Fueling Strategy: Please fill as needed tonight – Be Safe

NYMEX Crude $ 47.59 DN $1.2300
NY Harbor ULSD $1.6057 DN $0.0289
NYMEX Gasoline $1.5780 DN $0.0363

NEWS
Oil fell sharply Monday, with concerns over rising crude output from OPEC members and U.S. shale-oil producers pushing prices to their lowest finish in three weeks. Losses for oil intensified after a report from the U.S. Energy Information Administration revealed expectations for a monthly rise in domestic shale-oil output. “U.S. production remains the single biggest headwind for the oil market right now, and until we begin to see signs that domestic output growth is fading, [West Texas Intermediate oil] will have a very hard time rallying through the $50 mark in the absence of an unrelated bullish catalyst,” Tyler Richey, co-editor of the Sevens Report, told Market Watch.

WTI crude oil for September delivery dropped $1.23, or 2.5%, to settle at $47.59 a barrel on the New York Mercantile Exchange. That was the lowest settlement July 24, according to FactSet data. Brent oil for October fell $1.37, or 2.6%, to $50.73 a barrel on ICE Futures Europe, with prices also settling at their lowest since late July.

In a report Monday, the EIA said it expects to see a climb of 117,000 barrels a day in September to 6.149 million barrels a day The report has shown increases in shale-oil production every month so far this year. “This is not the report that [the Organization of the Petroleum Exporting Countries] wanted to see,” said James Williams, energy economist at WTRG Economics. “It is far more optimistic than the EIA’s Short-Term Energy Outlook, which only anticipated a 10,000 [barrel-per-day] increase in September lower-48 [states] onshore production.” Williams pointed out the regions covered in EIA’s Drilling Productivity Report Monday cover 85% of the onshore production in the lower 48 states. The report also showed that the number of drilled, but uncompleted wells, or DUC, climbed by 208 in July from June to 7,059. “This is also bearish because the more DUC wells there are, the more capacity is ready to come online in the face of any sort of price rally,” said Richey. “So, even if prices rebounded—say on OPEC developments or geopolitics—the subsequent surge in U.S. production would likely spur another decisive imbalance in oil economics as supply would quickly outpace demand.”

Monday’s drop in oil prices comes after both OPEC and the International Energy Agency last week said oil production from the cartel had risen in July to almost reach 33 million barrels a day. Meanwhile, data released Friday from Baker Hughes showed that the number of active U.S. rigs drilling for oil edged up by three for the week after a decline of one the previous week. In a daily email, Phil Flynn, senior market analyst at Price Futures Group, said “the U.S. oil rig count is still rising, but more slowly and not enough to make up for the lack of completions and the existing well production decline rate.” He believes that the “slowing rig count will mean that U.S. production will start to level off and drop.” Flynn also noted that “shale producers will continue to struggle” as oil stays below $50 a barrel. “Many may be able to produce at sub $50.00 levels but can’t make money because of debt and well head economics such as rising costs,” he said.

Have a great day,

Loren R. Bailey, President
Fuel Manager Services Inc
“Serving the Trucking Industry Since 1992”