WTI and Carry On.

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Daily Settlement Prices

Monday overnight/Tuesday morning energy markets started the much lower as prices took a breather from the violent up move of the previous two trading days. This downward pressure was aided by talks of a ceasefire agreement between Nigeria and the militants. Previous conflicts between the two groups had markets concerned over future supply in the region. However, mid-morning, prices started to move off of their lows and move higher. As has been the case recently, this upward movement was led by the RBOB contract, which recovered to finish positive on the day, with the front month WTI and ULSD contracts finished down slightly.

Starting today, the WTI contract will show the August month as prompt, which will lead to an artificial higher price to start. This is due to the carry in the WTI market, where prompt futures are priced below the next months.

Trading moved futures much higher after the settle, following the release of the API’s weekly inventory levels. The data showed draws across the board, highlighted by a sizable draw in crude inventory levels of 5.2 million bbls. While this draw was large and did move markets higher, the magnitude of this move was likely tempered, as the market waits to see the Department of Energy’s (DOE) mid-morning release today. As noted in the past, from time to time, these reports can vary greatly. This was seen last week, when the API showed crude oil inventories rising 1.2 million bbls, but the DOE pointed to a draw of almost 1 million bbls.

Gulf Coast cash markets were active Tuesday, as both main products prepared for Wednesday’s Colonial Pipeline’s scheduling day. Diesel basis was slightly weaker, but highlighted by a switch in market structure. After several months of seeing ULSD (prompt two cycles structure) trade backwardated to flat, Tuesday saw cash front cycles trade in slight carry. Gasoline basis was quiet early. However, following reports of a downed FCC unit at Shell’s Deer Park, the market was well bid. This increased gas basis around a penny for both RBOB and CBOB, which has been one of the larger basis increases in several days.

Published by PAPCO, Inc. (PAPCO)

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