"We have bullish news. We have bearish news. It’s a moody market,” Phil Flynn, senior market analyst at Price Futures Group in Chicago"
indeed it is! How do we feel about it? The above statement is reference to
"China processed a record amount of crude in the first half of 2016 as economic growth last quarter exceeded estimates, adding support to the market. U.S. crude production, on the other hand, rose for the first time since early June last week and fuel stockpiles climbed, according to an Energy Information Administration report released on Wednesday."
Pricing has been sideways for a while now - and it is the summer holidays in the US so its peak driving season so it ought to mean peak gasoline demand which ought to mean peak crude demand (so drawdown on storage both at refinery and elsewhere to refine to gasoline and quickly replenish storage - yes?).
"Oil has traded between about $44 and $51 a barrel since early May and has climbed from a 12-year low in February "
Duly noted. And of course the raft of analysts. My bolding for emphasis
"Analysts including BNP Paribas SA and JBC Energy GmbH warned prices may sink toward $40, due in part to seasonal demand weakness. Crude fundamentals are weaker than many realize, according to Julius Walker, senior consultant at JBC Energy in Vienna.
“Inventories are still high, both for crude and products. Refining margins have been weak and there have been some reports of run cuts in the U.S. and Asia,” Michael Wittner, the New York-based head of oil-market research at Societe Generale SA, said by telephone. “It’s not a bullish market. It’s a market that deserves caution.”
If true (run cuts) that is strong suggestion that demand overall is weaker than expected.
"U.S. inventories are brimming after two years of surplus production and demand for gasoline -- the key driver of prices in summer -- is proving to be disappointing. Stockpiles of the fuel rose by 1.21 million barrels last week and refiners reduced operating rates by 0.2 percentage points to 92.3 percent of capacity, according to the EIA report."
What else should we be looking for then in SEA's Qtrly report?
IMO, if increasing hedging as an overall percentage (so accounting for the increase in production and acquisition) has been taken out when prices were at $50 WTI, this would suggest SEA mgmt forsees further weakness in price. If hedge percentage not increased, then SEA mgmt likely believe prices are still on the up and they will be able to take advantage of that later in H2.
"We haven’t sorted out our excess supply problems,” Tchilinguirian said. “Unless you see visible reductions in inventories and more pronounced declines in U.S. shale production, the market will have to go back to $40.”
OR ... all news is BS and being contrarian to what is reported (because if they say they are long they are really short and vice versa) is the right thing to do.
GFTA
SEA Price at posting:
11.5¢ Sentiment: None Disclosure: Not Held
