Crude and refined products are all undergoing a small rally this morning. WTI crude for April delivery has rose $0.89 to $33.67, heat is up $.0290, and RBOB $.0159. Continued talks of Saudi Arabia potentially working with other producers to freeze production and bring stability to the market may be the cause of this morning’s rally, but Bloomberg, Morgan Stanley, and Wall Street will all tell you not to get too excited. When you have countries such as Iran, feverishly pumping crude into the market now that sanctions have been lifted, it’s hard to imagine them agreeing to any sort of production freeze or output cut. More of the same still trends in petroleum news:
- Last week’s Baker Hughes rig count showed a decline of another 13 rigs to 400. Lowest since December 2009.
- Global oil production outpaced demand in January and may exceed consumption by an average of 1.75 million bpd for the first half of 2016, according to the I.E.A.
- We have cut production here in the U.S. (-2%), however that is not nearly enough to impact the 2 million bpd worldwide excess. Additionally, taking a holistic view, if a production freeze were to occur, and crude prices increased globally, U.S. shale production would then increase.
- According to a Reuters poll, oil prices in the mid-40s would allow some shale producers to expand output.
- BP has confirmed turnaround time for two large refineries in Indiana and Ohio. Chicago cash market may strengthen on both distillate and gasoline in response.
- Iran, whose crude export sanctions have been lifted as mentioned before, had 1.75 million bpd exports in the month of February, which were up 400,000 from last year.