Thursday June 16, 2016
Risk was off on Wednesday as downward momentum continued to be the story, and energy markets moved lower for a fifth consecutive day. Overnight Tuesday, and into early Wednesday, crude oil and refined product futures started much weaker. The bulk of this was a result of bearish API data from Tuesday afternoon, which showed a surprising build of both crude oil inventory and gasoline stocks.
Markets also continue to be pulled lower by the uncertainty in Europe of the pending “Brexit” vote. Although, European equities were stronger yesterday, the overall fear of potential lower oil demand in the area, still weighs on the energy market. At the low of the day, front month WTI reached its lowest level since May 19th, falling just over $4 in the past 5 days.
Futures gave back some of the early losses after the release of the Department of Energy’s (DOE) weekly release. Crude Oil stocks drew just under 1 million bbls, which is lower than the expected draw from a Reuters poll of 2.3 million, but still far from the API report’s data which showed a build. So while the data was bearish, it did not confirm the severity of its API counterpart. The difference in reports was enough to push front month WTI slightly positive on the day, but this lasted briefly and ultimately price action continued to follow its downward momentum of the past week.
- CRUDE OIL STOCKS: -.93 million bbls
- DISTILLATE STOCKS: +.79 million bbls
- GASOLINE STOCKS: -2.63 million bbls
The other news item surrounded a meeting of the Fed and the speech of Fed chairperson, Janet Yellen. However, their announcement of no new interest rates hike fell within the market’s expectations and as a result market reaction was muted.
- Net inputs of crude oil came off slightly, but are on par for last year’s level at this time of year. Worth noting: Last year’s throughput levels are the highest points of the past five years, yet at 16.3 million barrels per day, we are still at elevated levels of crude demand.
- Distillate fuels production has increased 323 thousand barrels per day over the last month, a ramp up that historically occurs in July.
- Production of gasoline bounced back from the prior week’s decline, adding the same amount as this week last year.
- We have regained the 10-million barrels per day production volume, only the second time this year we’ve broken that barrier.
- Commercial stocks of crude continued seasonal declines, but the pace hath slowed last week.
- Imports of crude oil last week were down slightly, lurking just below the historical average.
- Inventory levels of distillate fuels eked out a build despite the market expecting the seasonal norm of a draw.
- The build was sourced from the East Coast (PADD I) more specifically the mid-Atlantic sub district B – the home of NY Harbor and the backyard of the NYMEX.
- Demand for gasoline matched the record level from mid-August of 2007 (9.762 million barrels per day), leaving no real question as to why inventories drew over two and a half million barrels.
- The large draw from the Midwest (PADD II) is largely due to the Magellan refined products pipeline – a major supply line to the area – being shut down because of flooding.
Published by PAPCO, Inc. (PAPCO)
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