Paving the Way to $50

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Daily Settlement Prices

The energy complex ended the week on a quiet note, with each of the major product indices settling near unchanged on Friday. Those minor day changes, though, did not mask the overall bullish trend of the week. Like Thursday, when prices settled virtually unchanged from the day before, Friday’s settlement saw little changes from Thursday (WTI down a little, the finished products up a little). For the week, however, the market tenor led to some serious buying (short covering?) with crude oil supply disruptions now becoming commonplace and crude oil demand, at least in the U.S., creeping higher after the slumber of refinery maintenance season. Technically, WTI has seemingly hit a top just below $47, though a push through that number could easily lead to a quick dash to $50.

Also like Thursday, the Friday trading range for June WTI was very subdued, trading in a nifty 75-cent range around $46 (ultimately settling at $46.21 on Friday). This front month contract expires later in the week, at which point the July WTI contract (with its 70-cents of contango) takes over as prompt. For the week, June was up about $1.50, though the entirety of that gain really happened on one day (Wednesday), when the bullish Department of Energy inventory summary led to a spate of buying.
Aside from macro-energy stories in the news (Canadian wildfires, Nigerian and Libyan unrest, strong gasoline demand), the dollar value should be viewed with interest (no pun intended) in the coming weeks. For now, it doesn’t appear that the U.S. Federal Reserve is in any hurry to raise interest rates, which is quite the disappointment to the currency bulls and commodity bears. A non-rallying dollar could be viewed as a weak dollar, yet another reason behind oil’s latest push higher.
RBOB and Heating Oil each posted minor gains on Friday, and were up nine cents (RBOB) and six cents (HO) for the week. Like WTI, the majority of those weekly gains were realized on Wednesday. The product settles on Friday were the highest since a single day late in April (and second highest of the year).

051316 Weekly Pricing Graph

Published by PAPCO, Inc. (PAPCO)

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