On November 27, the nation’s attention will descend on the heart of Texas for another classic NFL Thanksgiving matchup between the Dallas Cowboys and Philadelphia Eagles. Cheap seats on StubHub are currently selling for $150 and up.

Also on Thanksgiving Day, but on the other side of the world, the oil industry’s attention will descend on Vienna, Italy, for the latest meeting between members of the Organization of Petroleum Exporting Countries. Tickets are not available, but if they were, they would be well worth the price of admission.

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Analyst Commentary

Raymond James Equity Research (11.13.14)

This week's petroleum inventories update was bullish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates) fell by 2.7 MMBbls, versus consensus estimates calling for no change. The largest delta came from the change in crude stockpiles this week, with the decline of 1.7 MMBbls in stark contrast to expectations for a build of 1.1 MMBbls. While Cushing crude inventories continue to rebuild (up 1.7 MMBbls this week), Gulf Coast inventories reversed course and fell by 2.8 MMBbls. Total petroleum inventories were down 5.2 MMBbls.

Refinery utilization rose to 90.1% from 88.4% last week as maintenance season comes to an end. Total petroleum imports were 8.7 MMBbls per day, up slightly from 8.6 MMBbls per day last week. On a four-week moving average basis, imports are down 0.8 MMBbls per day vs. last year. Total petroleum product demand rose 1.2% after last week's 2.3% decline, and is essentially flat on a four-week moving average basis.

Amid a rapidly shifting macroeconomic and geopolitical backdrop, there has been plenty of volatility in oil prices over the past year - including an exceedingly sharp correction from August through the present, taking prices to four-year lows. The bounce in the first half of 2014 was mainly driven by improved economic data as well as geopolitical instability (Libya, Syria, South Sudan, Iraq). More recently, negative datapoints have come out of several key economies, including China and the euro zone. Demand continues to decline for OECD countries in aggregate, and demand growth in China and other emerging markets is slow, in part due to declining oil intensity. On the supply side, non-OPEC supply is trending up, driven largely (though not exclusively) by robust growth in the U.S. Of course, the wildcard remains the possibility of supply disruptions (above and beyond the lingering outages in Libya), as evidenced by the crisis in northern Iraq (although it has had virtually no impact on oil production thus far). The geopolitical risk premium in oil prices has clearly subsided. Concurrently, strength in the U.S. dollar has further pressured oil prices. Balancing all of the above variables, last month we lowered our 2015 Brent forecast to $90/Bbl (vs. $110/Bbl previously). For WTI, we project $75/Bbl in 2015 (vs. $85/Bbl previously), which reflects our concerns about constraints in domestic light sweet refining capacity, and in the absence of major changes in crude export policy. For some context, the 12-month futures curve is currently at $82.84/Bbl for Brent and $75.72/Bbl for WTI.  


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