Oil sees inventories rising while distillate stocks fall

Diesel Dump

That is right! We have the possibility for more demand and lower prices as the government securities markets are signaling an earlier than expected rise in interest rates. Dow Jones reported that the FOMC says fed-funds rate will stay "exceptionally" low at least through late 2014, but committee's acknowledgement of moderate economic expansion prompts futures traders to expect a rate hike sooner than that. Market now fully priced for FOMC to lift funds rate to 0.5% at its meeting in late January 2014, up from 72% chance Tuesday, and 60% chance Monday. Shorter-dated contract prices in 76% chance for 0.5% rate after early November 2013 meeting, up from 44% chance Tuesday, and 34% chance Monday. FOMC has held funds rate in record low range of 0% to 0.25% since December 2008. Higher rates mean a stronger dollar which will moderate demand growth and because of that we could see more demand and a lower price.

Loyal readers of the Energy Report all know that US oil production is rising but do you happen to know that just 5 states produced a whopping 56% of all of US oil production? Can you guess what those 5 states are? Well we'll add another to just the latest prodigious reports from Energy Information Administration some of these states may surprise you and some may not.

One is Texas! That’s right! Good times for the Lone Star state! And the state that gave us Texaco not only sitting at number one but number 1 with a bullet! The EIA says that the Eagle Ford shale formation in south Texas contributed to gains in the state's oil production, which averaged 1,425 thousand barrels per day (bbl/d), the highest level since 1997. It is very likely that Texas production will continue to rise.

Number 2 is Alaska. Alaska's production fell for the ninth year in a row, averaging 563,000 barrel per day. So remind me again, why are we not drilling in ANWAR?! Alaska's oil revenue and therefore their checks, are starting to shrink. 

And number 3 is California but beware, it seems that they could soon be falling down the chart. They are facing a new challenge from the up and comer, North Dakota. Everybody knows oil production in North Dakota is up for the year, but North Dakota’s December monthly oil output passed California to become the No.3 oil producing state! Take heart though. California still leads the way in fruit and nut production!

And the feel good comeback story of the year is Oklahoma! OK production averaged 204 thousand barrel per day during 2011, topping 200 thousand barrels for the first time since 1998. Yeeha!

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading 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. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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