Low Oil

Oil traded near the lowest closing level in seven months as U.S. gasoline supplies unexpectedly rose for a second week.

Futures were little changed in New York after slumping 3.7 percent Wednesday, the first drop in four sessions. Motor-fuel stockpiles expanded by 2.1 million barrels last week, the Energy Information Administration reported. Most analysts surveyed by Bloomberg had forecast a decline. Crude output climbed while nationwide inventories fell less than predicted.

Oil has declined almost 8 percent this month amid speculation that rising U.S. supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies, including Russia. New production from OPEC rivals will be more than enough to meet demand growth next year, the International Energy Agency said Wednesday in its first forecast for 2018.

“Any build in U.S. commercial stocks gives us an indication of the uphill battle OPEC is facing,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “Although last week the big bearish surprise came in the form of significant builds across the board, this time around gasoline was responsible for the consequences.”

West Texas Intermediate for July delivery was at $44.70 a barrel on the New York Mercantile Exchange, down 3 cents, at 10:01 a.m. London time. Total volume traded was about 46 percent above the 100-day average. Prices dropped $1.73 to $44.73 on Wednesday, the lowest close since Nov. 14.

Brent for August settlement was up 10 cents at $47.10 a barrel on the London-based ICE Futures Europe exchange. Prices slid $1.72, or 3.5 percent, to $47 on Wednesday. The global benchmark crude traded at a premium of $2.14 to August WTI.

U.S. crude stockpiles dropped by 1.66 million barrels last week, the EIA reported Wednesday. Inventories were forecast to decline by 2.45 million, according to the median estimate in a Bloomberg survey. Production rose by 12,000 barrels a day to 9.33 million barrels a day.

Oil-market news:

  • The Qatar crisis is reverberating in Libya, inflaming political divisions in the war-torn oil exporter and dragging commodity-trading giant Glencore Plc into a dispute over crude sales.
  • Iraq is driving up crude-oil exports to the U.S., the world’s second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

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Russian Grain Gain

Russia’s wheat fields are expected to see warm, dry weather in the next two weeks, a relief for farmers that have struggled with a cold and soggy planting season.

Wet fields of winter wheat will start drying out, which would benefit the crop to be harvested next month, according to Commodity Weather Group. Later in June, most models show rain will return, which would replenish soil moisture and keep the crop in good shape, said David Streit, a forecaster for the Bethesda, Maryland-based firm.

“Russia has a good soil moisture supply in place going into this drier spell that the wheat can tap into,” Streit said, adding that the dry weather will help prevent disease.

Bad weather has lowered expectations for Russia’s total grains production, and traders are closely watching weather forecasts ahead. Earlier this month, the Agriculture Ministry cut production estimates to as low as 100 million metric tons from a previous forecast of 110 million tons, according to a report from Tass news service, which cited an interview with the minister.

Cold, Wet

Earlier in the year, cold weather in central and southern Russia, the main areas for winter wheat, raised the risk of delays to the wheat and barley harvest. It’s also possible that central and eastern Ukraine, and central portions of Russia’s North Caucasus could see lower yields, said Kyle Tapley, a senior agricultural meteorologist at MDA Weather Services.

“I don’t see major problems for the winter wheat except for some falling behind with vegetation, but it is not the major issue,” said Dmitry Rylko, director general of Institute for Agricultural Market Studies in Moscow.

The weather could be a bigger problem for spring crops, such as wheat, barley and corn, which are falling behind in planting and development, he said.

In the spring-wheat areas of Volga region and the Urals, the fields will likely remain cold and wet over the next 10 days, which could slow planting and early crop growth, said Tapley of MDA. However, conditions could improve later in the season, he said.

Sowing of spring wheat, the smaller of the two main wheat harvests in Russia, are lagging behind last year’s pace. Plantings account for 12.5 million hectares (30.9 million acres) as of June 2, compared with 13.3 million hectares a year before, according to the Agriculture Ministry.

