Step Aside Chaos: Fundamentals Are Here To Stay...At Least For Today

By: Greg Gill / July 18, 2016

Oil prices fell approximately two percent today despite the mayhem in Turkey and Libya this weekend. As of 11:14 am, HO is down $0.0321, RBOB is down $0.0339 and WTI is trading down $1.00. Traders do not seem overly concerned about the failed attempt to overthrow the Turkish government.

 Another piece of bullish news that is being brushed aside today is that guards at Libya’s Hariga oil terminal have forced a shutdown in protest over unpaid wages. This throws cold water on expectations that Libyan output would increase after a lengthy period of low production following the Gaddafi regime’s downfall. Libya’s oil production is less than a quarter of its 2011 high of 1.6 million bpd.

One might expect events like these to prompt a stronger reaction in the markets, but they were countered by a couple of bearish news items regarding the supply glut. Reuters reports that market intelligence firm Genscape is showing a build of 26,460 barrels in Cushing last week. In addition, Morgan Stanley reported that demand for refined products is lagging behind petrochemicals, resulting in an uncertain outlook for crude. The firm stated that its “tepid 800,000 barrels per day growth estimate for global crude runs looks too high.”

 

In other news, the U.S. Energy Information Administration sees a brighter future for U.S. oil companies. As reported by the EIA today, “Although the crude oil price decline since 2014 has led to significant reductions in operating cash flow for U.S. oil companies, their immediate financial situations are improving. As oil companies' spending falls and crude oil prices increase, the need for oil companies to find external sources of funding may decline, which could reduce financial strain in the coming quarters.” The following charts show oil companies are getting closer to balancing capital investment with operating cash flow.

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Categories: Daily Market Update


Greg Gill

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Greg Gill

I’m passionate about fully understanding my customers’ fuel operations and the fuel markets in which they operate. I want them to view me as their fuel expert. To develop strong, trusting partnerships with customers, I have to provide them with meaningful and timely information to ease the challenges of making smart fuel decisions, allowing them to focus on their core business.


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