Wednesday August 31, 2016
Markets followed through on the previous day's weakness, to finish lower across the board. Several small factors led to the downward pressure on Wednesday. Market participants are now less optimistic about an OPEC out freeze (or even how effective this would be with Saudi Arabia already producing at record levels). Further, the U.S. Dollar moved higher yesterday, reaching its highest level since August 9th, which exerted downward pressure on commodity prices.
The storm panic, also seems to be subsiding. It does not look like we are out of the woods; however, it appears any potential storms will be landing on the East Coast and more of a threat to product demand. This is counter to tracks last week, which showed storms potential in the Gulf of Mexico. This would have taken oil rigs off line and threatened refinery production, but with the paths shifting, it appears the storms will be hitting Florida and the Carolinas during the busy Labor Day holiday. Despite all the bearish news on the day, one potential hiccup is seen in the not too distant future. It appears a new weather formation is coming together off the coast of Africa. Although too soon to real tell the strength or the path, it points to the fact that this continues to be a busy storm season thus far.
Late yesterday afternoon, the American Petroleum Institue (API )released its weekly inventory report. Crude oil stocks built just under a million bbls and gasoline fell 1.6 million bbls, both in line with expectations. However, the big variance was on the distillate side. Distillate built 2.98 million bbls, which far exceeded industry expectations. As the market prepares for this winter, many will continue to pay close attention to how these stock levels shape up, going forward.
Written & Published by: PAPCO Supply & Trading