Oil prices continue to be range bound until the market bulls or bears take control. As of this morning, there were more bullish than bearish factors which is resulting in green across the board for the moment.
On the bullish side, API data came out last night with more bullish forecasts on the inventory situation than what analysts were predicting. API reported a crude draw of 3.2 million barrels vs. a 2.3 million barrel draw expectation, a massive RBOB draw of 4.9 million barrels vs. 0.8 million barrel draw, and a distillate draw of 1.3 million barrels vs. a 0.2 million barrel build.
At 10:30am EST this morning, the DOE report came out and kept the bullish tone train churning. Crude oil stocks fell 6.1 million barrels, RBOB fell 2.3 million barrels, and distillate fell 0.1 million barrels. Cushing inventories fell 1.2 million barrels, refinery runs decreased 0.5% to 93.8% and U.S. oil production remained unchanged at 11 million barrels per day. The market is understandably still trading higher, however, out of the 6.1 million barrel draw in crude oil, 4.5 million of which came out of the West Coast. Sometimes traders discount what happens in the West Coast because they are so dependent on imports. Therefore, we’ll have to see if this rally is sustained once everyone reads through the tea leaves of the report.
On the bearish side of things, we need to watch how much this torrential rain on the East Coast this week will dampen demand and affect next week’s DOE report.
Rain from the outset of this week in the Carolinas, Virginia, and Pennsylvania has resulted in localized flooding and will probably decrease demand of refined products. As this system moves northeast, Accuweather reports that “rounds of torrential rain and serious flooding will continue in a tropical atmosphere in the mid-Atlantic and spread into more territory of the northeastern United States into Thursday.” Although this is a temporary situation, it may cause refined product prices to soften relative to crude as we head into the end of next week.
September WTI currently trades higher by $0.99 to $69.51/barrel, RBOB is higher by $0.0229 to $2.1185, and ULSD is up by $0.017 to $2.1496/gallon.
