After last week’s announcement that OPEC has no plan to cut back on production and actually plans to increase output, the market surely reacted. Friday, the market closed down $0.0162 on heat and down $0.0261 on RBOB. Additionally, the trend holds and the market continues to react with crude oil hitting a seven year low this morning of $37.88. Heat is down more than 5 cents at $1.2834 and RBOB down around 4 cents at $1.2252. Concurrently, we are experiencing a very strong dollar, which further supports lower crude prices due to the inverse relationship between the U.S. dollar and crude oil. With many hot topics in the petroleum industry taking place it is hard to focus on just one:
- OPEC’s meeting ended in disagreement about output cuts and with no mention of an output ceiling.
- 2016 could see a potential increase of OPEC oil by 1.43 million barrels-per-day.
- Goldman Sachs takes a very bearish position and believes in the most skewed forecast reaching as low as $20/barrel in the coming months.
- This time last year there were more than 1,500 oil rigs here in the U.S., and according to Baker Hughes there are currently only 545.
- Abundant global supply and lower prices have caused U.S. drillers to cut capital expenditures, lay off numerous workers, and shut down rigs.
- The EPA has released the Renewable Fuel Standard (RFS) blending mandates for the next 3 years.
- Biofuels blending volumes for the next 3 years are not expected to require the introduction of E15 gasoline.
- This is a weight off the backs of retail owners, who could see up to $200,000 of investments to retrofit their USTs in order to be compatible with E15 gasoline.
- The RFS is based upon a target of 10% of motor fuels being renewable fuel. YTD 9.93% of the U.S. gasoline pool has been ethanol. The 2016 mandate effectively calls for 10.36%. To achieve this we may see an increase in the availability of E-85 gasoline at the pumps. The USDA made $100M available this year for investment in infrastructure to support this.