Trade Prospects Improve, California Power Outage

Oil prices are trading flat this morning after impressive gains to end last week. Oil prices saw the largest leap since the Saudi oil attack in September, demonstrating the power of positive trade news and low inventory concerns. Crude oil is currently trading at $56.64, unchanged from Friday’s close.

Fuel prices are also mixed/flat. Diesel prices are currently trading at $1.9805, in line with Friday’s closing price. Gasoline prices are $1.6755, up a meager 0.3 cents.

In trade news, markets continue to expect some progress on US-China trade, and “Phase 1” is reportedly close to being complete. Although the first round of negotiations will be small relative to the overall trade barriers now in place, it should be a symbolically important win. Most of the conversation is centered around agriculture for now, with the US expected to re-open trade for cooked Chinese poultry while China lifts its ban on US poultry. Other agricultural products such as soybeans (which is also used for biofuels) are also on the table.

The Baker Hughes Rig Count report on Friday showed US rigs falling by 17 rigs to the lowest level since April 2017. US producers are trying to limit their capital expenditures to improve their financial returns for investors, and the cash crunch has sent rig counts spiraling. Crude production, however, continues setting new records each month. When will declining rigs catch up with production and cause reduced output? The answer is yet to be seen, and new technologies may enable production to continue even as rig count growth slows.

California Power Outages

Out in California, supply markets are celebrating a near miss for oil pipeline infrastructure. Power companies have been cutting off power in certain areas to prevent forest fires, leaving thousands without power. This weekend, one major pipeline company in northern California warned that the power outage could impact shipments to San Jose, Stockton, Fresno, and Concord. Fortunately, the company was able to maintain power, but the threat highlights the on-going supply concerns in California as power outages and refinery issues push prices higher.

NYMEX Pricing October 28, 2019

Market Condition Report - Disclaimer
The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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