Came across this item talking about WTI moving higher based on 2014 Oil Demand expectations from the IEA….but also VERY strong inventory draws domestically…From the item:
“The run of inventory increases had the market rattled, but it now appears to be reversing and the focus is coming back to global growth numbers,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “The outlook is for a test of higher levels for crude.”
It’s amazing the difference a few weeks can make. As I was analyzing next year’s outlook in recent weeks, the crude bears were central to my thoughts. However, recent OPEC comments about their bullish outlook on global economic recovery in addition to back to back monster crude draws in the USA (-7.5MM this week!!), plus this IEA report have me rethinking things.
For instance, we were marketing September 2014 through December 2014 pre-buy contracts around $1.09/Conway very early last week. I felt at the time that were I a marketer, I’d begin stepping in around $1.00/Conway. Now, I’m not so sure $1.10 isn’t a good place to begin the cost averaging process…if we get back to those levels.
Conway’s inventory problems are…well…a problem. Not just for this winter but possibly for next year, too. You take Cochin supply out of the mix, you suck 50Kbbls/day out of Conway on the Southern Hills Pipeline starting in January and if we have strong demand all winter, it will be tough to build levels back to acceptable levels next fall, or acceptable enough for prices to get back down below a dollar.
A lot can happen between now and then, but I’d really start thinking about next year and a number…right now is not the time as our Sept14-Dec14 number is $1.2925…yes, we’ve seen a twenty-cent run-up in the last two weeks on that timeframe. That’s because we’ve seen a similar run-up in current pricing.
This new crude picture has affected my view of next year and what I think is going to be a good place to start buying.
INVENTORIES: Those will come out later this morning. I have been surprised at how mild the Midwest draws have been the past two weeks…I am expecting something more bullish later today.
WEATHER: The 11-15 timeframe of the forecast looks like another blast of much below normal cold. This is going to be one wild year.