Oil Markets Go “Risk On” after Brexit News

Main Image
Daily Settlement Prices

Oil prices responded Friday to the six-day down streak with aplomb, gaining support from the increased likelihood of Great Britain remained in the European Union (EU) and on good, old-fashioned bargain hunting. The week-long plunge lopped five dollars off the front month WTI contract, putting that vehicle in danger of retrenching to “correction mode”, where further price dips were likely. That said, Friday’s strong move to the upside erased a good portion of those losses.

The British population votes later this week on whether or not she should remain part of (and the strongest economic member of) the EU, and recent polls now seem to indicate a lean towards staying. Oil market bulls fear that if Great Britain leaves the EU (affectionately known at “Brexit”), that group could fall into greater economic turmoil, which would have a decided impact on oil demand. Still, even with Friday’s strong rally, prices did close lower for the week, only the fourth time that has happened in the last four months.

From the start of Friday’s session, there was little doubt that the day would be “risk on” (i.e. prices going higher). The aforementioned speculative views on Great Britain, and a firm bullish sentiment heading into the weekend, put the market in rally mode overnight and into the unofficial market open on Friday. Prices moved higher in linear fashion through the day, with July WTI crossing $47 (up a dollar) by mid-morning and not looking back. Trading was a little limited (summer Friday), but that can’t be blamed on the firm direction of the market. One late, last push brought prices to their high point of the day, and July WTI settled up $1.77 at $47.98. This essentially erased Thursday’s losses, which were the biggest of the six-day plunge. For the week, July WTI was down a little more than a dollar. (NOTE: July WTI contract expires on Tuesday)

The finished products joined the rally parade on Friday, with RBOB gaining four cents and Heating Oil climbing by six cents (though both had multi-cent losses for the week). The RBOB / Heating Oil spread (previously referred to as the Widow Maker trade) is down to less than two cents (RBOB over HO). This spread was well into double digits a few weeks ago.

While Heating Oil has moved in tandem with WTI for a while, RBOB has been the weak sister of the petroleum patch, with PADD I (Northeast) gasoline inventories extremely robust (and building on the historical surplus). High volumes of gasoline imports from Europe are helping to swell Northeast stocks.

062016 Weekly Pricing Graph

Published by PAPCO, Inc. (PAPCO)

PAPCO Newsletter Disclaimer. The information that is published in this newsletter, including the market reports, is derived from trade, statistical, and other sources that we believe are reliable and accurate. However, PAPCO does not guarantee the completeness, accuracy, or reliability of such information, and information should not be relied upon as such. Additionally, PAPCO assumes no responsibility for the material contained in the newsletter and the views expressed therein. Further, PAPCO expressly disclaims any express or implied warranties or guarantees with regard to such information. The information contained in this newsletter and any views expressed herein are provided for your informational purposes only and should not be interpreted in any way as an offer, invitation to make an offer, inducement, or recommendation to buy or sell options contracts, commodity futures, products, or any other type of security.



Post Comment

Commercial Price Risk Mgmt Lubricants Retail Home Heat About Us
Fuel Products
Fleet Card
Energy Markets
Manage Risk
Custom Solutions
6 Easy Steps
Pricing Tools
Weekly Updates
Inventory Mgmt
Branded Fuels
Unbranded Fuels
Custom Solutions
Site Development
C-Store support
Inventory Mgmt
Pricing & Incentives
Delivery Options
Service Programs
Price Protection
Service Areas
News & Events
Contact Us

Sign up for
Email Updates


4920 Southern Blvd
Virginia Beach, VA 23462

© Copyright 2019

Site Map
Privacy Statement
Terms & Conditions