- Yesterday saw further declines in the refined products in the front months. January RBOB futures settled down 6.52 cents and the January HO contracts settled down 67 points. Yesterday was also the last trading day for Jan WTI contracts. Trading was therefore very light in the Jan contract, but the Feb contract settled at $35.81 per barrel. Read More
The geopolitical news has gotten louder with France declaring war on ISIS, after their airstrikes in Syria yesterday/Sunday. The market reaction from the aftermath of the attacks in Paris suggests that the global oversupply of crude stands strong, as it has been for quite some time now. How long will the global glut of product trump global market news? I thought this quote from a Commerzbank analyst in Germany was quite interesting; “The fact that France has stepped up its airstrikes against IS positions in Syria obviously increases the geopolitical risks, yet this is unlikely to disrupt oil production in neighboring countries.”
WTI petroleum futures were up significantly early this morning, but more recently slid off once Genscape data came out showing a 1.8mm bbl build on crude at Cushing. Heat and RBOB are currently trading up slightly. Last week ended with a three-day drop in the market; will today end that streak? Downward price pressure was persistent last week despite the U.S. rig count being down (-6) for the 10th straight week, and evidence suggesting that even with a weakened economy, Chinese oil demand has not wavered. The market has been shaking off the bullish headlines and is focused on the abundant inventory levels instead.
The big news in our market stemmed from the Windy City, where the cash market on CBOB and RBOB weakened by 6cts/gal each this past Friday, the first sign of weakness in the Chicago gasoline market since late August. We also saw diesel in Chicago drop 13 cpg last week. Marathon’s refinery in Detroit resumed normal production capacity last week, and BP’s Whiting, Ind. Refinery has been restarting several units. It seems the majority of planned and unplanned outages in PADD 2 have ended. Read More
Despite the global oversupply of oil of approximately 1.5-2.5 mbpd, many traders are still buying. They are doing so even though going long in recent years has resulted in losses over a billion dollars. This buying has pushed the markets enough to provide technical buy signals.
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Yesterday crude closed up $2.74/bbl to $45.94, RBOB closed up $0.0629/gal to $ 1.3501 and HO finished up $0.0595/gal to $ 1.4839. The futures market is volatile this morning after yesterday’s rally, bouncing back and forth from negative to positive.
Following Friday’s reports, there are many mixed opinions on how the market is going to respond next, and technicals are stuck in the middle between support and resistance levels.
A Goldman Sachs research report stated that oil could sink as low as $20/bbl, along with reports that Saudia Arabia does not support an OPEC meeting to discuss production cuts, outweighed the bullish IEA report for most of the day Friday. Brent crude also fell on Monday due to the release of Chinese data showing it is only growing at 4%, which is weaker than expected. This adds to some concerns that lessening global demand may only worsen the surplus of crude.
The EIA’s Weekly Petroleum Status Report was released yesterday. There was a build of 2.6 million bbls on crude inventories, mostly located in PADD 5. The Midwest crude builds are due to the BP Whiting refinery issues. The EIA stated that for refined products, gasoline drew 2.7 million bbls and distillate rose by 0.59 million bbls. According to Thomson Reuters, September WTI lost $1.82/bbl to close at $40.80/bbl. This is the lowest close since March 2, 2009 on front-month WTI. Today is the last trade day for September WTI, therefore the slight rally seen this morning is not a true indicator of the market direction as traders look to remain balanced.
The downtrend continues, as WTI has a lower technical objective of $39.44 if trades stay below $42.03. US Crude futures hit an intra-day low of $41.42 yesterday, which has not been seen since early 2009. A Reuters poll has predicted U.S. commercial crude oil and gasoline inventories will fall by 600,000 bbls and 1.5 million bbls respectively in the latest week. U.S crude stockpiles are expected to rise as refineries prepare to reduce operations for maintenance season. Heat’s $1.5212 objective still remains in place while RBOB has a lower targeted support level of $1.6230 if trades stay below $1.6722.
What the market is going to do next is still unclear. While the trend has been down as of late, all contracts are trading close to flat. Heat has been able to trade up to $1.5741 today, well above the next support level of $1.5212, and WTI is currently trading at $42.44, above the support level of $42.03. However, traders are keeping a keen eye on RBOB; this is the only contract last Friday to stay above the 8-day, but is currently down -$0.0278 to $1.6588. The RBOB mark to watch is a close above $1.6880 which would indicate recovery. Anything below, could spiral down to the next support level of $1.6048.