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A Refined Products Glut Continues

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Yesterday, markets continued their ratable march lower. Like previous days, the market started somewhat positive as overnight trading kept the contracts in the green, but U.S. hours pushed it lower. Front month WTI has finished in the red for six consecutive days and seven of the last eight sessions. As a result of the recent weakness, front month ULSD is at its lowest price level since April 20th. As the theme of oversupply continues, the market seems similar to the weakness seen last year. Only this time it is a refined products glut that is grabbing attention. As a result of the market’s view that ULSD is well supplied, we are seeing large carry values between months (an average of over 2 cents per month out to January), which incentivizes suppliers to store barrels.

With all the downward pressure in yesterday’s market, one of the exceptions was Natural Gas futures. The Department of Energy’s released its weekly natural gas storage numbers on Thursday, which showed a build below what was expected. This pushed the future’s contract up over 21 cents for the day. All of this is also occurring during a large sustained heat wave across the country, which is boosting cooling degree days.


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