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Refined Products

Recap:  Oil markets popped up across the board Tuesday after having dropped Monday, following its see-sawing theme observed in recent weeks. Tuesday's pop was likely attributable to Saudi Arabia raising its official selling price (OSP) for all crude oil delivered to the U.S. by $1 per barrel and by $1.40 for extra-light crude oil to Asia. Market participants viewed the price increase to suggest a firming in demand. However, it seems concerns the storage hub in Cushing, OK is now close to two-thirds full of crude oil and Saudi crude imports are at their lowest level of 813,000 bpd since August 2009 (most current EIA data from December 2014), the OSP increase appears to be more of a price strategy being interpreted by oil market participants. The reality is that there has been tremendous demand for refined products, particularly the heating oils in the Northeast. Couple this fact along with refinery icing issues last week on the East Coast, and we may have oil markets preparing for less product inventory, while crude oil inventories could be increasing more. We will see the definitive results this morning at 10:30 AM when the EIA releases its weekly DOE Inventory Report (see estimates below). Settlements: NYMEX ULSD (HO) up 5.22 cents to $1.9395, NYMEX RBOB up 5.26 cents to $1.9499, NYMEX (WTI) Crude up 93 cents to $50.52, and ICE Brent is up $1.48 to $61.02. 

Currently, oil markets are mixed as products are down while NYMEX Crude is up, seemingly influenced by the American Petroleum Institute's (API) inventory data release yesterday afternoon that showed a smaller .3 Million barrel (MMb) distillate stock decline than market estimates, a .5 MMb gasoline increase when market estimates are calling for a decline, and lastly, a crude oil stock build of 2.9 MMbs which is less than the 3.95 MMb market estimates. NYMEX ULSD is down 1.87 cents to $1.9208, NYMEX RBOB is down 2.12 cents to $1.9287, NYMEX Crude is up 40 cents to $50.92, and ICE Brent is down 28 cents to $60.74. 

An Iran Deal?  Oil markets have been closely watching the second day  of Iranian nuclear talks as U.S. Secretary of State Kerry met with Iranian Foreign Minister Javad Zarif in Switzerland Tuesday. Any hint of lifting Iranian sanctions would be bearish for crude as Iran's oil exports would increase global supplies. However, Israeli Prime Minister Benjamin Netanyahu was at the U.S. Capitol Tuesday addressing the U.S. Congress today, effectively imploring U.S. lawmakers that "It will all but guarantee that Iran will get those nuclear weapons, lots of them," the Israeli leader said. "We'll face a much more dangerous Iran, a Middle East littered with nuclear bombs and a countdown to a potential nuclear nightmare." (Reuters 3-3-15) And it is not just Israel that is unhappy about the current plan the U.S. is negotiating with Iran. Saudi Arabia is very upset, prompting Secretary John Kerry to make a stop to visit King Salman in Riyadh this week. "While the main critics of the U.S. push for a nuclear deal with Iran are Israel and Congressional Republicans, Sunni Muslim powerhouse Saudi Arabia is also concerned that an accord would allow Iran to devote more cash and energy to Shi'ite proxies in Syria, Iraq, Lebanon and Yemen, escalating conflicts. 'The Saudis fear Obama will give the Iranians a deal whatever the cost because it is important for his legacy and that Iran will get a certain regional status in exchange for an agreement,' said one diplomat in the Gulf." (Reuters 3-3-15) Iran's interim nuclear agreement expires July 1st.

DOE Inventory Estimates: For the week ended February 27, 2015, Citi Futures is expecting the following increase (build) or decrease (draw) ranges: 4 to 5 MMb build range for crude stocks, Bloomberg is expecting a 3.95 MMb build, last year there was a  1.4 MMb build  and the 5-year average is a 2.1 MMb build. For gasoline, Citi Futures is expecting a 1 to 2 MMb draw range,  Bloomberg is expecting a 2 MMb draw, last year there was a  1.6 MMb draw, and the 5-year average is a 1.6 MMb draw.  For distillates, Citi Futures is expecting a  2 to 3 MMb draw range, Bloomberg is expecting a 2.5 MMb draw, last year there was a  1.4 MMb build and the 5-year average is a .3 MMb draw. Citi Futures is expecting a .5 percentage point decrease in refinery % operable utilization to 86.9%, last year was  87.4%, and the 5-year average is 83.8%.
Click here to view today's Refined Products MarketWatch.

Natural Gas

On Tuesday, March 3rd, the front-month NYMEX Natural Gas Futures Contracts opened at $2.679, two cents below Monday’s closing price of $2.698.  After bouncing off of the intraday low of $2.668 (9:10AM), the contract speedily launched skyward, achieving a local maximum of $2.729 a mere twenty minutes later.  Rolling downhill from there, April sunk to the $2.67 level at 11:10AM, but recovered momentarily above the $2.70 line around 11:20AM.  Skidding evenly past midday, prices appeared indifferent to a reconfirmation of Monday’s warm March forecast, and initiated an accelerating ascent at 12:20PM.  With the intraday high of $2.734 secured at 1:10PM, the contract relaxed into the $2.71 level, and then strolled leisurely to the finish line.  April closed up 1.2 percent at $2.712 on Tuesday.  

This morning in Globex, WTI Crude was up 25 cents; Natural Gas was up four cents; and, both Heating Oil and Gasoline were down three cents.

New England and New York cash prices were lower across the board.  

Natural Gas Glossary

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to or call 1-855-466-2842.