Spring wheat, mainly grown in Siberia, usually accounts for a third of Russia’s total harvest.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

Global Round Up

Here are some of the key events coming up:

  • More Fed officials will be speaking as the FOMC’s June 13-14 meeting approaches. Robert Kaplan will be in New York on Wednesday.
  • The U.S. jobs report Friday may bolster the case for a rate hike, with a gain of 180,000 positions expected.
  • Brazil’s central-bank decision Wednesday will probably see a cut of 75 to 100 basis points from the current 11.25 percent, according to economists.
  • The EIA is due to release its monthly supply reports Wednesday.

Here are the main movers in markets:

Stocks

  • The MSCI Asia Pacific Index dropped less than 0.1 percent, paring its advance for May to 2.6 percent. The Stoxx Europe 600 Index fell 0.1 percent, trimming a monthly gain to 0.8 percent.
  • The Shanghai Composite rose 0.2 percent, after nearly wiping out an earlier gain of 1.1 percent. The manufacturing purchasing managers index remained at 51.2 for a second straight month in May, compared with a median estimate of 51 in a Bloomberg survey of economists.
  • Hong Kong’s Hang Seng was flat, heading for a fifth straight monthly gain, the longest winning streak since 2013, as improving earnings outweighed concerns about China’s campaign to cut leverage.
  • Japan’s Topix fell 0.3 percent, following two days of gains.
  • Futures on the S&P 500 rose 0.1 percent. The benchmark index slipped 0.1 percent Tuesday, retreating for the first time in eight days. The Nasdaq 100 Index advanced for an eighth day to an all-time high.

Currencies

  • The pound dropped 0.3 percent to $1.2817. The euro was little changed, heading for a monthly gain of 2.7 percent, its best performance in more than a year.
  • The yen weakened 0.1 percent to 110.93 per dollar after rising 0.4 percent Tuesday. The South African rand strengthened 0.4 percent, after tumbling for two days.
  • The onshore yuan climbed 0.4 percent, poised for its highest closing level since November.
  • The Bloomberg Dollar Spot Index was little changed for a third straight day. The gauge is down 1.3 percent for the month.

Commodities

  • Iron-ore futures in Dalian fell 5.4 percent to 429.5 yuan a ton, the lowest since Nov. 7.
  • Gold was little changed at $1,262.69 an ounce, extending a 0.4 percent loss Tuesday.
  • Oil dropped 0.6 percent to $49.35 a barrel after retreating 0.3 percent in the previous session. OPEC and Russia’s deal last week to extend output limits through March was met with a selloff as it didn’t include deeper cuts, a plan for the rest of 2018 or a new ally.

Bonds

  • The yield on 10-year Treasuries rose two basis point to 2.23 percent, after declining four basis points in the previous session.
  • Benchmark yields in the U.K. rose one basis point, after a drop of two basis points Tuesday.
  • Australia 10-year yields fell less than one basis point to 2.39 percent.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

UK Oil

BP started a project in the U.K. North Sea that will restore production halted since 2013 and help double the company’s output in the area by the end of the decade.

BP and its partners budgeted 4.4 billion pounds ($5.7 billion) for the Quad 204 project, which involved building a new floating production and supply vessel and redeveloping the aging Schiehallion and Loyal fields. Output from Quad 204 will ramp up to 130,000 barrels of oil a day this year, the London-based company said in an emailed statement Monday.

The producer plans to double its U.K. North Sea output to 200,000 barrels of oil equivalent a day by 2020, the company said. Volumes from the region, one of the world’s most expensive areas for finding and extracting oil, have shrunk in the past decade as older fields deteriorated and exploration spending dropped with crude’s three-year decline. BP partner Royal Dutch Shell Plc said earlier this year that it was selling a majority of its North Sea positions.

Among those divestments, Shell agreed to reduce its interest in the Schiehallion field, where it owns a 55 percent stake, while BP has 33 percent and Siccar Point Energy 12 percent. Once the deal is completed, Shell will hold 45 percent.

The Schiehallion and Loyal fields stopped production in 2013 as the sites needed redevelopment, new wells, replacement of infrastructure on the sea bed and a new production vessel. The new ship, the Glen Loyal, is 36 percent owned by BP, which is the operator, 54 percent by Shell and 10 percent by Siccar Point. The partners intend to drill 20 new wells there.

BP’s shares rose as much as 0.8 percent and Shell’s B shares added as much as 0.7 percent in London trading, in line with the gain in the Stoxx Europe 600 Oil & Gas index.

