Fueling Strategy: Please keep tanks topped tonight, Wednesday AM wholesale prices will go UP 2.5 cents – Be Safe Today
NYMEX Crude $ 42.77 DN $.2500
NY Harbor ULSD $1.3307 DN $.0129
NYMEX Gasoline $1.3462 DN $.0158
NEWS
Oil futures pulled back from a two-week high Tuesday to settle modestly lower as traders weighed continued concerns about a global supply glut versus prospects for an agreement by major producers to curb output.
On the New York Mercantile Exchange, crude futures for delivery in September fell 25 cents, or 0.6%, to close at $42.77 a barrel. October Brent crude on London’s ICE Futures exchange lost 41 cents, or 0.9%, to settle at $44.94 a barrel. Oil flipped between gains and losses in a choppy session, but were dragged lower around midday after the U.S. Energy Information Administration, in its monthly short-term energy outlook, said it expects U.S. crude oil production to decline to 8.73 million barrels a day in 2016 from 9.43 million barrels in 2015. In July, the agency had forecast 2016 production of 8.61 million barrels. The change comes amid an uptick in the number of domestic rigs drilling for crude oil.
Futures, however, were locked in a relatively tight trading range ahead of weekly supply data, with some support attributed to a planned meeting of oil-producing nations in September despite skepticism over the prospects for curbing output. Traders “continued to eye the possibility that [Organization of the Petroleum Exporting Countries] members may hold talks in September to consider production caps,” wrote strategists at Tradition Energy. On Monday, Mohammed bin Saleh al Sada, Qatar’s energy minister and the president of OPEC, said the 14-member group will hold an informal meeting Sept. 26-28 at the International Energy Forum in Algeria.
Many analysts have dismissed speculation about a meaningful agreement as well-timed posturing. Doubts about the likelihood of an agreement come after much-hyped production freeze talks in April collapsed. But some analysts said traders shouldn’t assume there’s no appetite for an agreement. “There are some that are laughing off the possibility of a production freeze because of the failure at Doha in April, but one must not just dismiss it out of hand,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “A deal at Doha was closer than anyone imagined and there is a possibility they can put those pieces back together.” Sada sounded a positive note about the crude-oil market, saying demand was expected to be strong in the second half of 2016, while the global petroleum supply would weaken. Expectations for higher crude demand in the second half of 2016, coupled with a decrease in availability, are leading analysts to conclude the current bear market is temporary and oil prices will rise later in the year, he said.
Several OPEC members want to revive the idea of setting new limits on production—a subject raised but quashed in the April meeting. At the time, Saudi Arabia said market forces were helping to reset supply and demand back toward a rebalance. Iran also rejected the idea, saying it would continue to produce until it reaches pre-sanction levels. Iran’s production has crept back up to 3.6 million barrels a day, rising almost 600,000 barrels a day since world powers lifted economic restrictions over the country’s nuclear program in January. That brings production to within reach of the 4 million to 4.2 million barrels a day Iranian officials said they would require before agreeing to a freeze.
In the near term, the market will monitor movements of U.S. gasoline and crude stocks, which likely shrunk last week by 1.6 million barrels and 1.75 million barrels, respectively, according to a survey of analysts by S&P Global Platts. Such a decline in crude would be 27% short of the average 2.4-million barrel drop seen during this period during 2011-2015. Crude oil stocks were 36.6% above the five-year average through the last reporting period. Official data from the Energy Information Administration will be released Wednesday. Data from the American Petroleum Institute, an industry trade group, is expected late Tuesday.