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USA Crude Oil Stocks Small Rise

U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve (SPR), increased by 1.2 million barrels from the week ending May 24 to the week ending May 31, according to the U.S. Energy Information Administration’s (EIA) latest weekly petroleum status report. The country’s crude oil stocks, not including the SPR, stood at 455.9 million barrels on May 31, 454.7 million barrels on May 24, and 459.2 million barrels on June 2, 2023.  Crude oil in the SPR stood at 370.2 million barrels on May 31, 369.3 million barrels on May 24, and 353.6 million barrels on June 2, 2023, the report revealed. Total petroleum stocks in the U.S. – including crude oil, total motor gasoline, fuel ethanol, kerosene type jet fuel, distillate fuel oil, residual fuel oil, propane/propylene, and other oils – stood at 1.646 billion barrels on May 31, the report highlighted. This figure was up 14.4 million barrels week on week and up 37.5 million barrels year on year, the report showed.

“At 455.9 million barrels, U.S. crude oil inventories are about four percent below the five year average for this time of year,” the EIA noted in the report.

“Total motor gasoline inventories increased by 2.1 million barrels from last week and are about one percent below the five year average for this time of year. Finished gasoline inventories decreased, while blending components inventories increased last week,” it added. “Distillate fuel inventories increased by 3.2 million barrels last week and are about seven percent below the five year average for this time of year. Propane/propylene inventories increased by 2.5 million barrels from last week and are 14 percent above the five year average for this time of year,” the EIA continued. The EIA revealed in the report that U.S. crude oil refinery inputs averaged 17.1 million barrels per day during the week ending May 31, which it pointed out was 61,000 barrels per day more than the previous week’s average. “Refineries operated at 95.4 percent of their operable capacity last week,” the EIA stated in the report. “Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day,” it added. U.S. crude oil imports averaged 7.1 million barrels per day last week, according to the EIA’s report, which revealed that this was an increase of 289,000 barrels per day from the previous week. “Over the past four weeks, crude oil imports averaged about 6.8 million barrels per day, 3.5 percent more than the same four-week period last year,” the EIA said. “Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 699,000 barrels per day, and distillate fuel imports averaged 142,000 barrels per day,” it added in the report. Total products supplied over the last four-week period averaged 20.0 million barrels a day, up by 1.3 percent from the same period last year, the EIA noted in the report.

“Over the past four weeks, motor gasoline product supplied averaged 9.1 million barrels a day, down by 1.0 percent from the same period last year,” it added. “Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, down by 3.4 percent from the same period last year. Jet fuel product supplied was up 13 percent compared with the same four-week period last year,” it continued. The price for West Texas Intermediate (WTI) crude oil was $78.96 per barrel on May 30, 2024, $0.48 more than a week ago, and $7.20 more than a year ago, the report stated. At the time of writing, the WTI price is trading under $75 per barrel. The report also stated that the national average retail price for regular gasoline declined to $3.516 per gallon on June 3, 2024, “$0.061 below last week’s price, and $0.025 less than the year-ago price”. The national average regular gasoline price as of June 6 is $3.487 per gallon, according to the AAA Gas Prices website. The week ago average was $3.569 per gallon and the year ago average was $3.545 per gallon, the site showed.

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Crude oil prices rise 2% after ECB rate cut

The price of crude oil for front-month deliveries increased on Thursday in the aftermath of the European Central Bank’s first rate cut in five years which appeared to alleviate some of the concerns about the bloc’s economic stability, seemingly pushing the commodity prices to rise. The labor market data coming from the United States showed an underwhelming figure for private-sector employment in the country, bolstering hopes that the Federal Reserve might follow its European counterparts during their two-day weekend next week. The upward movement of crude oil prices was further fueled by Russia’s reassurance that OPEC+ producers are committed to stabilizing the market.

West Texas Intermediate (WTI) for July contracts jumped 2.16% to sell at $75.65 per barrel at 11:59 am ET. Brent for August settlements climbed 2.03%, trading at $79.94 a barrel.

