Tuesday August 30, 2016
Oil prices settled lower on Monday, weighed down by a sloppy RBOB market and the lack of a bullish catalyst. The NYMEX RBOB market settled down four cents, but cash markets in the Gulf Coast and Midwest were even weaker, as it appears the still not-named-yet-but probably-will-be-named-though-not-really-a-threat storm will button hook right around Florida and dump lots of rain on the Panhandle rather than Gulf Coast refining assets.
WTI continues to ebb and flow in a range a few dollars above $45, though the bullish fervor of last week (OPEC headlines) has faded and has been met by perhaps even greater bearish pressure from expected interest rate hikes.
Monday was a holiday in London, which lightened trading volume and market volatility. October WTI stayed in a tight range all day, and ultimately settled down 66-cents at $46.98. NYMEX Heating Oil lost a similar amount (down a penny), but the real outlier in the group was the RBOB contract (down over four cents on the day). That products' weakness can likely be attributed to anticipated weaker demand, both from the end of the summer driving season and from any potential storm problems (heavy rain in Florida and along the East Coast in the next few days should damped driving). The September RBOB and HO NYMEX contracts expire on Wednesday.
Gulf Coast cash gasoline differentials were down an additional four cents (on top of the four cent dip in the NYMEX). The storm threat premium, which sent cash markets (and rack prices) much higher last week, has faded quickly. September is a transition month for Gulf Coast gasoline, as summer grade barrels are liquidated to make room for the cheaper, higher-RVP fall and winter grade barrels. As such, it is not uncommon to see wild fluctuations in values across the Southeast during the month.
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