12, down 48 cents
RBOB - Dec $1.7298, down 1.49 cents
HO -Dec $1.9455, down 3.11 cents
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