Regrets; they have a few, but then again...
Iran offered regrets for attacking the Saudi Embassy. On one hand, the Iranians seem to be acting a little conciliatory, offering regrets after the United Nations Security Council on Monday condemned their attack on Saudi Arabia's embassy in Tehran following the Saudi execution of Shia cleric Sheikh Nimr al-Nimr on Saturday. Yet Iran’s President said that Saudi Arabia cannot cover its crime by severing ties with Iran. It appears the Saudis are still taking a hard line against dissidents as they are fearful the U.S. won’t have their back in the event of an attack. Oil spiked but later sold off as concerns about China and U.S. manufacturing raised concerns of a slowing global economy.
Yet what really seemed to break the market was a report by the private forecast group Genscape that said that crude supply in the NYMEX delivery point hit an all-time high. They say the record was reached, “In part to increasingly favorable storage economics in connection with a widening 12-month price contango structure for WTI, as reflected in the NYMEX crude futures contract. Capacity utilization at Cushing is currently two percent below the all-time high set in March 2011. Since that time, close to 32mn barrels of storage capacity has been added."
Genscape say that seven operators at the Cushing tank farm are now above 80 percent capacity utilization, indicating that most of their storage volumes are likely merchant, or leased to others, rather than operational. Genscape considers 80 percent capacity utilization to be an operational maximum. These seven owners, representing 31.184 million barrels of operational capacity in total, have only 4.745mn barrels of available capacity. Four terminals are currently 70 to 80 percent full with only 6.302 million barrels of remaining capacity.
Yet the world is still a dangerous place. There are reports that ISIS is attacking Libyan oil terminals and two tanks are on fire.
James L. Williams of WTRG Economics, a legend in the industry, says to also keep an eye on Venezuela. He reports that the opposition led parliament gets seated today. The outgoing parliament seated an imaginary one and Maduro is trying to prevent the new National Assembly from being seated and having a super majority. If Venezuela is going to have an insurrection, this will be the closest since Chavez took office.
Saudi Arabia is cutting prices for oil again. The Saudis cut their selling price for February and this is a sign there will be no let up in the oil production war.
Natural gas is still struggling after U.S. manufacturing data disappointed and winter, while colder, is not really that bad. Manufacturing contracted in December as the PMI (R) registered 48.2 percent, a decrease of 0.4 percentage point from the November reading of 48.6 percent, indicating contraction in manufacturing for the second consecutive month, and is the lowest reading since June 2009.