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A Quick Peak at $50

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Daily Settlement Prices

Thursday’s price action saw WTI trade over $50 for the first time since last October, though the early $50-plus trade was a mere tease to the weekend-ready bulls. Prices eased through the day, with finished products softer than oil, but the pullback was likely a result of book squaring and profit taking heading into the long weekend.

Oil prices are up roughly 10% so far this month, driven mostly by global supply outages that threaten to bring equilibrium to the supply / demand equation. Lost in the shuffle is the next official OPEC meeting, scheduled for next Thursday, June 2. This regularly scheduled meeting, different from the special Doha soiree in April, is not expected to produce any different rhetoric, especially since oil prices are 10-dollars per barrel higher in the last few months.

The July WTI peak above $50 occurred early in the day, but by 10 AM the market was already giving back some of those gains. The slow sell-off never reached epic proportions, and the front month WTI contract was still above $49 even at its low point of the day. Trading volume tapered off late, a proxy to what Friday could portend, and the ultimate settlement ($49.48) and day change (down 17-cents) reflect that lack of volatility.

NYMEX RBOB and Heating Oil are wrapping up their trading before Tuesday expiration, and each settled over a penny down on the day. Like recent times, however, the more interesting price action was on the cash side, with gasoline cash differentials continuing to move higher (especially in the Gulf Coast). Thursday was scheduling day for the last May Gulf Coast pipeline cycle, which likely added some noise to the price direction, but the recent increase in cash gas (and rack prices) is more of a reflection of less available supply in the South. More Gulf Coast refined barrels are heading to the Midwest. Gas differentials were up a few pennies on Thursday, and are up at least a nickel this week.

 

Published by PAPCO, Inc. (PAPCO)

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