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Oil Complex on a Late Summer Standby

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Oil prices posted moderate gains on Thursday, recovering from Wednesday's decline but staying near the top of the recent trading range. Certainly recent market sentiment has been to the upside, with some anticipation of real OPEC action at the cartel's informal meeting in a month. For now, it seems like Iran will attend and rhetoric from that camp has been price supportive. Still, with a few failed attempts to make a real run at $50 (peaks at $48-ish), and with summer driving season nearing an end, it seems a bit premature to get extremely bullish on oil. For now, WTI seems to be content to stay in a few dollar range just north of $45.

October WTI was relatively muted yesterday, trading in a dollar range virtually the entire day. A late mini-rally bought prices to their highest point of the day, and the contract settled at $47.33 (56-cents). The real price action of late has been on the products and, more specifically, the cash markets.  

Gulf Coast cash differentials for CBOB and ULSD jumped again yesterday, with each reaching multi-month highs (in fact, the ULSD differential is the highest since late 2014). Tropical Depression 99-L, still not strong enough to be named but certainly big enough to merit watching, added another piece of bullish news to that regional market.

With summer grade gas availability winding down, some headline refinery problems in play, and an anticipated spike in demand next week before the long holiday weekend, the potential for a storm in the Gulf Coast has put the South on notice. Rack prices for all products are certainly following that bullish view.

Published by PAPCO, Inc. (PAPCO)

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