Tuesday August 16, 2016
Oil prices settled higher for the third straight day, continuing the market's momentum that began in earnest late last week. Since the Saudi Arabian oil minister called for an informal, late September producer summit (non-OPEC members are invited), the front month WTI contract has risen by more than four dollars (ten percent), with market participants perhaps anticipating a greater likelihood of production cutbacks in the near future (since the Saudis initiated this meeting). The recent rise has certainly seen some short covering by market bears, but, with growing open contract interest, there is probably some new, fresh, bullish length boosting the market. Yesterday, September WTI was up $1.25 (settled $45.74), the third consecutive day of dollar-plus gains in the front contract. It has been over eighteen months since that happened (i.e. three straight days of WTI being up over a dollar on the day).
The day's advance was very seamless, with ratable and consistent movement throughout the day. At the official market open, the market was actually flat (quiet overnight) but upward moves took hold right away; RBOB and Heating Oil were also smartly advancing during the session, with HO again outperforming its sibling product. Technical advocates would point to a new WTI trading range of $42.50 - $46.50, and the market is now firmly ensconced in that window. Momentum is clearly on the side of the bulls right now and, in the near term, perhaps only a very bearish Department of Energy inventory summary (Wednesday) could stem the tide.
RBOB posted a three cent gain, while Heating Oil was up four cents. Last week, HO gained a dime, with RBOB flat, further demonstrating the disconnect between the two products. Even Gulf Coast gasoline cash markets have wanted in recent days (after a period of strength), as summer grade gas is winding down and marketers / refiners suddenly seem to be ready to move out all remaining barrels.