Goff Heating Oil Market Price Information
Oil Market, Exchange Rate and Heating Oil Price Information February 2021.
Brent Crude Dated ($ per Barrel)
Price at Start of Month: $55.84 Price at End of Month: $65.83
Highest Price in Month: $65.87 Lowest Price in Month: $55.84
Pound £ to US Dollar Rate $ Exchange Rate FT:
Start of Month: 1.3663 End of Month: 1.3981
Kerosene (Heating Oil) Cargo Price $ per tonne
Start of Month: $473.00 End of Month: $473.00
Highest Price in Month: $556.00 Lowest Price in Month: $544.00
Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 3.52 ppl
Market Commentary:
In the UK the news centred on the race to jab verse the spread of new variants, but on the international stage oil supply and fuel demand was back driving the market. Heating Oil prices were supported by massive snow falls on the East Coast of the USA which is the largest heating oil market in the world and the cold that crippled Texas.
Crude oil fundamentals were mixed compared to refined products. Crude demand has fallen due to the refinery outages. However, US shale production has also fallen and according to some producers between 200-500 bpd of production might never return due to the serious damage caused by the ice storm. Attention is also focused on the OPEC+ meeting on 3rd and 4th March. We believe Brent Crude will struggle to post a clear break higher above $65/b. in the near term.
The fundamentals for kero / diesels were mixed but generally supported by the Texan refinery outages following the ice storm two weeks ago. Total distillate stocks fell sharply by 5mb and demand remains up 6.4% on the year when based on a four week average. With demand generally healthy and stocks falling the potential to see a downside for kero / diesel prices is limited.
Market commentary on the Newsfeeds:
Oil Prices Rise As Producers Stick To Supply Curbs
Oil prices hit a one-year high early on Tuesday on the back of improving market fundamentals and a general risk-on market sentiment.
As of 10:08 a.m. ET on Tuesday, WTI Crude was up by 2.45 percent at $54.85, after hitting $55 earlier in the day, and Brent Crude was trading up 2.32 percent at $57.65.
Oil prices on Tuesday extended their gains from Monday, amid expectations that the oil production curbs by OPEC+ and its leader Saudi Arabia would tighten the market in the first quarter. Saudi Arabia has said it would reduce its crude oil production by an additional 1 million barrels per day (bpd) beyond its quota in the OPEC+ pact.
The members of the alliance were estimated to have complied almost completely with their production cut quotas in January, giving the market hopes that the producers would not over-produce now that the cuts were eased by 500,000 bpd last month.
Russia, the leader of the non-OPEC group in the OPEC+ pact, is estimated to have stayed within its 125,000-bpd allowed production rise in January. According to Reuters estimates, Russian oil production rose last month, but the 120,000-bpd increase in production from December was lower than the 125,000-bpd additional allowed rise.
The futures curve continues to firm into backwardation, the state of the market that points to tighter supplies with the prices of the nearer futures contracts higher than those further out in time.
OPEC Secretary General Mohammad Barkindo was also pleased with the backwardation at the opening of the OPEC+ panel meeting on Tuesday.
“With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand,” Barkindo said.
“Boosted by a general increase in risk appetite as seen through stocks together with an improved fundamental outlook. Saudi production cuts combined with strong Asian demand have, despite lockdowns and reduced mobility, started to bite with the backwardation in Brent rising to a one-year high, a sign that large stockpiles are shrinking fast,” Saxo Bank said in market commentary early on Tuesday.
“Also, in China, the recent liquidity squeeze may be over for now thereby reducing demand risks from the world’s biggest importer,” Saxo Bank’s strategy team wrote.
By Tsvetana Paraskova for Oilprice.com 2nd Feb 2021
Crude pushes to 1-year highs as OPEC+ cuts tighten supply outlooks
OPEC+ commitment supports prices, with US Dollar tests two-month highs and Brent approaching resistance at $60/b
New York — Crude oil futures pushed to fresh one-year highs Feb. 4 as the market eyed a tightening global supply picture. NYMEX March WTI settled 54 cents higher at $56.23/b, and ICE April Brent climbed 38 cents to $58.84/b.
Oil prices continued to ride a wave of optimism following the Feb. 3 OPEC+ Joint Ministerial Monitoring Committee meeting that highlighted the success of production cuts in lowering global oil inventories and made no recommendations for any changes to the alliance's production cut accord.
The overnight rally stumbled in midmorning US trading amid a rising US dollar, but prices were able to shrug off those headwinds amid tightened supply outlooks. The ICE US Dollar Index climbed above 91.5 in afternoon trading, up from 91.15 on Feb. 3 and on pace for the highest close since late-November.
