Tuesday July 19, 2016
The oil complex started the week lower yesterday as attention turned to what appears to be an oversupplied market. The downward price action was led by the RBOB contract, which had been the lagging product on Friday.
Monday was a muted day for news, and overall the market is looking to today’s API and tomorrow’s DOE report for signals on future price action. August WTI was down 71 cents on the day, moving it towards the $45 dollar support level with front of the curve structure settling at 70 cents of carry.
The oversupply issue is leading to more barrels being put away in storage, as the market is displaying favorable structure to do so. In the past, when the focus was on the crude oil glut, we saw barrels being put in any available location, including floating storage. This occurs when there is enough incentive for suppliers to pay shipping companies to hold barrels on a vessel and allow it to just sit on the water. Now, with more refined products around, we are starting to see a similar environment.
Monday was Colonial Pipeline scheduling day for both gas and diesel. Most of the attention, however, seemed to be on the gasoline side as it started up early through late in the day with basis moving up 75 points on the CBOB. It will be interesting to see how this basis level is affected by the perceived oversupply in the market.
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