United States V. The World

This morning the market is trading down by approximately 1 cent on both gas and diesel, while WTI crude sits ever so slightly above the important $47 dollar threshold. Some wonder why the market isn’t feeling more downward pressure this morning, especially after learning that Qatar could be in cahoots with groups like ISIS and Al-Qaeda.

As mentioned in my colleague Jon’s blog yesterday, “Qatar is only responsible for roughly 600,000 barrels per day of crude, which in the big picture is not a lot to OPEC.” Therefore, the market doesn’t seem overly concerned at the moment, however it does not mean it will not weigh on the price floor in the near future.

Maybe the market is trying to hold off on making its next big move until it sees something more concrete that says it should be headed up or down. In my mind, the one thing one thing the market wants to see is the numbers, specifically U.S. production, U.S. exports and inventory storage capacity.

Why are these figures important to the market?

  1. U.S. Production– Has been ramping up despite oversupplied market
  2. U.S. Crude exports– Crude exports are on the rise, roughly double what they were last year at this time (and growing). It’s likely these exports are a response to decreased global inventories resulting from OPEC’s production cuts.
  3. Inventory Reports/ Storage Capacity– We’re seeing domestic draws on crude, as a result of increased refinery run rates. With increased run rates come increased production of refined products, so we should eventually see weakness in refined products markets unless exports step up to offset increased supply.
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