"OPEC restraint, as well as struggling US oil production, is causing global inventories to tighten," Price Futures Group analyst Phil Flynn said in a note. "So much so that the world is headed towards a substantial supply deficit in the next year as we continue the oil demand vaccine-related recovery pace."
The oil rally may be running out of steam as prices reach levels that would entice producers to ramp up output analysts said.
"The closer we shift towards $60/b [for Brent], one would have to assume it could be a potential faster game-changer and OPEC+ production cut unwinder. Not to mention [that] US shale will be eager to step on the production accelerators," Stephen Innes, chief global markets strategist at Axi, said in a note Feb. 4.
NYMEX March ULSD settled down 1 cent at $1.7005/gal, while March RBOB declined 38 points to $1.6448/gal.
"Crude continues to rise on strong momentum from falling stockpiles and COVID vaccine progress," OANDA senior market analyst Edward Moya said in a note. "It's been quiet on the energy front so far, which is allowing energy traders to focus on the improving supply and demand fundamentals."
The ICE New York Harbor RBOB crack versus Brent fell back to $14.44/b in afternoon trading, down from a Feb. 3 close of $14.73/b.
Where Did The ‘Missing Barrels’ From 2020s Oil Glut Go?
While analysts and industry officials hail the tightening of the oil market and the rebalancing of supply and demand, the huge build of global stocks last year poses the question of what happened to all those barrels of oil accumulated during the COVID-19 shock to demand.
The ‘missing oil barrels’ may be distorting the analysts’ view of how balanced the market really is, Jinjoo Lee of The Wall Street Journal argues.
The ‘missing barrels’ issue tends to resurface on the oil market when there is a large distortion of supply and demand or a shock to the balances, which 2020 undoubtedly has.
The market has to contend with ‘missing barrels’ in nearly every oil cycle, according to the paper ‘The COVID-19 Shock and the Curious Case of Missing Barrels’ by Bassam Fattouh, Andreas Economou, and Michal Meidan of the Oxford Institute for Energy Studies.
The so-called missing barrels are those barrels of oil that are basically unaccounted for by the International Energy Agency (IEA).
These barrels are “the gap between the change in inventory implied by global supply-demand balances on the one hand and the observed change in inventory levels by commercial and government entities (adjusted for floating storage and oil in transit) on the other hand,” the authors of the paper wrote in December.
Based on IEA data, the authors estimated that in the first half of 2020—the worst of the COVID-induced shock—inventories globally increased by 1.39 billion barrels of oil. According to the IEA, out of the total inventory build in that period, OECD stocks accounted for 25 percent of the increase, while floating storage and oil in transit accounted for 8 percent of the rises. But the remaining 940.4 million barrels, or 68 percent of the total increase to balance, is “essentially unaccounted for including changes in non-reported stocks in OECD and non-OECD areas that the IEA labels as “Other & Miscellaneous to balance.”
According to the Oxford Institute for Energy Studies, the volume of missing barrels in the first half of last year was the largest ever recorded gap between observed and implied stocks since at least 1990.
These estimates highlight not only the opaque nature of observed oil stocks in China and other countries in Asia. They also highlight the argument that calling the ‘market rebalancing’ – and therefore, predicting oil price trends – is much more art than science.
By Tsvetana Paraskova for Oilprice.com 16th Feb 2021
Is This Oil Rally The Start Of Something Much Bigger?
Commodities have rallied in recent months, outperforming equity indexes amid expectations of an economic recovery, easy monetary policy, and rising inflation.
The commodity bull run across the board—spearheaded by a 50-percent jump in oil prices over the past three months—isn’t finished running, analysts and investment banks say. Some of the biggest investment banks have even started to call the start of a new commodities supercycle, which by definition, lasts years—typically about a decade.
Yet, not all investment banks and analysts are as convinced that we are in for a commodities supercycle across the board, warning that the term supercycle is too optimistic for a bull run that could fizzle out within a year or two and could still fall victim to negative COVID-related impacts.
Commodity Rally
As early as in October 2020, a few weeks before the first announcement of an effective vaccine candidate, Goldman Sachs said that commodities were headed toward a bull run in 2021. Hedges against expectations of rising inflation, a weakening U.S. dollar in which most commodities are traded, and signals of “very easy” monetary policy from central banks would be the key drivers of rallying commodities, Goldman Sachs said back then.
Goldman expected the S&P Goldman Sachs Commodity Index (GSCI) to return 42.6 percent for energy over a 12-month period, and 17.9 percent for precious metals.
Over the past three months, the S&P GSCI has outperformed the S&P 500 index, with the commodity index rising by 25 percent, compared to (just) a 9-percent increase in the S&P 500.
