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Another Down Day

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The oil market settled lower on Wednesday, dragged down by a flagging RBOB contract despite a moderately bullish Department of Energy (DOE) inventory summary. Since dipping and settling below $40 early last week, WTI had risen by over three dollars, though that advance was surely limited by the suddenly struggling NYMEX gasoline market. Wednesday’s negative settles were brought on almost entirely by the move lower in RBOB, as early strength in WTI quickly disappeared after the DOE report. In the near term, front month WTI seems to be content to trade in a small range just above $40. Read more

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OPEC Mutterings Spur Bullish Action

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Boosted by murmurs and conjecture from some unhappy OPEC members, the oil market rallied on Monday with front month (September) WTI closing at its highest level in two weeks. After the early summer rally that boosted oil into the low $50s, the market slid through July and prices are back to levels last seen in the spring when OPEC hawks voiced similar ‘woe-is-me’ rhetoric. While the next official OPEC meeting is still three months away, continued “low” prices (in the cartel’s mind, at least) could prompt more rumors and press conferences. Either way, the market rallied on this talk (ex-RBOB) and has gained over three dollars since bottoming out last Tuesday. Read more

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Strong Jobs Report Changed Little

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Despite a stronger-than-expected jobs report, the oil market ended the day on Friday relatively unchanged with some stability just above $40 in the front. The Department of Labor, in its monthly employment review, reported more than 250k jobs were added to the economy in July, the strongest report in recent months. Such news is bullish for oil demand, and price. However, other than a mini-spike not long after the report was published, the oil market seemed to discount the news. After a few weeks of price malaise, oil did find some firm footing last week (after settling below $40 for the first time in nearly four months) and did manage to post a gain for the week. Oil supply builds could become the norm in the coming weeks, however, as refiners may trim activity due to economics (poor margins) and maintenance (post-summer gasoline season). Read more

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Oil Prices “Heat” Up a Second Day

Oil prices rose for the second straight day, the first time that has happened in nearly three weeks, continuing the subtle flat price bounce that occurred immediately following the release of this week’s Department of Energy (DOE) inventory summary. The Wednesday rally was led, not surprisingly, by RBOB (and the reported three million barrel draw in gasoline stocks) but yesterday’s move was ushered higher, surprisingly, by the Heating Oil contract. The sum of the two days’ worth of gains is WTI up over two dollars, providing a respite to the oversupply conundrum that has pressured prices lower over the past several weeks. Read more

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Gasoline Leads the Way

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Front month WTI reclaimed the $40 market on Wednesday, as the market was led higher by a strong RBOB contract and by technical buying in defense of a dropping market. The Department of Energy (DOE) inventory report was moderately bearish overall, with an expected large build in crude oil stocks (again), though the market instead chose to focus on the very large gasoline draw. Recent comments by energy companies about refinery margins and operations indicate looming (or perhaps ongoing) run cuts, which should manifest builds in oil stocks (less demand) and draws in products (less supply). The DOE data yesterday matched that hypothesis, though it was only one week’s worth of data. Read more

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Oversupply Continues Bearish Action

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After trading higher early in the day on Tuesday, oil prices reversed course to close lower and settle below $40 (WTI) for the first time since April. The early bounce, likely technically driven off of $40 price support, recouped a good portion of Monday’s loss though the day’s fairly stunning turnaround. This does not portend well for the bulls. While the NYMEX continues to struggle on the heels of fully laden supply and not-as-much gasoline demand support, cash differentials in several parts of the country (most notably the Chicago area and the Gulf Coast) are well supported by refining glitches. The Department of Energy (DOE) will publish its weekly inventory summary this morning, with expected draws in all three major product categories. The last few DOE reports have been bearish, including builds in gasoline, which has certainly contributed to the market’s extended malaise. Read more

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Will $40 be Breached?

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Oil prices traded down to fresh near-four month lows on Monday, pressured by more evidence of lingering oversupply and strength in the dollar. Last week, the front month (September) WTI contract fell by more than two dollars, putting it within shouting distance of the psychological $40 marker (finished products suffered similar losses during the week). One of the data points that had been supporting oil prices through the spring is strong gasoline demand. However, the Government’s energy watchdog (EIA) published data last week that indicated May gasoline demand was some two hundred thousand barrels per day weaker than previous estimates – not bullish. On Monday, the market was greeted with news that OPEC has continued to increase its output (July over June), which will further saturate the physical oil market. As such, prices were soft all day and threatened to close below $40 for the first time since the infamous “Doha No-Ha” meeting in April (which would be very negative for near-term price action). Read more

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A Pause in Downward Price Action

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The downward price action took a pause on Friday as morning weakness reversed and the energy market moved higher at end the day. Most of this increase was due to technical and simple statistics, as the percentage chance of seeing a seven day decline in any commodity or investment is very slim (before Friday we were down six straight days). However, overall the market has a very bearish tone. Hedge funds length, as reported by the Commodity Futures Trading Commission, continues to cut long holdings. Further the U.S. Dollar remains at elevated levels, which should weigh on commodities. The overall theme of ample supply continues to be a driving force, and something that will not be cleaned up overnight. Read more

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A Refined Products Glut Continues

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Yesterday, markets continued their ratable march lower. Like previous days, the market started somewhat positive as overnight trading kept the contracts in the green, but U.S. hours pushed it lower. Front month WTI has finished in the red for six consecutive days and seven of the last eight sessions. As a result of the recent weakness, front month ULSD is at its lowest price level since April 20th. As the theme of oversupply continues, the market seems similar to the weakness seen last year. Only this time it is a refined products glut that is grabbing attention. As a result of the market’s view that ULSD is well supplied, we are seeing large carry values between months (an average of over 2 cents per month out to January), which incentivizes suppliers to store barrels. Read more

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DOE Report Points to a Bearish Situation

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The only real change to the market yesterday was that the calendar flipped a day. After the release of the Department of Energy’s weekly data report, markets were quickly sold off as the downward price action continued. Front month WTI has finished lower five straight trading sessions. Seven of the last eight have finished lower as well, as the continuing theme of an oversupplied market continues. Yesterday’s WTI settle of $41.92 is $9.75 lower than the June 9th WTI price peak. After falling below a key WTI support level early in the week, we are quickly approaching another level. It will be interesting to see how price reacts around the current levels. Read more

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