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Novak: There are many wrong interpretations of OPEC+ move……Russia’s Oil Revenue Surged 50% in May

Russian Deputy Prime Minister Alexander Novak told reporters on Thursday that after the most recent meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), oil prices declined due to “wrong interpretations.”

“There are many speculative factors,” he explained. Novak further added that he believes oil prices will be between $80 and $85 per barrel until the end of 2024.

Commenting on the OPEC+’s decision to gradually restore oil production starting in October, Novak stated that this will “allow us to balance supply and demand.”

According to Bloomberg calculations, the country’s oil-related taxes in May clocked in at 632.5 billion rubles ($7.1 billion) with total oil and gas proceeds increasing 39% to 793.7 billion rubles. Russia got $74.98 per barrel for its Urals last month, up from $58.63 a year ago as the blend’s discount to the global Brent benchmark narrowed considerably despite a $60 per barrel price cap imposed by the G-7. Russia’s oil and gas budget proceeds, however, actually declined by more than 35% in May, with Bloomberg pointing out that the country’s profit-based levy is paid four times a year, in March, April, July and October. Russia’s oil revenues last month could have been even higher if the government had not paid out almost 202 billion rubles to companies to partially compensate refiners for the difference in car fuel prices in Russia and abroad.

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Analysts Warn Against Rationalizing Reaction to OPEC+ Meeting

It is perhaps unwise to attempt to rationalize the market reaction to the various June 2 OPEC+ meetings, analysts at Standard Chartered Bank, including Commodities Research Head Paul Horsnell, said in a report  by Horsnell late Tuesday. “It may be best to categorize the price undershooting as the consequence of markets that are dominated by a combination of extreme macroeconomic pessimism and speculative shorts, topped off with a layer of often over-enthusiastic algorithmic trading that crowds out more fundamentally based traders,” the analysts stated in the report. “To the extent that some media and analysts have (ex-post) justified the fall in prices, the dominant rationale given is that the market is concerned about a significant volume of OPEC+ oil returning in 2024,” they continued. The analysts noted in the report, however, that they do not think this explanation holds much water. “The increase in output in 2024 is relatively small; targets for the eight countries involved are unchanged until October when, subject to market conditions, the plan is to commence a series of gradual month on month increases that finish in September 2025,” they said in the report. “Assuming market conditions are such that the increases can commence, targets increase month on month by 180,000 barrels per day in October, 183,000 barrels per day in November, and 180,000 barrels per day in December,” they continued. “The increase in Q4 relative to Q2 is therefore about 360,000 barrels per day, dependent on favorable market conditions; it may be significantly less depending on which payback schedules for past overproduction are in force and how assiduously they are being met,” they said. “A small increase in Q4 signaled well in advance and very carefully flagged as being non-automatic does not, in our view, represent just cause for the scale of recent price declines,” they went on to state. Assuming market conditions allow further increases, the month on month increases continue in 2025 at a faster pace of about 210,000 barrels per day, the Standard Chartered analysts noted in the report. “If the market will take the oil at an acceptable price, the plan is to return the last of the 2.2 million barrel per day voluntary cuts (those announced in November 2023) to the market in September 2025; this would lead to a 1.73 million barrel per day increase in targets on average in 2024 relative to 2023,” they said. “Should the market be unable to take that oil, then the return of the last barrels cut in November 2023 will be delayed. In all, the forward guidance seems complete and reasonable to us, and, most importantly, conditional on market conditions,” they added. The analysts also highlighted in the report that “most commentary seems to have concentrated solely on the plan to phase out the November 2023 voluntary cuts” but added that there were other “significant components to what was agreed on June 2”. “One – the 1.65 million barrels per day of voluntary cuts agreed in April 2023 have been extended to the end of 2025. Two – the required production level for all OPEC+ countries across 2025 was reaffirmed. Three – agreement was reached in the long-running discussion with the UAE, resulting in a 300,000 barrel per day increase in the UAE’s required production level, phased in over nine months starting in January 2025,” the analysts said in the report. “Four – the discussion of targets in light of third-party consultant assessments of capacity was postponed until late-2025 when it may be a basis for discussion of 2026 required production. Five – in signal of continued proactivity and response to market conditions, the Joint Ministerial Monitoring Committee (JMMC) was given authority to hold additional meetings should it choose to, as well as to request an OPEC+ ministerial meeting at any time,” they continued. “Six – Iraq, Russia, and Kazakhstan agreed to produce a compensation schedule for H1 overproduction by the end of June, the transparency of which should make further overproduction, while not impossible, increasingly awkward diplomatically,” they went on to state. In the report, the Standard Chartered analysts said, overall, they think the OPEC+ decisions will ultimately prove positive for oil prices. “Most importantly, the likelihood of the most bearish tail-risk events materializing has been reduced,” they added. “In recent months a significant volume of media commentary has described both the discussion with the UAE about the required production levels and broader assessment of capacity and associated discussions as immediate and existential crises for OPEC+,” they continued, noting that “neither of those issues are live ones anymore”. In the report, Standard Chartered forecasts that the nearby future ICE Brent price will average $98 per barrel in the third quarter and $106 per barrel in the fourth quarter. The nearby future NYMEX basis WTI price is expected to average $95 per barrel in the third quarter and $103 per barrel in the fourth quarter, the report showed.

