Where the last several weeks were pretty volatile for prices, this past week has, mercifully, been somewhat tame. Oil prices will definitely finish out the week on a downward note, but it appears that the build in storage isn’t as much cause for alarm as is typically the case.

While generally inclined to put the relative quiet in the markets to the start of the NFL season this weekend, the reality is that market participants are going to require several weeks to assess the overall space as we wind down the peak demand driving season and U.S. refineries reduce utilization to perform critical turnaround activities.

With the low input prices, U.S. refineries have been running virtually flat out for the last several months, but even that relentless profit seeking has to take a break at some point to make sure the plants are in working order.

It is not unreasonable to expect some price volatility in the coming months as this lower utilization is reflected in inventory builds (tpyical of this time of year), however this is offset again this week by another significant drop in reported lower 48 oil production numbers.

And all things being equal, this is the first week in a long time that hasn’t featured the latest drastic economic news out of China or runaway Fed speculation. Expect that to pick up.

Following up on the discussion of prices and forecasting, I dug up this gem earlier this week from the Calgary CFA Society Forecast Dinner held in late January 2015.

To set the scene, this is an annual dinner held by our local CFA Society, attended by about 1500 of Calgary’s financial and investment community who’s who, at which 2 or 3 high profile analysts are asked to forecast markets and key indices for the upcoming year for the audience at large. A sideline of this is a forecaster of the year ballot for each attendee and some pretty healthy table betting.

At the time of the dinner, the price of oil was hovering in the mid-$40s and the energy community was up in the air on whether to be optimistic or throw in the towel. At any rate, attached is a photo of my ballot, which I have compared to the other ballots at our table. It is interesting to note that I was the most pessimistic of our table of 10. After a surprisingly short deliberation, I am going out on a limb and am going to stick with the commodity price prediction as written if only because it is contrarian. Interested in hearing what the collective group here is thinking as well. And yes, I realize my stock picking is lousy.

Aside

Seven years ago today, the price of oil was $100 a barrel, the price of natural gas was $7.25 an mcf and the global financial market was in the process of heading off a cliff. And I couldn’t have cared less because my second daughter was born. Happy 7th birthday Lu!

Prices as at September 11, 2015 (September 4, 2015)

• The price of oil traded in the $44 to $46 range during the week before settling at the lower end
  • Storage posted a modest but surprise increase (yay imports! Thanks again Canada)
  • Production decreased
  • Markets were generally calmer than in the past month or so, likely a combination of little news and a short trading week
  • The rig count decreased
• Natural gas rallied marginally during the week primarily on weather

• WTI Crude: $44.77 ($46.01)
• Nymex Gas: $2.696 ($2.653)
• US/Canadian Dollar: $0.7545 ($ 0.7537)

Highlights

• As at September 4, 2015, US crude oil supplies were at 458.0 million barrels, an increase of 2.6 million barrels from the previous week and 99.4 million barrels ahead of last year.
• The number of days oil supply in storage was 27.8, ahead of last year’s 21.8.
• Production decreased to 9.135 million barrels per day from 9.218 with lower 48 decreasing by about 200,000 barrels (and largely ignored by the market) and Alaska prodcution jumped by 100,000. Production last year at the same time was 8.607 million barrels per day.
• As of September 4, 2015, US natural gas in storage was 3,261 billion cubic feet (Bcf), which is 4% above the 5-year average and about 17% higher than last year’s level, following an implied net injection of 68 Bcf during the report week.
• Overall U.S. gas consumption decreased by 0.9% this week, with a 1.9% decrease in industrial use leading the way
• Oil rig count at September 4 was down to 652 from 662 the week prior.
• Natural gas rigs drilling in the United States was down to 196 from 202.
• As of September 8, the Canadian rig count was down to 167 (22% utilization), 120 Alberta (23%), 34 BC (41%), 10 Saskatchewan (8%), 3 Manitoba (16%)). Utilization for the same week last year was 48%.

Drillbits

• CNRL announced a 10% wage rollback for its corporate staff
• Nexen was allowed to do a partial restart at its Long Lake facility.
• The NFL season kicked off with the New England Patriots beating the Pittsburgh Steelers. Accusations of cheating and headset signal manipulation by the Patriots emerged soon afterwards. While entirely neutral on this matter and not a Patriot fan, isn’t enough enough? Just admit they’re better and that you need to play harder and smarter if you want to win.
• The Bank of Canada left its benchmark interest rate unchanged at its policy meeting on signs of stability in the economy
• Canada Election Watch:
  • Conservatives – trying to convince Canadians that more of the same is the way to go and that since the recession may already be over, it makes no sense to look at the platforms of the other guys because sheesh, are you dumb?
  • Liberals – trying to convince Canadians that only they can recklessly spend our way out of a recession that may already be over
  • NDP – trying to convince anyone in Ontario (is anyone listening?) that they aren’t Bob Rae and that only they have the austerity chops to manage Canada through the recession that may already be over. And by austerity, they mean tax hikes on high income earners and sspending hikes.
• Drumpf Watch – still ahead in the polls. This past week’s target – Rivals Carly Fiorina and Ben Carson. Next week – primary debate. Who’s watching?