Page 1

Type to enter text


TEMPLETON FINANCIAL GROUP

2016/2017

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 3

PRODUCTION DECLINE?

PAGE 4

REFINERY TO THE WORLD

PAGE 5 GLOBAL MISHAPS

PAGE 6 SOURCES

When the history of the contemporary auto

confidence, falling gas prices and cheap leases

industry is written, 2014 and 2015 will go

all helped unleash pent up demand that sent

down as years of contrasts. Deluged by safety

Americans into dealers’ showrooms the last

recalls, auto manufacturers faced the ire of

two years. With these record sales has come

regulators and consumers. Yet buyers did not

record consumption of finished motor gasoline

stay away and instead gave the American auto

according to the EIA. It is our opinion that

industry its best sales years in nearly a decade.

this will lead to an even stronger 2017.

The result, announced each January, were a

Global Oil demand seemingly bottoming in

crushing sales success: Nearly one million

the second quarter of 2014, has since been

more vehicles were sold in the United States

steadily rising, with year over year gains.

both years than in 2013. According to the

Global oil demand is forecasted to grow by 1.3

tracking company Autodata, 16.5 million new

mb/pd according to the International Energy

autos hit the streets for 2014, and over 17

Agency in 2016. Product markets, meanwhile

million in 2015; the highest number since the

have proved unexpectedly strong. Not only

record of 16.94 in 2006, and it looks like 2016

have product prices lagged those of crude

could surpass those numbers. As of end of

during the selloff we experienced, but have

September U.S. Auto sales are on pace for

moved ahead in the recovery. Because refining

nearly 18 million motor vehicle sales, which

margins have been remarkably firm, this has

would be another record.

supported unexpectedly strong throughputs.

Analysts cited a host of reasons for the growth; a rebounding economy, increasing consumer

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.


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

2016/2017

Type to enter text

Source: Baker Hughes

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 techniques, further production increases are possible. Horizontal drilling combined with an increasing number of hydraulic fracturing stages in tight formations 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 rates have steadily 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 the fall of 2014 we have seen a significant drop in rig count from 1608 in October 2014 to as low as 315 May 2016, currently 452 which equates to an approximate 72% decline. It is our opinion that this will eventually have a heavy impact on crude oil supplies domestically, which could make the cost of crude more expensive, and in turn the refined products as well. If this low rig count trend remains, this price change could happen rapidly.

Food For Thought: In an interview with Jim Rogers in Singapore October 1, 2015, Rogers stated “When there’s bad news and something doesn’t decline, it usually means it’s at a bottom and will be turning”. Jim Rogers, who correctly predicted a commodities rally in 1999 also stated. “Whether we’re at a turning point or not, I don’t know yet, and I’m watching this very closely.”

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

2016/2017

Refinery to the World 1. The U.S. has become

as the East Coast) still

the world’s fueling

rely on imports of

station, sending more

refined products, in

gasoline, diesel, and

aggregate the U.S. is now

other refined petroleum

exporting more refined

products abroad than

products than it is

ever before. Exports of

importing, and these

these fuels have almost

trends are expected to

tripled in 10 years.  

continue.

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 P: 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.


TEMPLETON FINANCIAL GROUP

2016/2017

Global Mishaps Supply disruptions are a feature of world oil markets that cause substantial uncertainty and can immediately impact market prices. Supply 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 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 the U.S. and Russia are actively involved in Syria against the rebels,which is just another hot spot with refugees pouring into Europe by the thousands. These events could create a significant amount of instability in the region and potentially heat up the area where a significant amount of the world’s oil is produced. Although the next event in this is unknown, it seems fair to say that the conflicts will continue and could possibly get worse, which could make oil prices move significantly faster.

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.autoalliance.org/auto-marketplace/sales-data http://online.wsj.com/mdc/public/page/2_3022-autosales.html http://www.bloomberg.com/bw/articles/2013-11-14/2014-outlook-the-udot-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-jumpfor-2014.html?_r=0 https://www.iea.org/oilmarketreport/omrpublic/ http://www.businessinsider.com/baker-hughes-rig-count-october-16-2015-10 http://online.wsj.com/mdc/public/page/2_3022-autosales.html http://www.bloomberg.com/news/articles/2015-10-02/jim-rogers-says-oil-ignoringbad-news-usually-means-rebound-near Source: Dr. Michael Izady at Columbia University and The Intercept) http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WGFUPUS2&f=W

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 is a member of the

Type to enter text

and a registered Introducing Broker with

5300 West Atlantic Ave., Suite 612, Delray Beach, Florida 33484 P: 866-413-2974 / F: 561-499-4018 www.TempletonFG.com

Reformulated Blendstock for Oxygenate Blending  
Reformulated Blendstock for Oxygenate Blending