Geopolitics roil oil markets… WSJ

by Jim Colburn • Tuesday, May 22, 2018

From Christopher Alessi and Alison Sider, WSJ, here

”The victory of Venezuela’s far-left president, Nicolás Maduro, on Sunday in a race that was called illegitimate by the opposition and foreign governments paves the way for the imposition of stricter international sanctions, including potential new U.S. measures targeting the country’s already-hindered oil industry.”

”Venezuelan crude output fell 50,000 barrels a day month-on-month in April, to stand at 1.42 million barrels a day, according to the International Energy Agency’s latest monthly oil market report.”

”Also lifting prices Monday, Secretary of State Mike Pompeo spelled out what the Trump administration is demanding in any new nuclear agreement with Iran. Mr. Pompeo said the administration won’t try to renegotiate the old deal, and outlined 12 requirements for a new one—toughening the nuclear demands and calling for a major overhaul of Iran’s military role in the region.”

Front month implied vol is only 23.6%, compared to a long term average of around 33…




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Solar panels in California…

by Jim Colburn • Monday, May 21, 2018

The Grumpy Economist has a go at the mandate, here

”So why is California doing it? Grumpy free marketers tend to bemoan nitwit liberalism, but economics teaches us to look for rational maximizing actors even in government.

So here is a suggestion. It’s actually a brilliant move. Large-scale rooftop solar is only sustained by subsidies — tax credits for installation and the requirement that homeowners can sell power to their fellow citizens (through the utility) at above-market rates. To put the matter mildly, not everybody thinks these subsidies are a good idea, and moreover you can’t count on Washington to maintain subsidies for the 30 year lifespan of solar panels. You never know, someone like, say, Donald Trump might get elected president and start tearing apart energy subsidies.

So, once solar panels are on the rooftops of thousands of registered voters, you have a natural constituency that will vote and otherwise pressure the state, the administration, congress, and agencies to continue solar subsidies.“



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Ruble vs. oil price… WSJ

by Jim Colburn • Monday, May 21, 2018

The WSJ’s The Daily Shot, here, always has interesting charts and is worth looking into… Here is the Russian ruble/US dollar rate vs. oil prices:

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The Rise of Shale… St. Louis Fed

by Jim Colburn • Monday, May 21, 2018

From the St. Louis Fed’s The Rise of Shale, here

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World economic growth is slowing… The Economist

by Jim Colburn • Sunday, May 20, 2018

But don’t worry says The Economist here

”Make no mistake: world growth has slowed, but it remains strong. Surveys of activity in China, America and Europe are, when combined, higher than they have been 83% of the time over the past decade, according to UBS, a bank. Poor weather may have depressed European growth in early 2018. America’s economy often seems to slow early in the year, only to rebound, a phenomenon dubbed “residual seasonality”. Strong retail sales and high consumer confidence suggest that if a downturn is coming, Americans have missed the memo.”

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Ethiopian Airlines CEO talks to the WSJ

by Jim Colburn • Friday, May 18, 2018

Here is CEO Tewolde Gebremariam on hedging:

Q: Have you been hedging fuel costs or currency exchange rates to insulate yourself from price volatility?

A: Our strategy is not to hedge the fuel price [or currency] and we don’t intend to do so. We leave it for the market to prevail. It works for us.

There is more here

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Distillate vs Gasoline…

by Jim Colburn • Thursday, May 17, 2018

From the EIA’s This Week in Petroleum, here are gasoline and distillate stocks compared to 5 year averages:

Distillates are winning the race to the low of 5 years…

And, from, here is the price spread action of  NYMEX June RBOB vs June diesel:

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A downside to hedging… WSJ

by Jim Colburn • Thursday, May 17, 2018

Christopher M. Matthews and Bradley Olson of the WSJ wrote an excellent piece on why frackers are struggling to make money despite higher oil prices… I focused on the hedging part, but there is more here

“Hedging played a big role in companies’ underwhelming cash generation. Seeking stability after years of wild fluctuations in crude prices, many operators entered into derivatives contracts in late 2017 that effectively ensured they could sell some of their 2018 output for $50 to $55 a barrel. Now that prices have risen to more than $70 a barrel, many are failing to capture the value of the rally. WPX Energy Inc.reported an adjusted net loss of $30 million last quarter, which it said was driven by $69 million in losses on its hedges due to higher oil prices.

Some companies are already adjusting their strategies because of higher oil prices. Parsley Energy, which is focused on the Permian Basin, the oil field in Texas and New Mexico that is currently the center of U.S. shale-drilling activity, hedged most of its 2018 production. It plans to change that going forward, and expects to generate more cash relative to spending in coming quarters.”



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This Week in Petroleum… EIA

by Jim Colburn • Thursday, May 17, 2018

From the EIA’s always excellent, This Week In Petroleum… Which is more eye-popping, crude oil exports (at 2.566 mbd for the week)…

or the decline in diesel stocks…

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Global Oil Stocks at Three-Year Low… IEA/WSJ

by Jim Colburn • Wednesday, May 16, 2018

The IEA reported today that oil stocks have dropped to a three year low…  The Wall Street Journal reproduced this chart showing inventories compared to 5 year averages:



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