Oil looks for support in refining runs, pipeline

Oil Break

Even the bulls are throwing in the towel, yet there may be signs that the crude collapse (NYMEX:CLZ13) may slowdown just a bit. A jump in refining runs on the American Petroleum Institute report as well as a report from that companies are getting ready to start the pipeline from Cushing, Okla. to those big refineries in Port Arthur, Texas could slow the onslaught! Still as we have said before oil is headed longer-term toward $88, a target we have had for weeks and now is looking more like we are going to be right on target. Forget about $100 a barrel oil, start worrying about breaking $90.

The API report though was not as bearish as the bears might have hoped.  While crude supply did rise just shy of 1 million barrels in Cushing, Okla., overall stocks rose just over 871,000 barrels. That comes as refinery runs shot up by 1.2% yet gasoline fell by a huge 4.3 million barrels. Distillates also fell and signs that refiners are coming out of maintenance could lend some support especially if the EIA confirms that data. We are oversold so we could bounce but we would still be looking for a chance to position short. Swing traders and day traders should be in paradise as the volatility against the backdrop of large supply should lead to some great trades.

On top of that, a strong non-manufacturing number increased the odds of a Fed taper, which added to the market weakness. But down the road a report from Bloomberg that said that TransCanada would start oil shipments on TransCanada’s Gulf Coast pipeline to the Texas Gulf Coast from Cushing, Okla. within “next few weeks,” VP Oil Pipelines Alex Pourbaix says on earnings call. That of course will start drawing down more Cushing supply and should start easing the growing North America.

Remember that big natural gas break? Nat gas took a big hit on a big order! MarketWatch reported a “monster” 20,000 contract sell order was placed on natural-gas futures Tuesday, according to Nanex Research. The sell order appeared, then slowly faded away over a period of four minutes, Nanex said, noting that it’s rare to see orders over 100 contracts. The trade came a day after natural-gas futures prices closed at their lowest level since Aug. 20.

The order may be in part because of fund liquidation of CTAs at AlphaMetrix liquidating. Reuters reported that fund manager AlphaMetrix, which earlier disclosed financial troubles, said on Wednesday it will end trading in its commodity pool on Thursday because of a flood of redemption requests.

Reuters also reported that The U.S. Commodity Futures Trading Commission sued AlphaMetrix LLC on Monday, accusing the liquidating Chicago-based firm of misappropriating at least $2.8 million and issuing false or misleading account statements to conceal fraud.  In a complaint filed in the U.S. District Court in Chicago, the CFTC said AlphaMetrix had agreed between Jan. 1 and Oct. 31 to rebate fees to participants in its commodity pools by reinvesting those sums in the pools, only to transfer the money to bank accounts of its parent AlphaMetrix Group LLC ("AMG").  "As a result of this unlawful conduct, AMG received AlphaMetrix pool participant funds to which it had no legitimate interest or entitlement," the CFTC said.”

Could a showdown with Russia be avoided?  Dow Jones reported that Ukraine signed a deal with Chevron to develop shale gas as it tries to ease its dependence on Russian supplies that it is struggling to pay for. Chevron will invest $350 million under the production-sharing agreement.

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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