Over the same period, oil prices have rallied from the low $40s to above $60 a barrel, driven by vaccine rollouts, OPEC+ production cuts, and expectations of a tight market and rising oil demand later this year when economies return to growth, helped by large stimulus packages.
Some Drivers Of A New Supercycle Are Here…
According to JPMorgan, there are reasons to believe that a new commodity supercycle may have just started.
“We believe that the new commodity upswing, and in particular oil up cycle, has started,” JPMorgan analysts led by Marko Kolanovic said in a note last week, as carried by Bloomberg.
The latest commodity supercycle ended in 2008 after a 12-year run, boosted by the super-spending and economic surge in China.
JPMorgan now sees several potential factors underpinning a new supercycle: post-pandemic global economic growth, “ultra loose” monetary policies, increased and tolerated inflation, weakening U.S. dollar, financial inflows to hedge inflation, metals for energy transition markets such as batteries and electric vehicles (EVs), and underinvestment in new oil supply.
The International Energy Agency (IEA) warned last year that if investment in oil were to stay at the 2020 levels over the next five years, it would reduce the previously expected level of oil supply in 2025 by nearly 9 million barrels per day (bpd).
This year, global upstream investments will stay low, just like they were in 2020, Wood Mackenzie said in December, expecting upstream oil and gas investment at a 15-year low of just US$300 billion, down by 30 percent from the pre-crisis level of investment in 2019.
“The world may be sleepwalking into a supply crunch, albeit beyond 2021. A recovery in oil demand back to over 100 million b/d by late 2022 increases risk of a material supply gap later this decade, triggering an upward spike in price,” said Simon Flowers, Chairman and Chief Analyst at WoodMac.
Then, “very easy monetary policy” and reflation trade could push oil prices as high as $100 a barrel next year, Amrita Sen, chief oil analyst at Energy Aspects, told Bloomberg earlier this month.
In the week to February 9, hedge funds increased bullish bets on 24 major commodity futures by 5 percent to a fresh high of 2.7 million lots, representing a nominal value of $143.7 billion, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, commenting on the latest Commitments of Traders report.
The combined net long position—the difference between bullish and bearish bets—in Brent and WTI has now increased to the highest in 28 months, while the net long in the grain sector in agriculture is not far from the record set in August 2012, Hansen noted.
Post-pandemic growth, tightening supply, and continued demand for reflation hedges pushed the Bloomberg Commodity index to a 27-month high, Hansen said.
But Is This The Start Of The Next Commodities Supercycle?
Although crude oil and other commodities have rallied and signals have emerged to support the call for a new supercycle, some analysts are cautious and say it is a little early to proclaim the beginning of the next commodity supercycle.
What we see in oil and commodities right now is a cyclical recovery, but a supercycle could be “two to three years away,” George Cheveley, portfolio manager at asset management company Ninety One, told Financial Times’ Natural Resources Editor Neil Hume.
This bull run is unlikely to turn into a supercycle for commodities, because while investment may be depressed, “the material is abundant” for many commodities, including crude oil, Ed Morse, managing director and global head of commodities research at Citigroup, told the Financial Post in an interview last week.
Commodities have certainly benefited from the optimism that post-COVID growth and stimulus packages will boost demand and prices, but it may be a little premature to trumpet the next decade-long across-the-board commodities supercycle.
By Tsvetana Paraskova for Oilprice.com 16th Feb 2021
$100 Oil: Big Banks Believe A New Oil Supercycle Is Beginning
Some of the world’s biggest names in oil trading and analyzing can’t seem to get on the same page when it comes to predicting what will happen next for the volatile commodity.
Some, like Jeffrey Currie of Goldman Sachs and Christyan Malek of JPMorgan, according to the Financial Times, are confident that oil is ready for the next supercycle—a prolonged rise in the price of oil.
And when they refer to this rise, they’re talking $80, or even $100 per barrel.
Others, like oil analyst Arjun Murti who correctly predicted the last $100+ per barrel achievement seen between 2008 and 2014, say that talk of this next supercycle may be a bit hasty.
For Malek, he sees a situation where demand outstrips supply, before “we don’t need it in the years to come.”
The reason for supercycle predictions is simple: stimulus packages, most notably the stimulus package that the U.S. government is expected to roll out, are expected to boost consumption.
And according to Currie, this stimulus will create a “significant, commodity-intensive consumption” as the stimulus package is mostly targeting lower and middle-income households.
“These people don’t drive Teslas,” Currie explained. “They drive SUVs”.
Murti, on the other hand, thinks that if oil demand were to increase by a half a million barrels per day over the next year, it wouldn’t be enough to outstrip supply.
As a point of reference, global oil demand sank roughly 10 million barrels per day as a result of the pandemic in 2020.
