8/20/2015 Market Update

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.

Refinery issues continue to be a large talking point as shutdowns continue to arise. Phillips’s 38,000 bpd hydrocracker remains shut down at the Wood River refinery. Valero is reporting a fire at its Texas City plant, requiring a shutdown of its 225,000 bpd capacity. Marathon had an issue with its 60,000 bpd FCCU at Galveston Bay after a power surge, and they are currently in the process of bringing it back online. All of these Gulf Coast refinery issues combined with the known issues in the Midwest will be playing into the cash market conditions across the board.  Gulf Coast cash markets are reacting as we speak.

Tropical storms are building in the Atlantic and could potentially turn into a hurricane in the Gulf Coast by as soon as next week. This storm will be important to watch and see if it turns into something that could affect the Gulf’s refining capacity and potential.

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