Energies whipsawed on Iran deal talks

Brent Gone Wild

A wild expiration day for the December WTI contract and even a wilder day for the Brent vs. WTI oil spread. Brent initially was selling off over optimism from the talks with Iran surrounding its nuclear program. Despite the fact that the Saudis and the Israelis are against any kind of a deal, the oil trade is increasing the odds that some sanctions might be lifted. Yet later in the day Brent spiked after a Reuters report of an explosion at Total's Antwerp refinery in Belgium, Europe's second-largest, killed two people, forced the evacuation of the site and caused the shutdown of a gasoline producing unit. The explosion shut down the port causing concern that gasoline supplies in Europe would tighten. It also reduces the chances for U.S. imports and improves the odds for U.S. product exports.

Yet confirmation of a Libyan tanker loading seemed to reverse the sentiment once again. Bloomberg reported that “A Libyan oil terminal loaded probably its first crude cargo onto a tanker in at least a month amid curbs on energy exports from other parts of the country.  The Matilda, a ship able to haul about 600,000 barrels of crude, is currently loading at the Brega facility in the center- east and will depart today, Ibrahim Al Awami, the director of measurement for the oil ministry, said by phone today. Libya’s National Oil Corp. said yesterday that a tanker would load at Mellitah, a facility in the west.”

The nation’s oil output has been curbed since July by civil unrest and protests. Brega doesn’t appear to have shipped crude for at least a month according to vessel-tracking, Richard Mallinson, an analyst at Energy Aspects Ltd. in London, said by phone today. Shipments from Ras Lanuf, Es Sider and Zueitina in the east remain curbed, he said. Eight Aframaxes went to Zawiya and Mellitah in Libya’s west in the month to Nov. 12 and then to import countries, ship signals compiled by Bloomberg show.  “It’s a small positive sign but what’s proved very clear is that improvements can easily reverse,” Mallinson said. “Any loading being managed from onshore terminals is an improvement.”

At the end of the day the WTI reversed and closed higher and the Brent tanked. Still with mounting supply we still look for oil to move lower, yet we may bounce after inventory data or perhaps Fed speak.

The American Petroleum Institute gave us an idea by reporting that U.S. crude oil inventories increased by 512,000 barrels. In Cushing the supply was a more impressive 1.75 million barrels. Gasoline inventories increased by 84,000 barrels and distillates fell by a big 4.91 million barrels. Watch distillates today! Watch the Fed today and signs of the dreaded taper. Fed officials continue to play mind games with the market and perhaps the Fed minutes will give us some insight behind the madness.

Natural gas was weak on weather forecasts that are not as cold as some were predicting! Maddening! Big picture, though, the long-term demand picture improves. Reuters reports that Freeport LNG received government approval on Friday to export more liquefied natural gas from its proposed export plant in Texas to countries with which the United States does not have a free trade agreement. The approval is the fifth of its kind by the U.S. Department of Energy since 2011 and comes as U.S. natural gas output continues to hit record highs and prices remain below those in Asia and Europe.

Subject to final regulatory approval from the Federal Energy Regulatory Commission, the facility is authorized to export an additional 0.4 billion cubic feet per day (bcfd) for a total rate of up to 1.8 bcfd for 20 years. It follows similar approvals for Dominion Resource Inc's Cove Point Plant in Maryland in September, the Lake Charles terminal in Louisiana in August and Freeport's original approval in May. Cheniere Energy's LNG.A Sabine Pass project in Louisiana was the first to receive non-FTA approval in 2011 and is the only plant under construction with FERC approval.

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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