If, however, oil demand were to pick up steam by as much as 1.4 million barrels per day, a supercycle may follow.
Veteran trader Pierre Andurand told the Financial Times that the fate of oil prices rests on OPEC—specifically on how much oil they supply.
Standing in the way of the next supercycle, says Andurand, could be Iran returning to the global oil markets, and OPEC’s production in general.
Retired veteran trader—a particularly successful one that made a not-so-small fortune on oil’s last supercycle—Andy Hall, sees the oil market in “terminal decline” the Financial Times writes, and likened any price rally as a dead cat bounce.
By Julianne Geiger for Oilprice.com 16th February 2021
Oil Demand Won’t Be Wiped Out By Energy Transition
The COVID-19 crisis has accelerated the timeline of peak oil demand while government policies to build back better and greener are speeding up the energy transition, major oil companies and forecasters say.
Most industry professionals and analysts believe that peak oil demand will occur at some point between the end of this decade and the latter half of next decade—sooner than thought before the pandemic.
Some, like BP, even say that the world may have already passed peak oil demand. Yet, it is also BP’s chief executive Bernard Looney who said at CERAWeek’s India Energy Forum in October that “peaking of oil demand does not mean the end of oil. Oil will be around for a very, very long time.”
Regardless of when peak oil demand occurs, the world will not stop using oil, and any decline will only be very gradual, despite the wishes of environmental activists that Big Oil (and any oil firm) stop pumping oil immediately and leave the world to run on green energy.
The reality is that even the energy transition will need a lot of fossil fuel-powered energy to build out the infrastructure necessary to support a shift to green energy sources, Neal Kimberley, commentator on macroeconomics and financial markets, writes for South China Morning Post.
Demand for oil is here to stay in the coming decades, even if the world is moving irreversibly toward increased electrification in transport and a growing share of renewable energy sources in the power generation mix. ‘Peak oil demand’, after all, means that global demand will stop growing, not the world weaning itself off crude.
In the coming years, the global recovery from the pandemic is set to bolster oil demand and oil prices, on the one hand. On the other hand, the COVID-related crash in investments in new oil supply—necessary to offset declines from maturing oilfields—could create a supply gap amid solid oil demand. And that could result in oil price spikes in as early as two or three years.
BP and Shell, for example, will be reducing their oil production as part of the net-zero pledges and the foray of Europe’s Big Oil into renewable energy, including EV charging, solar and offshore wind power, hydrogen, and carbon capture. But the world will still need oil in 2030 when BP plans to have cut its oil and gas production by 40 percent. Even if oil demand peaks by 2030, global consumption will plateau, not plunge.
If BP isn’t pumping the oil the world needs, someone else will, probably Saudi Aramco, because the world will need at least as much oil as it did in 2019—around 100 million bpd.
Growing emerging economies in Asia will need more and more oil even if fuel demand from light-duty vehicles in developed economies begins to decline due to the growing share of electric vehicles (EVs) in the fleet.
Oil demand for transportation fuel is just one part—a third, to be more precise—of total global oil consumption. Electric vehicles (EVs) are set to displace some oil demand for gasoline and diesel in mature economies.
But the rising preference for non-electric SUVs, which consume on average over 20 percent more energy than a medium-size car for the same distance travelled, completely cancelled the estimated 2020 reduction of oil demand due to higher EV share, the International Energy Agency (IEA) said in an analysis last month. The growth in SUVs in the United States, China, and Europe completely offset the 40,000 bpd reduction in oil demand from higher EV sales.
There is a clear trend for SUVs preferences, and while electric SUVs offerings are certainly not lacking, the share of e-SUVs needs to proliferate to over 35 percent by 2030 if the world is to shift onto a path aligned with the climate goals of the Paris Agreement, the IEA said. Last year, fossil fuel-powered SUV sales accounted for nearly 97 percent of global SUV sales.
While road transportation fuel drove oil demand growth in the past decade, the next decade’s growth will be driven by petrochemicals, the IEA reckons. Emerging economies will continue to need increased volumes of oil, and the economy needed to build out the infrastructure for the energy transition will also need fossil fuels.
Greener economies will eventually start eroding global oil demand, but it will be a prolonged decline in a decade or two from now. At the same time, if low investment to replenish production from maturing oilfields persists, it could open a supply gap, overtighten the market, and lead to oil price spikes.
By Tsvetana Paraskova for Oilprice.com 24th Feb 2021
Additional Oil Market commentary & Market Data available from the BBC here: Market Data
The Office for National Statistics record the price of heating oil and publish monthly updates on the average delivered cost of a domestic delivery of 1000 litres of kerosene in the UK . The information held by the ONS is freely available online and can be found here: ONS Price of heating oil