Goff Heating Oil Market Price Information
Oil Market, Exchange Rate and Heating Oil Price Information February 2022.
Brent Crude Dated ($ per Barrel)
Price at Start of Month: $93.32 Price at End of Month: $112.19
Highest Price in Month: $112.19 Lowest Price in Month: $93.32
Pound £ to US Dollar Rate $ Exchange Rate FT:
Start of Month: 1.3508 End of Month: 1.3302
Kerosene (Heating Oil) Cargo Price $ per tonne
Start of Month: $845.25 End of Month: $916.25
Highest Price in Month: $935.00 Lowest Price in Month: $845.25
Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 9.2 ppl
Market Commentary on the Newsfeeds:
Speculation is rife about whether oil prices will reach $100 this Spring.
A significant increase in U.S. crude production could put downward pressure on crude prices.
Many analysts are wondering how long the current rally in oil will last.
The price of West Texas Intermediate (WTI) opened 2022 at about $75 a barrel (bbl). Last week, the price rose above $90/bbl for the first time since 2014. That was also the last year the price of WTI was above $100/bbl.
To recap, in the first half of 2014, oil prices spent most of the time bouncing between $100/bbl and $105/bbl. But the shale boom had put millions of new barrels of oil into the markets over the course of several years, and by mid-2014 the market was approaching an over-supply situation. The price of oil started to decline, but then in the second half of the year OPEC embarked upon a price war to win back market share that had been lost to the American shale boom.
The result was that the bottom fell out of the oil market. By the end of 2014, the price had declined to $53/bbl. The price remained depressed for all of 2015, and by early 2016 WTI fell below $30/bbl.
At the time, I called this episode OPEC’s Trillion Dollar Miscalculation. I don’t believe that if OPEC knew how far oil prices would fall — and knew that their efforts wouldn’t actually derail the U.S. shale boom — that the cartel would have embarked upon that strategy.
The question now is whether the current situation is more like the first half of 2014, or whether it is more like 2011, when prices rose above $100/bbl and largely stayed there for the next three years.
I would argue that we are somewhere in between. In 2011, the markets weren’t oversupplied, but that’s where they were ultimately headed. U.S. oil production has increased by 600,000 barrels per day (bpd) year-over-year, but we are still 1.5 million bpd below the levels just before the Covid-19 pandemic hit the U.S. Thus, with demand largely recovered to pre-pandemic levels, we are still undersupplied relative to two years ago.
Last month OPEC and its allies said they would increase oil production by a total of 400,000 bpd in February. However, the cartel has been undershooting its production targets. That helps keep oil prices high, especially in light of the slow ramp-up of U.S. oil production.
When I made my energy sector predictions last month, I noted that “OPEC is always the wildcard.” They want the highest oil prices the market can bear, but that is always tempered by non-OPEC oil production. There are also demand factors that OPEC has to consider. High oil prices create incentives for alternatives, like faster adoption of electric vehicles.
So, how will it all shake out? I still believe the U.S. will significantly increase oil production this year, and that will help temper oil prices. It’s not at all clear to me that the 17% price increase in WTI that we saw in January is justified based on the fundamentals.
But oil prices overshoot the fundamentals all the time. WTI at $145/bbl in 2008 overshot the fundamentals, and the oil price plunge deep into negative territory in 2020 overshot the fundamentals. And when the correction toward the fundamentals happens, it can be swift.
Still, with oil just 8% away from that $100/bbl mark, and momentum continuing from January, it seems more likely than not that WTI will reach that level. But how long can it stay there, and where is the top of this current bull market in oil? I will be among those surprised if it’s still at that level in the second half of the year.
By R Papier 12th Feb 2022
Oil prices are soaring after media outlets began to report that a Russian invasion of Ukraine is imminent.
PBS has reported that according to officials, “the U.S. believes Putin has decided to invade Ukraine and communicated those plans to the Russian military.”
Six U.S. and Western officials have reportedly told PBS that they expect a Russian invasion to begin next week, with defense officials expecting a “horrific, bloody campaign that begins with two days of bombardment and electronic warfare, followed by an invasion, with the possible goal of regime change.”
The reports, hurridly carried out over the Twittersphere, sent oil prices skyrocketing, and stocks tumbling.
At 2:20 p.m. EST, WTI crude was trading at $94.42—a $4.54 (+5.05%) increase on the day. Brent crude was trading up $3.90 (+4.27%) on the day at that time.
WTI is trading at its highest level since 2014, and is up $10 in the last 30 days.
JPMorgan said earlier this week that Brent could “easily” reach $120 per barrel if Russia invaded Ukraine and the U.S. and other nations sanctioned Russia’s oil and natural gas exports.
