{"id":338,"date":"2018-11-22T14:09:31","date_gmt":"2018-11-22T14:09:31","guid":{"rendered":"http:\/\/commodity-trading.campus.local\/commodity-trading\/?p=338"},"modified":"2018-11-22T14:09:31","modified_gmt":"2018-11-22T14:09:31","slug":"north-american-crude-weekly-bulletin-2","status":"publish","type":"post","link":"https:\/\/campus.hesge.ch\/commodity-trading\/north-american-crude-weekly-bulletin-2\/","title":{"rendered":"North American crude weekly bulletin #2"},"content":{"rendered":"

Price cuts: Three men are controlling the price<\/u><\/em><\/p>\n

During the last month we have seen OPEC losing control of the oil market as it ever had. The action of Presidents Donald Trump, Prince Mohammed Bin Salman and Vladimir Putin will determine the course of oil prices in 2019 and beyond.<\/p>\n

While OPEC struggles to find solution, the three countries dominate the global supply. As we can see below, together they produce more oil than the remaining members of OPEC including condensates and natural gas liquids.<\/p>\n

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(U.S 15.2M barrels per day \/ Russia 12.3M barrels per day \/ Saudi Arabia 12.2M barrels per day)<\/p>\n

Forward price and spread Brent-WTI curves:<\/u><\/em><\/p>\n

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We can see on the chart above that during a short term it will be still profitable to store and sell in the future as the WTI and the Brent price curve are in contango.<\/p>\n

On the both curves, we can see a slow increase during Q1 2019, but probably due to the price\/production war between U.S, Russian and Saudi Arabia the Brent curve will sooner turn in backwardation while the WTI forward curve will remain stable during a short due to U.S influence as big supplier.<\/p>\n

The yellow curve shows the spread between the price for Brent Back month contracts and the price for WTI back month contracts.<\/p>\n

Canadian Crude Oil<\/u><\/strong>.<\/p>\n

Since mid-May heavy Canadian crude has been in a downward spiral.<\/p>\n

A recent increase in Western Canadian production caused a glut because the production was running into limited pipeline capacity. It has caused that heavy and light Canadian production has been trade at record discounts in comparison to world oil benchmarks. The discount was, one year ago, less than USD 15.<\/p>\n

Another issue that had an impact on Canadian oil prices is that most of the U.S. refineries that process the Canadian heavy oil have been in maintenance for the last two months.<\/p>\n

BP Plc just restarted a crude unit as well as a coker which help prices to recover.<\/p>\n

Although U.S. refineries are restarting, the crisis is far from done. Canada is still producing more oil than the pipelines can handle and his storage capacity has reach his maximum.<\/p>\n

BP has recently signed a multi-year contract with rail companies in order to load Western Canadian oil and increase volume of imports. In October, they reached an average of 274\u2019000 barrels a day and they are looking to double this volume by next year.<\/p>\n

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As Heavy Western Canadian Select\u2019s discount to WTI futures narrowed to USD 39.25 a barrel.<\/p>\n

\u00a0<\/u><\/em>Shale oil production:<\/u><\/em><\/p>\n

According to the department of energy, the U.S. oil production will reach 12 million barrels a day, 6 months sooner than expected. Shale oil producers from the Texas oil patch have added the past 12 months a volume equivalent to the entire output of Nigeria.<\/p>\n

This is why some suppliers from the Permian region want that the U.S government add three more pipelines. With those new pipelines, the suppliers from this region will try to produce 2 million of barrels per day.<\/p>\n

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Recommendation<\/u><\/em><\/p>\n

Due to this instability\/price war in the oil market, it will be judicious if we want to sell future contract to not sell future contract after Q1 ending in 2019. Having no real information about how U.S and Saudia Arabia will act those last month (cut a little bit the supply, continue to supply or increase ) people have better time to ensure themselves from a loss of money.<\/p>\n

Appendix:<\/u><\/em><\/p>\n

https:\/\/www.bloomberg.com\/news\/articles\/2018-11-21\/opec-s-worst-nightmare-the-permian-is-about-to-pump-a-lot-more<\/a><\/p>\n

https:\/\/www.bloomberg.com\/news\/articles\/2018-11-16\/canadian-crude-rallies-as-u-s-demand-and-rail-shipments-rise<\/a><\/p>\n

https:\/\/www.bloomberg.com\/opinion\/articles\/2018-11-18\/bin-salman-trump-and-putin-control-the-oil-price-now<\/a><\/p>\n

https:\/\/www.bloomberg.com\/news\/articles\/2018-11-22\/oil-holds-gain-as-u-s-fuel-inventory-drop-counters-trump-tweet<\/a><\/p>\n

https:\/\/www.bloomberg.com\/news\/articles\/2018-11-20\/canadian-oil-patch-plunged-into-crisis-by-historic-price-crash<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Price cuts: Three men are controlling the price During the last month we have seen OPEC losing control of the oil market as it ever had. The action of Presidents Donald Trump, Prince Mohammed Bin Salman and Vladimir Putin will determine the course of oil prices in 2019 and beyond. While OPEC struggles to find … <\/p>\n

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