Wednesday, April 9, 2014

Oil independence for U.S?

By Phil Flynn

The Energy Information Administration says that tight oil (NYMEX:CLK14) production of shale production as it is known will mean that net imports share of liquid fuels will reach a big goose egg! That is a major achievement.

The EIA is predicting that the U.S. will be totally independent by 2037!

Yet we can celebrate another day because in short term oil is more focused on the short term future. Oil rose on geopolitical fears and disappointment that the Energy Information Administration is cutting back their outlook for US oil production for this year. The Energy Information Administration lowered its U.S. oil production to mere 8.37 million barrels a day the highest in 40 years but less than a previous forecast. They also adjusted demand slightly higher to 18.9 million barrels per day.

Yet the American Petroleum Institutes is reminding us that there is no shortage of oil in the United States. The API reported that US crude supply rose 7.1 million barrels last week, The Increase was led by a surge in US oil imports that increased by 1 million barrels a day as things get back to normal in the Gulf Coast after the reopening of the Houston Shipping Channel. We also saw a rather surprising increase in Cushing Oklahoma supply of 204,000 barrels.

The API reported that Gasoline stocks fell by a hefty 3.6 million barrels a day. It seems that even as crude supply increased refiners did not quite rebound from Gulf related shutdowns. On top of that seasonally gas supply's fall as we sell out those cheap winter blends. Refinery runs perked up by 87.9 percent that seems to suggest decent gas demand.

The Energy Information Administration big picture sees gas price slightly lower this summer. They expect retail gasoline prices to average $3.57 a gallon in the April-to-September summer driving season, a penny less than last summer! A whole penny!! Put that in your loafer.

Distillate stocks rose so the long RBOB short Diesel spread should continue to work. The spread got support from a Bloomberg report that Exxon Mobil Corp.'s refinery in Baton Rouge, Louisiana, extending planned work on crude unit and coker from April 9.

Ethanol will also watch today's grain report with interest. Ethanol surge inspired in part by rail delays will focus on the rebound in corn prices. Corn surged in yesterday's trade as the market is fearing a bullish report. The USDA in its monthly supply/demand should lower its forecasts of U.S. 2013/14 corn and soybean ending stocks due to strong US exports. Corn and bean exports have blown away expectations.

On top of that winter weather has kept farmers out of the field so the expectaions are that planting progress will be slow. DA on Wednesdaywill cut its outlook for U.S. Traders expect that the 2013/14 soybean ending stocks to 139 million bushels, the smallest in five years. USDA also was expected to cut its forecast for the Brazilian soybean harvest to 87.43 million bushels due to the drought.

The USDA reported that crop progress report of 2014 that 35 percent of the U.S. winter wheat crop was in good to excellent condition, down from 62 percent in November, ahead of the crop's winter dormancy. The rating was also down from a year ago, when USDA rated 36 percent of the crop as good quality excellent. Kansas fell for a fourth straight week, with 29 percent of the state's crop rated good to excellent.

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