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Oil Complex Back in the Range

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Daily Settlement Prices

Markets bounced back on Thursday, recovering some of the sizeable losses from Wednesday. By finishing up almost a dollar, WTI has reestablished its range of $45-$50, which has been its long run channel.

RBOB was the leader on the day in terms of outright move, and has retaken its normally seasonal premium value over the ULSD contract. There was no true market news to drive yesterday’s rally, other than profit taking and a bounce off the previous days sell off. This up move was buoyed by the U.S. dollar, which was down on the day and reached its lowest level in four days.

Across many East Coast markets we are seeing ample levels of gasoline inventories. With gasoline cracks being so profitable in spring and early summer, refiners were incentivized to produce gasoline in large quantities. This production value has been seen in the DOE reports, where high demand numbers were overshadowed by higher production. This glut should subside, as the gasoline crack spread has been in a downtrend for a while, and the markets react to oversupply. One other possible externality from this increased production of gasoline has been an increase in value for Renewable Identification Numbers (RINs). As the obligated parties (refiners) produce more gasoline, the demand for RINs increase and currently sits near the highs of the year, just below $1.

Gulf Coast markets have seen significant reduction in basis values on the diesel side, over the past several days. This continued on Wednesday as selling pushed basis levels to their lowest value in months. After seeing Gulf Coast diesel basis stuck between around -.0500 and -.0400, recent levels have come off to the -.0600 level, which is translating to cheaper pricing at the rack level.


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