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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.

The day’s advance was really tied to a 90-minute period in the middle of the day, which saw oil rise by nearly a dollar and the Heating Oil contract move up by four cents. There wasn’t any particular news story that broke in the late morning (preceding the market move) but rather it was simply a case of momentum buying entering the market and staying (or, perhaps, some short covering). Trading volume was somewhat muted, making it easier for strong moves in either direction (August is often a slow month for commodities and equities, with large swaths of global population on holiday). September WTI settled at $41.93, up a dollar on the day. While not far enough above $40 to signifying a strong technical response to the brief breech of forty, the market’s move higher, if extended for a few more days, could lead to a period of calmness in the oil market.
The aforementioned strong Heating Oil contract posted a four cent gain on Thursday, and RBOB was up two cents. Cash market east of the Rockies continue to rise, led by the Midwest markets. Gulf Coast and Southeast rack prices have risen in the past few weeks on a slight clean-up of locale supply overhangs, and by barrels taken out of circulation for long-term storage. Northeast prices have risen on refining cutbacks (soft refining margins).


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