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Producers Are Hedging Production Again
As we entered 2017 with prices in the $50-$55 range, producers locked in their profits by hedging their future production, out through 2018. When prices plummeted to the $40-$45 range, this hedging stopped. With prices once again dancing above $50, producers are trying to lock in more profits through 2018. Click Here to read more from Bloomberg.
Think You Know Where Markets Are Going?
Oil trader Andy Hall, known as an all-knowing trading genius who made $100 million in one year trading oil contracts, has shut down his hedge fund after losing almost 30% so far this year. This is a sobering reminder that even the smartest in the industry do not always know where the market is going to go. Hall was a firm believer that OPEC’s actions would send market prices higher, but experienced substantial losses when prices stagnated in the mid-$40s. Click here to read more from Bloomberg.
Premium and Regular Gasoline Spreads Are at Record Levels
The price difference between premium gasoline and regular gasoline was around $.53 in July, according to the EIA. This compares to a historical average spread of around $.20. What’s driving the spread? In short, it’s driven by light crudes from the US shale revolution, as well as increased demand as more car engines require premium gasoline to meet CAFE standards. Click Here for a very informative, in-depth analysis from RBN Energy on the differences between premium and regular, as well as the factors driving spreads higher.
China Surpasses the U.S. as an Oil Importer
China surpassed the U.S. as an oil importer in the first half of 2017. Does this signal the U.S. losing ground to the Asian giant? Not exactly. China has been stocking their Strategic Petroleum Reserve, while the U.S. is draining their reserves. U.S. production is surging higher as well, while China’s crude output has been weak. China also exports refined products regionally, meaning they are not consuming all the oil they import. Understanding the reasons behind the trend will help make it easier to forecast future output; if China’s production resurfaces or they reduce their SPR stockpiling, imports could fall. Click Here to read more from Reuters.