Wednesday July 6, 2016
The energy complex witnessed a sizable pullback on Tuesday, due more to a variety of small items, rather than one colossal event. To start, renewed fears about Brexit kept pushing the U.S. dollar higher, putting the energy complex on a lower footing. Concern over global demand and Genscape data that points to another build of crude oil inventory levels in Cushing, OK continued the downward momentum. It is likely that technical trading throughout the day pushed the final momentum lower.
With the dramatic downward move, front month RBOB reached its lowest level since mid-April, and front month Heating Oil (HO) moved towards the lower end of its recent range. Furthermore, RBOB settled almost .0170 below HO, which is rare for this time of year. The RBOB contract usually commands a premium over its HO counterpart. As both inventories remain high, it will be worth monitoring this relationship going forward.
The Gulf Coast market was active for both main products, as Tuesday was the first day of a three day scheduling window on Colonial Pipeline. While distillate basis moved down slightly, gasoline basis rose higher. RBOB was up around 25 points, with the CBOB counterpart up almost a penny. Inventory data this week will be delayed by a day (due to the July 4 Holiday) so the news cycle will be heavier in the 2nd half of the week.
Published by PAPCO, Inc. (PAPCO)
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