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FUELS By Keith Reid heating Season Fuels Outlook Update A major development has rocked crude markets since the article came out last month A significant development has occurred since we released last month's Heating Season Fuels Outlook for 2014—a crack has appeared in OPEC's price support wall. Historically, a lack of long-term dis- cipline in OPEC was the order of the day for many years. Regardless of a commitment to hold prices at a certain level, invariably a member (often Venezuela) would decide to cheat and the overall commitment among other members would gradually collapse. That seemed to have changed in the 2000s, with a focus on keeping production controlled to push the highest prices that could be supported short of destroying the economies of OPEC's oil customers. At the start of October, Saudi Arabia indicated that it is apparently more interested in maintaining market share than price, leading to a bump in volatility and downward prices. While this is seen as a significant development much of the original discussion in last month's article still holds true, and in fact this reinforce some of the underlying assumptions about the impact on petroleum markets and politics resulting from the U.S. shale boom. Alan Levine, CEO and chairman of Powershouse®, which provides hedging and price risk management ser- vices, took part in the price report last month, and made the following comments in his firm's Weekly Energy Market Situation newsletter, sent Oct. 20: The sharp selloff in oil prices rested at week end with a slight lift off the lows. October has experienced dramatic reductions in the value of petroleum, based in large part on unexpected events. The markets have known about the build in U.S. inventories of oil and gas; this has been priced into the value of oil and gas. What the markets did not expect were sharp reductions in the economic well-being of Europe cutting into product demand. The markets did not expect Saudi Arabia to change its production policy to support market share at the expense of price. The week ending October 17th ended with broad ranges for products and WTI crude oil. Distillate fuel oil fell to $2.42 during the week, a fourteen cent range. RBOB prices had a similar range. Gasoline's high price was $2.27; its low was $2.135. During the month of October, ULSD lost 29.6 cents in value. WTI gave up $15.12 during the month to date. Brian Milne, the editor of Schneider Electric's MarketWire, a real-time market and news service focused on US oil prod- uct markets, also took part in last month's article. He agreed to a quick conversation on the developments. "Those pressures were building and they've been out there for a long time, but it's almost been taken for granted that Saudi Arabia would just make these production cuts 16 November 2014 | FUeL oIL NeWS | www.fueloilnews.com Photo ©istockPhoto.com/komisar