Oman, Dubai, Malaysian, WTI Energy Recap
Jan Oman Crude Oil prices rose to their highest level in 3 months during Wednesday’s session but struggled to hold gains above 109.00.
In addition to a breakdown in the Jan Vs. Feb Oman Crude Oil calendar spread, some cash traders noted a measure of weakness in Malaysian grades due to an ample near term supply situation.
A volatile Crude Oil market trade Wednesday saw the premium of Brent Crude Oil widen against Dubai Crude Oil, and that is seen as a factor tamping down demand for European supply in favor regional supply.
On positive note, there were further gains in Asian Gas/Oil refining margins, which increased to their highest levels since 22 July.
Jan Brent Crude Oil prices experienced another choppy energy trading session but were able to register a slightly higher high in the process. Some of the support for the Brent market came from a surge in the Jan Brent Vs. WTI Crude Oil spread, which climbed to an 18.75 premium to Jan Brent.
Jan WTI Crude Oil broke down to its lowest level in more than 5 months, pressured by a larger than expected build in US energy supply and another build in Cushing, OK supply.
A measure of support for Brent Crude Oil came from escalating tensions in Libya
WTI Crude Oil prices got some lift Friday from renewed supply side concerns to Libya and also because of news that OPEC output in November declined and in the process reached the lowest level in over 2 yrs.
Clearly some of the potentially Bullish OPEC production data was countervailed by rising US output and it is also possible that month end short covering added to the Bullish tilt in energy prices Friday.
Energy prices may also have gotten some lift from news of tightening US distillate supply levels as the Y-Y deficit and the deficit compared to the 5 yr average supply for this time of the year fostered the 1st tangible supply threat in the energy complex since early July.
Another issue playing into the rekindling of supply side concerns were reports of death and violence inside Libya as some traders fear that turmoil might ultimately result in reduced Libyan Crude Oil exports.
Nat Gas prices were boosted by a US pipeline mishap and also because of a colder than normal temperature pattern.
Some traders suggest that Nat Gas prices were seeing long term short covering buying as the long held net Short contingent might be having second thoughts about remaining short Nat Gas.
Friday’s EIA report was Bullish Vs market consensus and compared to the so called normal 5 yr average and last year. The report showed a net withdrawal that was above the market consensus (13 Vs 10), and greater than last year and only slightly below the 5 yr average net withdrawal for the same period.
The 13 BCF withdrawal, normal for this time of the year, was about 3 BCF above the market consensus calling for a withdrawal of around 10 BCF.
The draw of 13 BCF was above my model forecast (5 BCF withdrawal) this week.
The Y-Y inventory situation remains in a deficit position Vs last year and is still in a small surplus position Vs the so called normal 5 yr average.
The current Nat Gas inventory surplus came in at 17 BCF versus the normal 5 yr average or about a positive 0.4%.
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