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Israel says it stopped infiltration attempt from Gaza

The Israel Defense Forces (IDF) said on Thursday that they killed three “terrorists” who tried to cross into Israel from the Rafah area in southern Gaza. The IDF said the suspected terrorists opened fire on their troops. The Israeli military responded with an airstrike and tank shelling. An unnamed military official told the Times of Israel a fourth person might have escaped back into Gaza.

 

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Hamas: Israeli proposal differs from Biden’s

Hamas, in a statement on Telegram on Thursday, expressed that the peace proposal it received to resolve the conflict in Gaza does not align with the proposal unveiled by United States President Joe Biden just last week. Last Friday, Biden presented an Israeli three-phase proposal aimed at ending the conflict in Gaza. According to this plan, the release of hostages would be coupled with a “complete ceasefire,” along with Israel’s withdrawal from “all populated areas of Gaza” during the first phase. Earlier, the group made it clear that they will only agree to a ceasefire if it includes guarantees of long-term resolution to the conflict. Meanwhile, Israeli Prime Minister Benjamin Netanyahu has repeatedly emphasized that the conditions for ending the country’s war in Gaza remain unchanged. These conditions include the dismantling of Hamas and the return of all hostages.

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Oversold Oil Rebounds

Oil advanced from a four-month low as traders tried to establish a price floor after several days of declines. The market had entered oversold territory as a result of OPEC+’s plan to boost supply in October. Prices edged lower earlier in the session after the US Energy Information Administration reported that US crude stockpiles expanded by 1.23 million barrels. “It remains to be seen whether this recovery will last, given ongoing concerns over demand and the OPEC+ decision to eventually phase out the voluntary output cuts,” Fawad Razaqzada, a market analyst at City Index and Forex.com, wrote in a note Wednesday. “However, these concerns might be priced in by now, which should mean that prices could find some much-needed support.” Oil has tumbled almost 4% this week following a decision by OPEC+ on Sunday to start unwinding supply cuts in the fourth quarter, despite concerns about demand and higher output from outside of the group. Traders who rely on trend-following algorithms compounded the selloff.  While the Organization of the Petroleum Exporting Countries and its allies may have spooked the market with their decision, RBC Capital Markets LLC predicts the Saudi-led group will “hit the kill switch” on returning supply if weakness persists. Most analysts had expected OPEC+ to extend the curbs through year-end. The group is already hinting at concern about consumption. Saudi Aramco, the largest producer in OPEC+, lowered prices for oil delivered to Asia amid doubt about the strength of demand.

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Markets Have Overreacted to OPEC’s Plan To Phase Out Production Cuts

  • Standard Chartered: the price undershooting was the consequence of markets being dominated by a combination of extreme macroeconomic pessimism; speculative shorts and over-enthusiastic algorithmic trading.
  • Standard Chartered: OPEC+ decisions will ultimately prove positive for oil prices.
  • Brent crude declined almost $8 from last week’s high.