Quad 204 is the third of seven new projects BP plans to start this year. The company will restore its total oil and natural-gas production to about 4 million barrels a day by the end of this decade, a level it was at before the disastrous Gulf of Mexico oil spill in 2010 forced it to sell a third of its assets, Chief Executive Officer Bob Dudley said May 17.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

Oil Bears

U.S. oil prices fell nearly 4 percent Wednesday, reaching a session low of $50.28 per barrel and marking their biggest daily percentage decline since early March, as inventories posted a less-than-expected decline for the week.

US Crude Futures closed the day down 3.76 percent, trading at $50.44 per barrel and hovering only slightly above the key $50 level, while Brent Crude futures dropped nearly $2.30 to trade around $52.70 a barrel.

Earlier on Wednesday, the U.S. Energy Information Administration (EIA) said U.S. crude stocks fell 1 million barrels on the week, a bit less than anticipated. A surprise build in gasoline inventories despite heavier refining activity, along with an increase in U.S. crude production, largely pushed prices lower.

“[Wednesday’s] crude drawdown was not as large as expected,” John Kilduff, founding partner at Again Capital, said in an interview Wednesday. “There was also a large jump in refinery capacity utilization ahead of the peak summer driving season. That’s weighing on the perception of the [EIA] report.”

“In other words, production of these refined products is expected to rise, increasing inventories.”

Kilduff also noted that U.S. daily production increased to 9.25 million barrels per day. “That’s another bearish sign for oil prices.”

The selling intensified into the close on some maneuvering by traders.

U.S. crude for May expires Thursday, and traders are dumping their oil contracts ahead of that, one analyst also noted.

“Some of the people who picked up contracts below $50 decided to run out ahead of expiration,” said Gene McGillian of Tradition Energy.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) has had a difficult time reducing a global crude glut, as supply remains high in parts of the world, particularly the U.S.

“There’s a lot of talk the (OPEC) agreement is going to be extended, but we have a full month to go before the (OPEC) talks are held,” McGillian added. “The market has a hard time sustaining itself within striking distance of the year’s highs.”

U.S. inventories now sit at 532.3 million barrels, only down about 3 million units from the record reached in March.

Energy stocks dragged the stock market down further Wednesday with the SPDR Energy ETF falling to its lowest level since November.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

Buy Gold

Gold posted a breakout session Tuesday as investors took risk positions off the table as geopolitical tensions rose.

Futures on the precious metal jumped 1.6 percent during the regular session, bringing their year-to-date gain to above 10 percent. The metal kept going higher in after-hours trading with the futures reaching an intraday high of 1,277.40, which was their highest level since Nov. 10.

Gold futures also surpassed their average price of the last 200 days, a common measure used by technical analysts to determine a trend.

Short and sweet today, buy gold.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

Oil Market Movement

Oil’s plunge is bringing some excitement back into the market.

As futures in New York slipped to the lowest since OPEC’s output deal in November, options trading surged and signaled the biggest bias toward a price decline in six weeks. That’s a stark departure from last month, when the West Texas Intermediate benchmark traded at the narrowest price band since 2003.

Futures had been trading between about $50 and $55 a barrel this year as the Organization of Petroleum Exporting Countries and 11 other major producers implemented historic supply cuts to help rebalance the market. But shale producers aren’t helping. A drilling revival in regions like the Permian Basin of West Texas and southeastern New Mexico has pushed U.S. crude inventories to record highs, and production topped 9 million barrels a day.

WTI for April delivery slumped 2 percent to settle at $49.28 a barrel, the lowest level since November 29. On Wednesday, the U.S. benchmark broke below the 100-day moving average, a key technical level, also for the first time since late November. Futures are down 7.6 percent this week.

Options on WTI saw 570,934 lots traded as of 5:01 p.m. in New York, set for the second-highest volume ever, according to preliminary data compiled by Bloomberg. WTI crude futures volume was at about 1.57 million on Thursday, following 1.76 million on Wednesday. The most-active WTI options traded Thursday include April $50 calls, April $48 puts, April $51 calls, April $55 calls and April $47 puts.

For now we would say keep your powder dry but watch this space.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd