The Energy Report
The Energy Report
The Energy Report 3/17/17
Back in the Green!
Oil prices are showing a wee bit of green this lovely Saint Patrick's Day and look like it is on track for its first up week since January! This comes after oil took a hit after a record amount of hedge funds went long before the trade went arseways on us. Yet the bulls may find a pot of gold at the end of the rainbow after OPEC and non-OPEC leprechauns are talking about extending production cuts past the June expiration. The UPI reported that Russia's Rosneft is talking about an extension of production cuts as well as the Saudi oil minster! If they stick to their guns we are on track for the first global deficit in over a decade. SlÃ¡inte!
The Saudi Energy Minister Khalid al-Falih says that OPEC is on track and he seems to expect better cooperation from OPEC and non-OPEC producers. He is saying basically that cuts will continue unless we see a dramatic drop in global inventories. This comes after the Russian oil minster promised better compliance by Russia after a wee reminder from the Saudi's that could raise output as we cut it. When they reported a higher production number than the secondary sources, it was a message, "Where the tongue slips, it speaks the truth."
What about some big green energy news on the day where we are all wearin' the green! The U.S. Energy Information Administration reports in its latest "Today in Energy Report" that, "The United States exported more than 1 billion gallons (68,000 barrels per day) of fuel ethanol in 2016, an increase of 26% from export levels in 2015. U.S. imports of ethanol, which are relatively much smaller, decreased by 60% to 36 million gallons in 2016. The United States remained a net exporter of fuel ethanol for the seventh consecutive year, exporting ethanol to 34 different countries, with Asian and South American markets receiving the highest volumes."
Is gas demand really that bad? Gasoline consumption so far this year is down 1.7% from 2016 according to the Energy Information Administration. But is that a short-term situation or are we seeing the type of drop you normally see in a recession? With rising consumer confidence, we expect gas demand to come soaring back like a star in the Irish sky! The longest road out is the shortest road home. Time to start looking at the long side of the RBOB!
The Wall Street Journal is also questioning oil demand predictions asking whether oil demand going forward will be higher than expected. The Journal writes, "The International Energy Agency's closely watched annual estimates of global crude demand have been revised up for the past seven years by an average of 880,000 barrels a day, according to a Wall Street Journal analysis. Investors and analysts believe that the IEA will have also underestimated demand this year, suggesting that more oil is being bought than the market currently believes.
In a must read the Journal reports, "The history of discrepancies in demand predictions underscores how oil markets often trade on incomplete data. Demand revisions have amounted, on average, to less than 1% of a giant market in which about 97 million barrels of oil are sold daily. But the difference, if repeated this year, is important. The oversupply that has pressured oil prices for almost three years was estimated at around 1% to 2% of the market in 2016."
To be sure, the IEA may get its prediction right this year, and others release demand predictions that are used by investors. Still, there is little evidence that those other forecasts are more accurate. The U.S. Energy Information Administration's forecasts have underestimated consumption over the past seven years, with the annual figures being revised up by an average of 2.3 million barrels a day, according to an analysis by The Wall Street Journal. A spokesman for the agency said the underestimation is due to lags in historical data and the lack of data from some countries, among other reasons. The IEA's data though, is the most closely watched and is often used by oil analysts in their own reports.
The agency estimates global oil demand based on data and statistical models. It then revises the statistics in monthly reports as more data become available. The Journal compared the IEA's predictions for annual demand made in January of each of the past seven years with latest available estimates for those years. Looking at predictions made in March and September over the seven years, painted a similar picture of consistent underestimates.
Revisions of oil supply estimates are typically much smaller than for demand and are often about correcting overestimates for crude production. The IEA's supply data has been revised down 60,000 barrels a day on average over the last seven years, according to the Journal analysis. That means the oversupply usually ends up being smaller than initially thought, another positive for those wanting higher oil prices."
"May your trades be as green as the shamrocks. May your heart be as light as a song. May each day bring you bright trading hours that stay with you all the year long."
The trading of the type of green that you put in your pocket can be found on the Fox Business Network where they give you the Power to Prosper! The luck of the Irish be with you! Erin go Bragh! Call for my daily trade levels at 888-264-5665.
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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.
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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
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