If Russia did invade Ukraine, the Biden Administration would have to choose between sanctioning Russia’s oil exports and keeping retail gasoline prices at American pumps from reaching the stratosphere.
Gasoline prices are already higher than the Administration would like, particularly as Biden’s disapproval rating approaches 60%.
Sanctions on Russia would be devastating for both the Biden Administration and the American consumer—but it would also cause great hardship to Russia, which relies a great deal on crude oil revenue for its budget. Last year, the value of Russia’s crude oil exports totalled more than $300 million per day.
By J Geiger for Oilprice.com
The already priced-in geopolitical risk premium is probably more than $10 per barrel.
An imminent Iran nuclear deal could send oil prices down to the low $90s or even below $90.
An Iran agreement, a Fed hike, and de-escalation of the Ukraine situation by the end of March could lead to a significant drop in crude prices.
Following the escalation in the Russia-Ukraine crisis, oil prices surged within striking distance of $100 a barrel early on Tuesday, when Brent hit $99.50 before retreating to the $97 mark.
The already priced-in geopolitical risk premium is probably more than $10 per barrel, analysts say, and most of them believe it’s just a matter of when—not if—oil hits the triple-digit threshold.
Although the Ukraine premium is a large part of the current rally towards $100 oil, there are several bullish fundamentals that could keep prices elevated even if a worst-case scenario of a conflict with subsequent Western sanctions on Russian energy exports does not materialize.
These bullish factors include robust growth in global oil demand, which is set to exceed pre-COVID levels this year, the lowest commercial inventories in developed economies in seven years, and the lowest crude inventories at Cushing, Oklahoma—the designated delivery point for WTI Crude oil futures contracts—since September 2018.
On the bearish side, an imminent Iran nuclear deal could send oil prices down to the low $90s or even below $90 as the market tightness would see relief at some point later this year when U.S. sanctions on Iran’s oil exports are removed.
In recent days, reports have intensified that the indirect talks between the United States and Iran about returning to the 2015 deal are in their final stage and are said to be “about to cross the finish line,” according to a tweet from Russia’s envoy Mikhail Ulyanov on Tuesday. “At the final stage of the #ViennaTalks intensive consultations in various formats are underway,” Ulyanov said a few hours later.
Iran could bring 1.3 million barrels per day (bpd) to the global oil supply, although this would take some time, including technical time, for reinstating oil payment settlements and Iranian foreign accounts. At any rate, if a deal is reached, more supply would bring relief to the tight oil market.
As the past two years have shown, another bearish factor for oil would be a new infectious vaccine-jumping COVID variant that could prompt governments to re-impose restrictions. Expected Fed interest rate hikes could also have some slowdown effect on rebounding economic growth.
An Iran agreement, a Fed hike, and de-escalation of the Ukraine situation by the end of March could see oil prices around $80 in the second quarter, and at around $70-75 in the second half of 2022, Michael Lynch, petroleum economics and energy policy analyst, writes for Forbes.
Still, as-is, demand appears to be strong, the physical market is very tight, and as Omicron-related restrictions are lifted in many economies, global demand is expected to beat the 2019 levels in the third and fourth quarter this year and average more than the 2019 demand volumes for the whole of 2022.
Then, there is the growing gap between the OPEC+ nominal production increases and the actual supply to the market from the alliance.
If OPEC+ continues to fail in delivering its oil production targets amid rising demand and inventories at multi-year lows, oil prices will remain under upward pressure and are set for more volatility, the International Energy Agency (IEA) said earlier this month. The gap between OPEC+ output and its target levels surged to as much as 900,000 bpd in January, the IEA said in its Oil Market Report for February.
Moreover, major investment banks had started to predict $100 oil was coming even before the recent escalation in Ukraine. Many of them continue to believe $100 is justified right now. If the crisis escalates into a conflict that would trigger Western sanctions on Russia’s oil – accounting for 12 percent of global supply – prices could even hit $150 a barrel, J.P. Morgan said earlier this month.
“Such is the fundamental market tightness in oil today that under a best-case scenario in which tensions between Russia and Ukraine de-escalate, the oil price would likely merely drop to $84 bbl. But any disruptions to oil flows from Russia in a context of low spare capacity in other regions could easily send oil prices to $120 bbl. A halving of Russian oil exports would likely push the Brent oil price to $150 bbl,” Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, said.
Bank of America says that a Ukraine conflict could send oil higher by $20 a barrel than current levels, but it also notes that “A weaker dollar trend and a pro-growth macro backdrop, if it indeed occurs, could support crude near triple digits in the second half of the year.”
The world’s biggest independent oil trader, Vitol, sees further room for oil prices to rally, based on bullish fundamentals, as it expects global oil demand to surge in the second half of 2022.
By T Paraskova 24th Feb 22 for Oilprice.com
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: