Goff Heating Oil Market Price Information
Oil Market, Exchange Rate and Heating Oil Price Information July 2021.
Brent Crude Dated ($ per Barrel)
Price at Start of Month: $77.32 Price at End of Month: $76.38
Highest Price in Month: $78.42 Lowest Price in Month: $69.24
Pound £ to US Dollar Rate $ Exchange Rate FT:
Start of Month: 1.378 End of Month: 1.390
Kerosene (Heating Oil) Cargo Price $ per tonne
Start of Month: $626.25 End of Month: $642.25
Highest Price in Month: $642.25 Lowest Price in Month: $587.00
Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 2.42 ppl
Market Commentary on the Newsfeeds:
Crude oil has been having a great 2021 so far—a very different situation to last year’s when the pandemic devastated demand for all commodities fuelling a price rout that lasted well into 2020. Now, commodities are back with a vengeance, and nowhere is this vengeance clearer than in oil. Crude has become the hottest commodity for traders in the past few weeks as surging demand has topped all expectations, sparking a run on oil futures. According to a recent Wall Street Journal report, in mid-June, the ratio of bullish to bearish bets on oil in New York stood at a staggering 23 to 1. This compares with a ratio of 6 to 1 at the beginning of the year.
This is the speculative component of the price rally, and it is certainly a big component. But the fundamental component is a big one, too. OPEC+ stunned everyone earlier this month when it failed to reach an agreement on how to proceed with its production control beyond the current month. The UAE, a dissenter who had already criticized some aspects of the production cut deal, this time really dug its heels in and refused to make any concessions until concessions were made to it.
The latest update from this front is that the members of the oil-producing cartel have yet to make progress on the deal, according to unnamed sources familiar with the situation, who spoke to Reuters this week. The sources said Russia had been trying to bring the UAE and Saudi Arabia together to the negotiations table but was apparently having trouble succeeding, so a new meeting of OPEC+ was unlikely this week.
Meanwhile, however, there have been headwinds at play, too, namely fresh worry that the delta variant of the coronavirus could reverse the global economic recovery that has driven the surge in oil demand that few expected. Because of this worry, Reuters reported Monday, oil started the week with a loss, although a minor one, at less than a percentage point for both Brent crude and West Texas Intermediate.
On the stock market, oil traders have been taking profits. This has weighed on oil prices as well. Per Reuters’ John Kemp, last week hedge funds sold a total 34 million barrels of WTI and 5 million barrels of Brent as well as 14 million barrels of U.S. gasoline. The selloff, Kemp noted, came from the closing of bulling positions to the tune of 55 million barrels—and not the opening of bearish ones, suggesting sentiment remained upbeat on the whole.
According to the Wall Street Journal, however, there may be a ticking bomb hiding among all these oil bets. That ticking bomb would be the option that many traders have been using to bet on oil reaching $100 by the end of 2022. Analysts are concerned that a reversal of oil’s fortunes would lead to an options selloff, which, due to the size of the options market in oil right now, would send ripples across financial markets.
In all fairness, the chances of a sudden drop in oil prices are slimmer than they would normally be during a rally caused mostly by tightening supply. Normally, higher prices lead to greater production. This time, however, higher production is not coming. U.S. shale producers are being extra-careful and are not in a hurry to bring back too many barrels. Supermajors are being targeted by activist shareholders to reduce their output rather than boost it. There’s Iranian oil that a couple of months ago many expected to quickly return to legal global markets, but it appears that it will take a while yet for Iran and the United States to seal a deal that would make this possible. Wild price swings are likely to continue as speculators try to make the best of the oil rally.
By Irina Slav 13th July 21 Oilprice.com
The upstream oil and gas business is recovering from one of the worst slumps in recent memory as oil prices sit at around $75 per barrel and global demand rises. The expectation now is that prices will reach pre-crisis levels in just a few quarters.
However, the downstream segment's suffering is set to linger—and not only in the short term. Lower refining margins and structural overcapacity are the near-term challenges ahead for the oil refining industry. But there are two other challenges that refiners need to overcome if they want to remain relevant despite the energy transition and pledges for net-zero emissions, energy consultancy Wood Mackenzie says.
Persistently Low Refining Margins
Global refining margins are now higher than at this time last year, but they are still well below five-year averages and below the margins of the last 'normal' year for demand, 2019.
"[T]he refining margin is higher than the fourth quarter but still quite low. And then the marketing business from a volume perspective also not as strong as we've had certainly on a steady-state basis," Royal Dutch Shell's chief financial officer Jessica Uhl said on the supermajor's Q1 earnings call at the end of April.
