Libyan oil is just what the doctor ordered as the global energy markets looked for calm against a backdrop of rising geopolitical risk.
Not only are there reports that Libyans largest oil field Sharara a 340,000 barrel a day monster is ramping up production much faster than expected according to Dow Jones the field may reach two thirds of its output capacity by the end of the day. Add to that reports that Libya has stored up to 10 million barrels of oil (NYMEX:CLN14) they could not export and that oil may soon find its way into global markets. The promise of this oil has continued to break the back of oil bulls not to mention products. Forget Iraq's woes for the moment, or Russia /Ukraine or even Israel and Hamas prices are now below pre-Iraq /ISIS war levels as we could add the ample supply at a time when demand might not be that strong after all.
The peak of the summer driving season is behind us and we may get a sense of refiner's expectations for demand in this week's Energy Information Administration report. The API showed that crude supply fell by 1.7 million barrels; API showed that distillates fell by 522,000 barrel and gas supply increased by 112,000 suggesting that gasoline demand was weak.
The Energy Information Administration did give us some good news by saying that U.S. oil production will rise next year to the highest level since 1972. They also said that rising U.S. crude oil production is on track to cut the amount of petroleum liquid fuel imports needed to meet domestic fuel consumption in 2015 to the lowest level in 45 years." "Texas and North Dakota now account for almost half of total U.S. oil production, as monthly oil output in Texas recently topped 3 million barrels per day for the first time since 1977 and North Dakota's oil production hit a record 1 million barrels per day."
But warned that "The conflict in Iraq is expected to limit previously forecasted growth in oil exports from that country and reduce OPEC's surplus crude oil production capacity, leading to higher average Brent crude oil prices for this year and in 2015 than EIA previously expected."
As for Natural Gas (NYMEX:NGN14), The Energy Information Administration reported that "U.S. natural gas inventories increased at a record pace during May and June, with injections of natural gas into storage reaching 100 billion cubic feet or more for eight weeks in a row. More than 1 trillion cubic feet of natural gas has been added to storage since mid-April, marking the quickest 1-trillion-cubic-feet increase in inventories since 2003." The main reason why we saw such a sharp drop in price after Hurricane Arthur cooled off heat related demand.
Gold (COMEX:GCN14) and silver (COMEX:SIN14) keep edging higher but yesterday had a hard time keeping those gains. Gold bears are getting nervous as Hedge Funds are buying back in. Bloomberg news reported that money managers increased net-long positions for a fourth straight week through July 1 and holdings in exchange-traded products are climbing at the fastest pace since 2012. Gold may get a cue from the Fed minutes and if they believe the Fed will increase the pace of tapering we could see a stumble. But more than likely the Fed will be more concerned about the pace of growth and quality of the jobs market and if anything might play into the gold bulls hands.
Unlucky 13, Palladium is up 13 sessions in a row to a 13 year high. Strike talks continue in South Africa and Russian sanction fears are driving a market that is already facing a supply deficit. Dow Jones reports that a rally in platinum prices stalled Wednesday as the latest threat of strike action in South Africa receded. The mining industry in South Africa, the world's largest supplier of platinum, is trying to recover from a five-month-long strike that ended last month. That strike constricted global supply over the past five months, sending prices higher. A wildcat strike at producer Impala Platinum Holdings Ltd. on Monday sparked volatility.
Platinum went from strong gains to scaled-back losses and profit-taking, while palladium prices climbed to their highest level for more than 13 years. Prices news lost steam Wednesday as workers were expected to return to work. Spot platinum was up just 0.3% on the day at $1,495.95 a troy ounce, while palladium fell 0.2% to $867.50 an ounce.
Old crop soybeans are getting crushed as buyer are less frantic about near term supply when they expect a record bean harvest.