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Bulls Ease Back on the Reins Add to Market Fundamentals

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The oil market settled lower on Monday, ending an extended upward streak that added seven dollars to WTI and roughly 20-cents to the finished products. This due to profit taking and on news that a cease fire (for now) had been reached in Nigeria. Lost Nigerian oil production (along with that from Libya, Canada and others) has helped keep a floor on any significant price pull back. That said, the very recent "peace accord" between Government forces and rebels could start the process of ramping up production in that region.

September WTI, which expired Monday, settled down $1.47 on the day at $47.05. The October contract, which is now prompt, begins Wednesday at $47.41. Much of the very recent price run-up has been short covering, and last week saw the largest one week move in "managed money" (i.e. investment funds) length in history. While fundamentals likely did play a part in the Monday decline, bulls probably did ease back on the reins to reduce some long exposure.  



Finished product prices settled down three cents each, but are still well up from the lows seen earlier this month. Cash markets in the Gulf Coast / Southeast remain very strong, as persistent refinery issues (unplanned maintenance, power outages, floor damage) has caused a spike in cash differentials. The gas making difficulties comes at an odd time for refiners, as they try to balance their remaining summer-spec gas requirements with available supply. Most markets in the South switch to the transition grade gasoline by mid-September. 

Written & Published by: PAPCO Supply & Trading 

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