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TEMPLETON FINANCIAL GROUP
2015
Refo r mu l ated B l en d s to c k fo r O x yg en ate Blen din g (RBOB) Demand
CONTENTS PAGE 1 DEMAND
PAGE 2
PRODUCTION DECLINE?
PAGE 3
REFINERY TO THE WORLD
When the history of the contemporary auto
steadily rising, with year over year gains
industry is written, 2014 will go down as a
estimated at around 0.9 mb/d for the fourth
year of contrasts. Deluged by safety recalls,
quarter of 2014 and 1.0 mb/d for first
auto manufacturers faced the ire of regulators
quarter of 2015. The forecast of demand for
and consumers. Yet buyers did not stay away
2015 as a whole has been raised by 75 kb/d to
and instead gave the American auto industry
1.0 mb/d, bringing global demand to an
its best sales year in nearly a decade.
average 93.5 mb/d.
The result, announced in January, was a
Product markets, meanwhile have proved
crushing sales success: Nearly one million
unexpectedly strong. Not only have product
more vehicles were sold in the United States
prices lagged those of crude during the selloff
last year than in 2013. According to the
we experienced, but have moved ahead in the
tracking company Autodata, 16.5 million new
recovery. Because refining margins have been
autos hit the streets, the highest number since
remarkably fir m, this has supported
the record of 16.94 in 2006.
unexpectedly strong throughputs.
Analysts cited a host of reasons for the PAGE 4 GLOBAL MISHAPS
growth; a rebounding economy, increasing consumer confidence, falling gas prices and
PAGE 5 SOURCES
cheap leases all helped unleash pent up demand that sent Americans into dealers’ showrooms last year. Global Oil demand seemingly bottoming in the second quarter of 2014, has since been
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
TEMPLETON FINANCIAL GROUP
2015
Production Decline? Increased drilling and
improved drilling efficiency have led to significant crude oil production increases in the Eagle Ford region in southern Texas. These increases have occurred despite the region's relatively high well decline rates. However, by offsetting the natural declines through the use of new recovery t e c h n i q u e s, f u r t h e r production increases are possible. Horizontal drilling combined with an increasing number of hydraulic fracturing stages in tight for mations like the Eagle Ford typically enhance initial
production rates when compared to past results. These higher initial production rates are often accompanied by initially larger decline rates, before gradually leveling off to a consistent level of decline for the remaining years of the well life. While initial production r a t e s h ave s t e a d i l y increased since 2009, first-year decline rates in the Eagle Ford have fluctuated between 60% and 70%. Most notably, decline rates over the second year of production have steadily increased from 30% for wells drilled in 2009 to nearly 50% for wells
drilled in 2011 and 2012. Since 2013, many producers have been using significantly more proppant (sand or other material designed to keep a hydraulic fracture open) when hydraulically fracturing new wells, which appears to have increased initial production rates, but which was followed by a steeper drop in production.
Food For Thought: In an interview with CNBC, former Shell Oil President John Hofmeister predicts that U.S. oil could skyrocket from the current levels under $48 a barrel to $80 by this fall, just as consumers are getting used to the windfall from lower gas prices. That would force gas prices to double, from the current $2 to a whopping $4 by next winter.
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
TEMPLETON FINANCIAL GROUP
2015
Refinery to the World The U.S. has become t h e w o r l d ’s f u e l i n g
as the East Coast) still
station, sending more
refined products, in
gasoline, diesel, and
aggregate the U.S. is now
other refined petroleum
exporting more refined
products abroad than
p ro d u c t s t h a n i t i s
ever before. Exports of
importing, and these
these fuels have almost
trends are expected to
tripled in 10 years.
continue.
1.
rely on imports of
Unlike crude oil, which is generally prohibited
3. Exports are forecast to
from being exported to
keep rising as European
overseas markets, refined
refiners close, domestic
products are allowed to
crude production rises,
be exported from the
and demand swells in
U.S.
emerging markets. Export destinations for
2. In 2011, the U.S.
U.S. refiners include
became a net exporter of
Mexico, Central and
refined oil products for
South America, and
the first time since World
Western Europe.
War II. While some regions of the U.S. (such
TEMPLETON FINANCIAL GROUP 5300 West Atlantic Ave, Suite 612, Delray Beach, Florida 33484 866-413-2974
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
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TEMPLETON FINANCIAL GROUP
Global Mishaps Supply disruptions are a feature of world oil markets that cause substantial uncertainty and can immediately i m p a c t m a rk e t p r i c e s. S u p p l y disruptions can have an impact because there can be uncertainty surrounding how long the disruptions will last or how quickly other production can ramp up to replace the lost supply. In periods of low excess production capacity it is more difficult to absorb a loss of supply without increases in prices. Of all the factors that can move energy prices, there are perhaps none that are as sudden and potentially explosive as conflict and tension in the key producing areas. Over the years we’ve seen “Global Mishaps” move prices over very short periods of time. For example, in 1990 the invasion of Kuwait put Iraq on the hot seat and energy prices moved dramatically in a matter of months. Then, subsequent U.S. troop build up and eventual attack of Iraqi troops in Kuwait, sent prices on a ride. Both creating enormous opportunity and equal risks. We’ve seen Russia turn
2015
from a cold-war enemy and communist country into a so-called democracy and now Putin is back in the headlines with his annexation of Crimea and fighting in Ukraine. We’ve seen overthrown governments in Egypt and Libya as well as a civil war in Syria. As of this writing, the ongoing terrorism of ISIS continues, while all along Iran pur portedly is backing the Shia rebels in an attempt to overthrow the Yemen gover nment which is being supported by and neighbors Saudi Arabia. So what could be a proxy war between Saudi Arabia and Iran, two of the largest producing oil countries in the world, could create a significant amount of instability in the region. Although the next event in this is unknown, it seems fair to say that the conflicts will continue and could possibly get worse.
UNLEADED GAS (RBOB) Trading Unit Futures: 42,000 U.S. Gallons Options: One NYMEX Division RBOB futures contract Price Quotation In dollar and cents per gallon Trading Hours Open Outcry 9:00 a.m. -2:30 p.m. EST Trading Months Twelve consecutive months Minimum Price Fluctuation $0.0001(0.01cents) per gallon
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
Source page http://www.bloomberg.com/bw/articles/2013-‐11-‐14/2014-‐outlook-‐the-‐u-‐ dot-‐s-‐dot-‐crude-‐oil-‐re<inery-‐to-‐the-‐world http://www.cnbc.com/id/102381893 http://www.eia.gov/todayinenergy/detail.cfm?id=18171 http://www.nytimes.com/2015/01/06/business/us-‐auto-‐sales-‐jump-‐ for-‐2014.html?_r=0 https://www.iea.org/oilmarketreport/omrpublic/
Notes
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