U.S. swimming in oil

Gulf Coast Record!

Gulf Coast supplies soar hitting an all-time high but not enough to get the seasonally slap happy oil market to slow down. One reason may be the Houston Shipping Channel will cut into supply in coming weeks as well as a stubbornly weak dollar. While the stock market fell hard after a big bearish bet the demand side of oil may get shaky yet in spring demand hopes are eternal.

The Energy Information Administration reported that U.S. crude(NYMEX:CLK14) supply exploded by 6.62 million barrels. That is the highest amount on record. Now one reason for the build is that the pipelines coming from Cushing Oklahoma are humming and the fact that reduced runs at some refineries some will pay up for available light sweet supply. Cushing stockpiles fell 1.33 million barrels to 28.5 million. Oil is building as Gulf Coast refiners are in maintenance. U.S. crude oil refinery inputs averaged 15.1 million barrels per day during the week, 141,000 barrels per day more than the previous week. Products seemed tame after the report. The EIA reported motor gasoline inventories decreased by 5.1 million barrels last week though that may be a sign refiners are close to getting rid of the winter blends of gasoline. Distillate fuel inventories increased by 1.6 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 0.6 million barrels last week and is near the lower limit of the average range.

The EIA also reported that the United States accounts for more than one out of every 10 barrels of crude oil produced around the globe each day, due in part to rising production of tight oil found in shale rock formations. According to the U.S. Energy Information Administration’s new “Today in Energy” brief that “U.S. tight oil production averaged 3.22 million barrels per day (MMbbl/d) in the fourth quarter of 2013, according to U.S. Energy Information Administration estimates. This level was enough to push overall crude oil production in the United States to an average of 7.84 MMbbl/d, more than 10% of total world production, up from 9% in the fourth quarter of 2012. The United States and Canada are the only major producers of tight oil in the world. A Must read on the EIA website!

Natural Gas (NYMEX:NGK14) reports today that we may be getting ready for another bullish run this summer. The race to refill storage is on and high prices will be needed to get prepared for next summer. The EIA reported that The U.S. Energy Information Administration’s new “Today in Energy” brief looks at drop in coal supplies held at U.S. power plants. “The average supply of coal held at electric power generators in December 2013 dropped below 60 days of burn (a function of both inventory levels and anticipated consumption) for the first time since summer 2011. Inventory increased slightly in January but remains below a two-month supply. Coal consumption to generate electricity grew during summer and fall 2013 as the price of natural gas, a competing power generation fuel, increased from low levels in 2012. Consumption of coal increased further this winter due to bitter cold weather that drove up power demand.

The Energy Information Administration also reported that cold weather also contributed to continuing large withdrawals of natural gas from storage and a surge in natural gas spot prices, which hit record levels in several markets during periods of extreme cold. Natural gas working inventories on February 28 totaled 1.20 trillion cubic feet (Tcf), 0.91 Tcf (43%) below the level at the same time a year ago and 0.76 Tcf (39%) below the five-year average (2009-13). Henry Hub natural gas spot prices were volatile over the past two months, increasing from $3.95 per million British thermal units (MMBtu) on January 10 to a high of $8.15/MMBtu on February 10, before falling back to $4.61/MMBtu on February 27, and then bouncing back up to $7.98/MMBtu on March 4. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.44/MMBtu in 2014, an increase of $0.28/MMBtu from the 2014 projection in last month's STEO. Residential natural gas prices are expected to average $10.05 per thousand cubic feet (Mcf) this winter, an increase of $0.30/Mcf (3%) from last winter.

Looking to get bullish for summer!  Time for calls! EIA report should show a 55 bcf withdrawal!

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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