OPEC+ agreed on Sunday to extend most of its oil output cuts well into 2025 amid tepid demand growth, rising U.S. production and high interest rates.

OPEC+ is currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7% of global demand, including 3.66 million bpd of cuts previously set to expire at the end of 2024, and voluntary cuts by eight members of 2.2 million bpd, expiring at the end of June 2024.

The announcement led to an oil price selloff, with front-month Brent falling to a four-month low below $77 per barrel (bbl), good for a hefty $8/bbl decline from last week’s high and over $15/bbl lower from April’s YTD high. Commodity analysts at Standard Chartered have pointed out that the price undershooting was the consequence of markets being dominated by a combination of extreme macroeconomic pessimism; speculative shorts and over-enthusiastic algorithmic trading that crowded out more fundamentally-based traders. According to data from Bridgeton Research Group via Bloomberg, oil futures markets have now flipped to a net short position in Brent, compared with a net long position at the end of last week. StanChart says the oil price rout has been triggered by market expectations for a significant volume of OPEC+ oil returning to the global markets 2024; however, the analysts have argued that this explanation does not hold much water. According to StanChart, assuming market conditions are such that the increases can commence, the increase in Q4 relative to Q2 is likely to clock in at a relatively modest 360 kb/d, with the analysts saying that OPEC+ has room to increase production by 1 million b/d without upsetting market balance. Further, StanChart points out that the phase-out will be conditional depending on the state of global markets at the time with most general asset markets not expecting FOMC to follow all its current forward guidance to the letter regardless of future data and events. However, the reaction by oil markets seems to suggest that the forward guidance given by the eight OPEC+ countries concerned constitutes a determination to produce, regardless of whatever happens. StanChart has pointed out a number of other bullish factors that the markets have overlooked:

  •  The 1.65mb/d of voluntary cuts agreed in April 2023 have been extended to the end of 2025.
  • The required production level for all OPEC+ countries across 2025 was reaffirmed.
  • The agreement was finally reached in the long-running discussion with the UAE, resulting in a 300kb/d increase in the UAE’s required production level, spread out over nine months starting in January 2025.
  • Russia, Iraq and Kazakhstan have agreed to produce a compensation schedule for H1 overproduction by the end of June
  • The discussion of targets in light of third-party consultant assessments of capacity was postponed until late-2025 when it may be a basis for discussion of 2026 required production.
  • The Joint Ministerial Monitoring Committee (JMMC) was given authority to request an OPEC+ ministerial meeting at any time or hold additional meetings should it choose to.

Overall, the analysts say that OPEC+ decisions will ultimately prove positive for oil prices. More importantly, the OPEC+ report has increased transparency with the likelihood of bearish tail-risk events materializing minimized. NN: I urge you to get back on your bike.

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Israel ‘ready for extremely powerful action’ in north

Israeli Prime Minister Benjamin Netanyahu said on Wednesday that the Israeli military is prepared to carry out an “extremely powerful action in the north” of the country as tensions with Israel’s northern neighbor Lebanon escalated. “Whoever thinks that he can harm us and we will sit with our hands clasped has made a major mistake,” he said while visiting the border. The Lebanese militant group Hezbollah intensified attacks on northern Israel and Israeli-occupied Golan Heights, claiming on Monday that it killed several Israeli soldiers. Hezbollah also said yesterday that it does not intend to “expand the war” with Israel but that is ready to fight back and cause “destruction.”

Iran vows to respond to alleged Israeli attack in Syria

Islamic Revolutionary Guards Corps (IRGC) Commander-in-Chief General Hossein Salami (pictured) said on Wednesday that Iran will respond to the latest attack in Aleppo, Syria, allegedly carried out by Israeli forces which killed 16 individuals linked to the IRGC, including Iranian military adviser Saeed Aviar.

“The Zionist criminals who kill children should know that they will pay a price for the bloodshed, they should wait for the response” Salami warned.

In April, Iran launched a missile and drone attack on Israel in response to Israel’s previous strike on Tehran’s embassy in Damascus, Syria. NN: When not if all out war breaks out with Hezbollah you could make more money in oil then ole Jed from the  Beverly Hillbillies.