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A Few Certainties Among Uncertainty in the Oil Market

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Daily Settlement Prices

The September RBOB and Heating Oil contracts expired with a flourish, with that gasoline contract settling at a multi-year high and adding to the 50-cent price rise of the last week. Resupply dates and volumes remain very much up in the air for many East Coast locations, as product is still slow moving in the Colonial Pipeline and more delayed refinery startups are announced:

• Motiva Port Arthur - two weeks
• Valero Port Arthur - two weeks
• Shell Deer Park - three weeks

In the Northeast, refineries are selling barrels to the water for delivery to Southeastern ports (i.e. Charleston, Savannah, Florida), there is additional worry that New York may soon be tight on supply as well. As such, the NYMEX contract was extremely bid up today. This was not because of short positions, but rather suppliers who will take delivery of their long contracts (which turn into physical barrels at month end). The EPA has granted RFG and RVP waivers for 38 states for the next few weeks, meaning gas is gas is gas and whatever you have in tank will work.

Cash markets did take a small step back today, at least at the origin level. With origin barrels delayed though and no known pump date, it seems those values are less relevant. Rack prices have tended to lag origin changes, and with uncertain supply the big gap up in cash differentials could manifest to bigger rack changes heading into the long weekend.

Hurricane Irma, currently well east of the Caribbean, is likely to turn into a Category 4 status, matching Harvey's strength. Current weather models show paths as far west as New Orleans or as far east as New England. It will be a big storm, just very uncertain yet where it will land.


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