Change at The Pump. February 3, 2017

Transcription

1 Change at The Pump. February 3, 2017 Powerline Petroleum We provide independent research, consulting and hedge execution resources for petroleum producers, distributors and retail sales outlets. We help clients hedge commodity price risk, protect budgets, and enhance profit margins through the use of customized financial tools tied to your physical volumes. Darren Dohme: PH:

2 Disclaimer (c) 2017 by Powerline Group, LLC. Reproduction or electronical transmission to other companies or individuals in any form is strictly prohibited without written permission of Powerline. This material has been prepared by a sales or trading employee or agent of Powerline Petroleum, LLC and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not rely solely on this communication in making trading decisions. Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, the market commentary in this communication should not be considered a solicitation. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Powerline Petroleum, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guaranteed that the advice we give will result in profitable trades.

3 OPEC Said to be 80% Compliant. Overall, the Organization of the Petroleum Exporting Countries achieved 82 percent compliance with its promised production cuts, well above most market forecasts.

4 Several Different Analysts See Significant OPEC Cuts. OPEC supply to fall by 900,000 b/d this month: Petro-Logistics. Oil shipments from OPEC are plunging this month, according to tankertracker Petro-Logistics SA. Saudi Arabia has said more than 80 percent of the targeted reduction of 1.8 million barrels a day has been implemented. All the signs are pointing to a pretty significant OPEC cut, head of commodities research at Societe Generale in NY Jan 29 th. OPEC, Russia spare Asia oil supply cuts in fight to hold market share. A Reuters survey on Tuesday found Iraq lowered output by 200,000 barrels per day (bpd) compared with December - almost all the 210,000 bpd reduction it was supposed to make under the deal

5 US Crude Oil Production. US Crude Oil Imports. US Crude Oil Exports.

6 Crude oil Futures in Blue- US Oil Exports in Red.

7 Recent Investment Distirbution. Permian Basin producers make money at the current crude price CLc1 of about $53 per barrel because of the region's sprawling pipeline network, abundant labor and supplies, and warm winters that allow yearround work. Most of America's shale industry needs prices above $60 a barrel to justify new projects and expansion. Oil has not hit that price since June The demand for West Texas acreage has sent land prices soaring in the last two years. One deal in December 2016 priced out at more than $63,000 an acre, double the price paid in similar deal earlier that year.

8 CFTC Commitment of Traders Money managers WTI netlong positions rise to record: CFTC.

9 Middle East Risk Premium Iran finally confirmed they conducted a ballistic missile test, but maintain it does not violate a U.N. Security Council resolution. However, the White House came out yesterday with a tough stance saying it is putting Iran on notice for its defiance of their 2015 nuclear deal. The Administration s reproach comes as Republicans in the House just announced plans to introduce legislation to impose new sanctions on Iran due to their support for terrorism, human rights abuses and ballistic missile program. Following President Donald Trump s ban on travelers from seven predominantly Muslim countries, the Iranian government announced it would stop using the U.S. dollar as its currency of choice in its financial and foreign exchange reports, the local Financial Tribune reported. 3- days ago Yemen rebel 'suicide boat' attack kills Saudi sailors. Pentagon believes the attack was meant for US Frigate ship.

10 Global Oil Supply Disruptions are at Major Low Point. CITI Research: Global oil balances are tightening in the short term, but in the medium term, shale and other unconventional oil sources impose a $65 soft ceiling, while rounds of OPEC versus shale market-share battles could mean $40. The early period is modestly bullish, in the main due to potential OPEC country-level disruption risks, and OPEC holding the line on production cuts, but unconventional supply boosted by short-cycle shale should be ample to cover these risks; in fact, without OPEC disruptions, the global balance could be more weighty looks tight due to the OPEC production cut agreement, and so far, OPEC countries, particularly Saudi Arabia and the GCC seem to be toeing the line.

11 11 ½ YRs Since Last Major Hurricane. U.S. Hits Record 137-Months (11.4 years) Since Last Major Hurricane Strike. The last major hurricane to make landfall on the continental United States was Hurricane Wilma, which slammed into Florida on Oct. 24, months ago. 3-Day Bar Chart of Crude Oil. Text Book Bull Flag.

12 Gasoline Outlook: Gasoline demand in Red.

13 Refinery Runs May Drop 2% More to Take Gasoline Glut Off Market.

14 Gasoline Exports

15 Gasoline Ending Stocks.

16 Retail Gasoline Prices Drop 23 Consecutive Days. National Retail Gasoline prices has declined for 23 consecutives days. Demand estimates from the Energy Information Administration are eye-opening: gasoline demand down 7.7% so far in 2017 versus last year, barely making it past 8 million barrels per day, down nearly 20% versus peak summer demand season.

17 Retail Gasoline Margins in Orange. Gasoline Futures in Black. When futures price goes up, retail margins go down and retail margin improve when futures price goes down.

18 Retail Prices VS Futures Price Rally. Gasoline Futures

19 Gasoline 4 th Quarter Seasonal Low Dates. and Rally into 2 nd Quarter.

20 Retail Gasoline Prices Have an 98% Correlation to NYMEX Gasoline Futures Price. Retail gasoline prices have a 98% correlation to the NYMEX Gasoline Futures Price.

21 Retail Fuel Price Change from this Time Last year.

22 April 2017 VS April 2016 RBOB Gasoline Futures

23 Managed Hedge Program 480 Minute Chart: March RBOB Gasoline Futures.

24 Will Electric Cars Displace Gasoline Demand. Today, we don't have the generation capacity to displace a significant amount of gasoline or diesel used for transportation. Example: In 2015, there was a total of 3.06 trillion vehicle miles traveled in the US. A Toyota Rav4 EV uses about 45 kwh per 100 miles traveled. So, (3.06 trillion mi/yr) x (45 kwh/100 mi) x (1 yr/8760 h) = 157 million kw or 157,000 MW needed to replace all transportation miles in the US. A typical modern coal fired plant or nuclear generating station generates about 1200 MW of electricity. To replace all current transportation miles driven with RAV4 EV miles, would require up to 131 new large electrical generating plants in the US (157,000 MW/1200 MW/Plant). Even replacing 25% of the current miles driven in the US with RAV4 EV miles would require the equivalent of 33 new large generation facilities. This estimate is probably a little higher than that which would actually be required because some of the EV charging would occur during off peak hours when there is some spare generation capacity. But, you get the idea. In addition to building new generation capacity, we would also have to build more transmission & distribution infrastructure to deliver the power generated to where it is needed. I could not find data on the total global miles driven, so I cannot provide an estimate of the number of new power generation facilities needed globally, but I would note that there are about one billion (1B) vehicles running around the globe and only 250M (25%) of those vehicles are in the US. I would also note that over the next 24 years, the total global miles driven will significantly increase as countries with lower vehicle ownership rates increase their living standards and people buy more cars and light trucks. The bottom line is that many countries are already challenged to provide reliable electrical power to their populations and those power delivery challenges in undeveloped countries are already growing without a large scale shift to EV usage. The new power generation and distribution system requirements by the year 2040 with a large scale shift to EV usage would be nothing less than daunting.

25 Looking For a Managed Hedge Program Powerline Petroleum We provide independent research, consulting and hedge execution resources for petroleum producers, distributors and retail sales outlets. We help clients hedge commodity price risk, protect budgets, and enhance profit margins through the use of customized financial tools tied to your physical volumes. Darren Dohme: Darren@powerlinegroup.net PH:

26 Retail Gasoline Margins in Orange. Gasoline Futures in Black. When futures price goes up, retail margins go down and retail margin improve when futures price goes down.

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