So far this year, margins have somewhat improved with recovering gasoline demand in China and the United States. But recovery has been uneven across various refined products. Global jet fuel demand is still trailing the demand recovery in gasoline, forcing refiners to blend jet fuel with diesel, thus increasing diesel supply and depressing the margin, according to Wood Mackenzie.
Refining margins also come under pressure from more facilities stating up, especially in the Middle East and Asia. This exacerbates the overcapacity in the industry, which had started to become evident even before the pandemic-inflicted crash in fuel demand.
"Wood Mackenzie's global composite margin averages US$1.8/bbl this year so far, less than half the US$4.25/bbl five-year average. With new refineries in the Middle East and Asia coming online, we don't expect refining margins to recover further next year," says Alan Gelder, Vice President Refining Analysis at WoodMac.
The overcapacity in the industry is driving down global utilization rates. Wood Mackenzie expects this key metric of profitability in the industry to average slightly over 75 percent in 2021. While this would be up from the 68 percent from the second quarter of 2020, it is still below the some 80 percent average in the five years prior to the 2020 downturn.
If the global refinery industry doesn't see extensive further rationalization, the sector may never return to 80 percent capacity utilization, WoodMac noted.
The current crisis is an existential threat to smaller and less efficient refineries in Europe and Asia that were struggling to turn profits even before the pandemic. Even oil majors acknowledge that some sites have become permanently uneconomical amid depressed refining margins, fierce regional competition, and expectations of declining road fuel demand in the long term. For example, ExxonMobil and BP announced in the span of just a few months closures of their respective refineries in Australia. They now plan to convert them into fuel import terminals.
In Europe, 1.4 million bpd of refining capacity is under serious threat of closure by 2023 at the latest, according to a Wood Mackenzie analysis from the middle of last year.
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Refiners around the world announced permanent closures of refinery capacity last year after the pandemic crushed fuel demand worldwide, the International Energy Agency (IEA) said in November 2020. Yet, even after the announced closures, "there remains significant structural overcapacity," the Paris-based agency added.
How to turn in consistent profits amid industry overcapacity is the key short-term challenge to the sector. How to decarbonize operations and how much oil demand electric vehicles (EVs) would eliminate are the major longer-term challenges for refiners.
In a world where pledges for net-zero emissions are now the norm, the refining industry needs to show it is trying to clean up its act and reduce emissions from operations. This can be done through electrification of processes, low-carbon hydrogen, and carbon capture and storage (CCS), Wood Mackenzie says.
Some integrated majors have already started to think along this line of business. For example, TotalEnergies, in cooperation with a unit of ExxonMobil and chemicals companies, has just announced it would explore the development of a CO2 infrastructure, including capture and storage, to help decarbonize the industrial basin located in the Normandy region in France.
Emissions from operations would be easier to tackle despite the potentially high costs and years of development and implementation of projects. The issue with emissions generated from the use of refined oil products, Scope 3 emissions, is still a major issue.
"[T]he industry's restrained commitments beyond a handful of companies to reduce Scope 3 emissions reflect differences of opinion as to whether the responsibility lies with producers or consumers," WoodMac said.
EV Threat To Oil Demand
Finally, there is the big question that will differentiate winners and losers in the refining sector in the energy transition: how much fuel demand will EVs erase?
If the world were to get on the 2-degree pathway in an accelerated energy transition scenario, an aggressive EV market penetration would result in global oil demand falling to just 35 million barrels per day (bpd) in 2050, according to Wood Mackenzie.
This scenario may be overly optimistic about electrification in transport, but there will surely be some oil demand that would come off the market in the next decades.
To survive in a world where oil demand is not growing every year, the refining industry would need further rationalization. The winners will be the most competitive assets, such as coastal integrated petrochemical facilities processing not only crude but also waste and biomass, WoodMac notes.
By Tsvetana Paraskova for Oilprice.com July 21
Oil was steady near the highest close since October 2018 after an industry report pointed to a further decline in US crude stockpiles, adding to signs of a rapidly tightening global market. Futures in New York traded near $75 a barrel after rising 1.6 percent on Tuesday. The American Petroleum Institute said crude inventories slid by more than 4 million barrels last week. That would be an eighth straight weekly draw.
Some uncertainty looms over the market, however. Indonesia posted a record number of new virus cases, while Sydney extended a lockdown as the delta variant continues to sweep the globe. Still, oil has rallied more than 50 percent this year as the vaccine rollout lifts demand in major economies such as the US, and the IEA is warning that the market will tighten significantly if OPEC+ doesn't resolve its standoff and boost production.
West Texas Intermediate for August dipped 0.2 percent to $75.09 a barrel on the New York Mercantile Exchange at 7:50am in London.
Brent for September settlement slipped 0.1 percent to $76.42 on the ICE Futures Europe exchange after climbing 1.8 percent on Tuesday.
The market remains in a bullish structure, however, although it's eased somewhat. The prompt timespread for Brent was 79 cents a barrel in backwardation. That compares with 88 cents a week earlier.
Oil eased from its highest closing level since October 2018 as signs of a strong U.S. crude market were offset by fears over the delta variant’s threat to demand.
Futures in New York traded near $75 a barrel, after climbing 1.6% on Tuesday. American crude inventories declined substantially again last week, according to an industry report published ahead of government data due later on Wednesday. The nation’s oil demand has soared to new heights, with gasoline and diesel returning to pre-pandemic levels.
Yet the global outlook faces a growing threat from the spread of the coronavirus variant. Indonesia posted a record number of positive cases, while Sydney extended a lockdown.
“Trouble is brewing for the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “Fears are mounting that rising Covid-19 Delta cases could delay a full economic recovery. This, in turn, poses a significant threat to oil demand growth in the near-to-medium-term.”
Oil caught between tightening supply and virus fears
Oil has rallied more than 50% this year as the vaccine rollout lifts demand in major economies such as the U.S. and China, and fosters a recovery in Europe. Futures prices are showing a premium on nearer-term contracts, known as backwardation, which usually indicates tightness.
The International Energy Agency is warning that the market will tighten significantly if the OPEC+ alliance doesn’t resolve a standoff that’s preventing the group from reviving production.
West Texas Intermediate for August dipped 0.6% to $74.77 a barrel on the New York Mercantile Exchange at 10:34 a.m. in London.
It settled on Tuesday at $75.25, the highest since Oct. 3, 2018
Brent for September settlement slipped 0.7% to $75.99 on the ICE Futures Europe exchange after climbing 1.8% on Tuesday.
The prompt timespread for Brent was 78 cents a barrel in backwardation, compared with 88 cents a week earlier.
The American Petroleum Institute said crude inventories slid by more than 4 million barrels last week, according to people familiar with the data. The Energy Information Administration is expected to report a similar reduction later on Wednesday, according to a Bloomberg survey.
That would be an eighth straight weekly draw, the longest run of declines since January 2018. A surge in petroleum use for products such as plastic, asphalt, lubricants and other industrial needs is helping to propel the recovery.
Oil declined after OPEC+ agreed to boost production into 2022, resolving a bitter internal dispute that had shaken the alliance with a pledge to restore millions of barrels of crude output to the energy market. Global benchmark Brent and West Texas Intermediate each shed 1 percent. The deal gives Saudi Arabia, the UAE, Iraq, Kuwait and Russia higher baselines against which cuts are measured from May 2022. At the same time, a surge in virus cases from the US to Asia threatens to set back the demand recovery. After soaring 45 percent in the first half, Brent hit a turbulent patch this month. Brent for September settlement was 1 percent lower at $72.87 a barrel on the ICE Futures Europe exchange at 7:33am in London. WTI for August delivery fell 1 percent to $71.06 a barrel on the New York Mercantile Exchange. Brent's prompt time spread eased to 62 cents a barrel in backwardation. While that's a bullish pattern, with near-dated prices trading above those further out, it's down from 74 cents a week ago. The delta variant is still on the ascendant, especially among the unvaccinated, with some countries re-imposing curbs. US infections are set to surge 65 percent in the week to Sunday, outpacing a 19 percent global rise in cases, while on Saturday the UK reported the most cases since January.
The price of a barrel of Brent crude oil won't fall below $60, according to analysts. They pin the recent price drop not on the OPEC+ decision to ramp up production quotas, but rather on the mounting fears that a rise in Covid-19 cases—particularly the Delta variant—will stall an economic recovery and hence oil demand. Brent slid more than 7 percent on Monday, but has since rebounded. According to the analysts, Brent will hover in the $60-$70 range and will likely not fall below that threshold because additional lockdowns are unlikely despite the Delta variant. Vasily Tanurkov, director of corporate ratings group at Arca, said that the price drop-off was due to a variety of events that came to a head on Monday. "If you look at what basically happened on Monday in the financial markets, then almost everything collapsed: Stock markets, Asian, European, almost all raw materials fell. This was more due to fears about a new wave of coronavirus. Accordingly, this could lead to stagnation in global demand, including for oil," Tanurkov said.
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
Last month’s oil market report can be found here: