Big Day for RBOB the Builder

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Daily Settlement Prices

Pulled by a suddenly white-hot RBOB contract, the oil market posted a second consecutive day of strong gains, with the front month WTI contract (now July, soon to be August) running back up to near $50. Little new news appeared in the macro-oil environment on Monday, leaving the upcoming British EU Vote (“Brexit” or “Bremain”) and its impact on currency values to determine price direction for oil. The dollar was noticeably weaker on Monday, helping commodity values rise. July RBOB was up eight cents, and now cumulatively 11-cents in two days, which effectively added more support to the day’s gains.

Much like Friday, the oil market was in full-on buy mode yesterday, without any pullbacks or threats of decline. July WTI (which expires today and thus has seen limited trading volumes lately) traded in the black all day but ultimately fell short in its attempts to reach $50. The August WTI contract, which becomes prompt on Wednesday, is valued roughly 60-cents higher than the July contract (contango market), and, as such, it is possible the market may naturally trade above $50 soon when the contracts switch. During the recent six-day down streak, WTI lost nearly five dollars off of its recent peak, but has gained back three of those lost dollars since Thursday’s settle. The newly defined trading range for oil appears to be between $46 – $51.

The sudden strength in the RBOB contract is probably a bit overdue, as gasoline has been oversold in the last few weeks (especially in relation to WTI and Heating Oil). Though Northeast gasoline (over)supply remains an issue, the strong demand readings, both past and future, are likely to keep RBOB from dipping much more than it has. On Monday, July RBOB settled at $1.5827 / gallon, the highest that contract has settled in 10 days. Monday’s energy afterthought was the Heating Oil contract, which did settle five cents up on the day but significantly below the RBOB day change.

Published by PAPCO, Inc. (PAPCO)

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