With record inventories nearing full capacity, Phillips 66 dumped crude in unusual front-month deals. For its efforts, Phillips 66 sold crude at spreads yielding negative $2.50 and $2.75 a barrel.
Please consider U.S. Refiner Phillips 66 dumps Cushing Crude, Traders Spy Output Cuts.
U.S. refiner Phillips 66 dumped crude for immediate delivery in Cushing, Oklahoma on Wednesday, sparking speculation that the move reflected advance warning of looming output cuts amid sluggish winter demand and record inventories.
The unusual sales of excess oil added pressure to the March/April WTI futures spread, with the front-month discount widening to as much as $2.37 a barrel on Wednesday, the most since November.
It was unclear how many barrels one of the largest U.S. independent refiners sold, but three traders confirmed at least two deals traded at negative $2.50 and $2.75 a barrel. Two sources said a second refiner was also looking to offload barrels but transactions were not confirmed.
The so-called cash roll, which allows traders to roll long positions forward, typically trades in the three days following the expiry of the prompt futures contract. The trading period for February-March contracts concluded almost three weeks ago.
U.S. Energy Information Administration data on Wednesday showed inventories at the Cushing, Oklahoma delivery hub hit a record 64.7 million barrels last week – just 8 million barrels shy of its theoretical limit – stoking concerns that tanks may overflow in coming weeks.
One trader described the market as a “bloodbath.”
If Phillips 66 does cut refinery runs, it would be the third refiner to capitulate amid record gasoline inventories and negative margins.
Earlier on Wednesday, sources said Delta Air Lines’ Monroe Energy refinery near Philadelphia had decided to cut output by 10 percent at its 185,000 barrels per day (bpd) refinery due to economic reasons.
On Tuesday, sources said that Valero Energy Corp was planning to cut gasoline production at its 180,000 bpd Memphis, Tennessee, refinery by about 25 percent.
You need somewhere to put the crude if you’re cutting runs.
Front Month Discount
The March-April spread was negative $2.54 as of 2016-02-11 12:34 AM US Central.
Phillips dumped oil in “unusual sales of excess oil“. For its efforts, Phillips received spreads of negative $2.50 and $2.75 a barrel.
As I type, oil broke the $27 price suppot, falling as low as $26.72 a barrel.
Mike “Mish” Shedlock
Phillips 66 refineries benefit from lower crude prices. This one sale will pay handsomely for Phillips 66.
How do they benefit from lower fuel prices? This is a deflationary cycle that shows no bottom. Seems a bad time to bet on higher prices, but then again, I have never been much of a gambler.
I said Phillips benefits from lower CRUDE prices. Phillips is a refiner not a driller. Crude is an input cost for Phillips. If Phillips can frighten down the cost of crude with a few trades then all to the good for Phillips.
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sounds like bottom in oil market is very near.
Futures are still expecting higher prices in coming months…..
Bottom is not close…………. Supply up…. Demand slumping and going lower
Oil producers made budgets based on high price… now MUST sell to fund needed cash flow… They won’t stop pumping until cash flow from production is negative..
“Picking bottoms are for monkeys!” – Hugh Hendry
Enjoy following WTI down into the teens!
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We cannot go below o zero. I have been a buyer of oil stocks since $45.00 per barrel.
I said the same thing about interest rates.
This story is just getting started. Demand has been crushed.
Shipping: ships sitting in dock use no fuel, ships at half speed use a lot less.
Trucking: In the USA all the fracking sand that had to be moved. All the fracking water.
Oil Rigs and franking motors. Rigs 2000HP diesels and the fracking motors 5000HP diesels.
China’s ghost cities lots of trucking and heavy machinery
Mining companies lots of heavy equipment idle.
Demand has not been crushed. Too much supply. The Saudis are trying to put the weaker world producers out of business to protect their supply position. It’ll reverse at some point and all the oil stock buyers at today’s prices will be dancing a jig 5 or so years out. I know 5 years is eternity on Wall Street, but be patient and see.
Filled up last night in Crawfordsville, IN for 1.18.
Brad Rhoade
http://www.glfm.us
Mb: 317.753.2010
Of: 317.773.7697
The only thing that really matters is if the gamblers lose their nerve. If they decide to cash out to preserve their remaining wealth, it’s over. There have been lots of profit in these markets over the last few years, so I’m sure there are plenty of calculations being worked to determine where their pain thresholds actually lay. One can’t help but think it’s not far off now.
I, uh, guess your post last month ‘is a bottom forming in crude?’ – when WTI in mid $30s – no longer operative.
oil will go lower longer than most can imagine.
PSX has been one of the very few oil companies which has had its stock price hold up during this mess. Being a midstreamer they benefit from the lower oil prices. They have certainly been doing what they can to move product. About an hour west of Mish, the Phillips stations have usually been the lowest priced in the Rock River Valley for quite some time. I paid $1.35 yesterday at the Phillips on Rt. 26 in Dixon.