Energy Market Updates

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CRUDE

Crude Inventory Build Overshadows Finished Product Decline

The large Crude inventory build yesterday overshadowed the decline in finished products and took the floor out of pricing yesterday.  Crude increased over 12 million barrels, largely due to the limited refinery activity in the past weeks.  Refineries are running at about 80% capacity due to maintenance, cold, and limited demand forecasts.  Fundamentals have pushed aside the risk premium in the last few days.  The Global conflict premium had shot diesel pricing up almost $.40 since the first of the year.  With distillate demand down about 10% compared to the same time last year, it makes refiners walk a tightrope on producing even with margins very high on distillates, in the $41 per barrel range currently.

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Insights & Integrity: Rising Tensions & Refinery Challenges

Honesty and Integrity in all Dealings is not just a tag line for Dennis K. Burke, Inc, it is one of our Core Values as an Organization.  In a world that has become more and more competitive and polarizing, it is good to know that a true business relationships can still exist.  We strive to be transparent to our many Customers and non-Customer alike.  One of my weekly calls is from someone who is not even a Customer, but he is just simply looking for a new perspective or answer on a problem.    Which ties into another Core Value, a Commitment to Customer Service Excellence.  In my mind, a Customer is not defined as someone with an open account at DKB, it is more of anyone that I can assist or help out, in this often times crazy business.  (many of you have received a note from me with an introduction to someone who you can help out) Partly the reason for these updates is letting you know what is happening, insight in to what may be coming, and keeping an open line of communication.

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The Market Giveth and the Market Taketh - Winter is Coming

We had a nice $.10 pullback going from Friday to Tuesday, but the market giveth and the market taketh. After another 2.2-million-barrel draw in crude inventories posted this week, the entire complex moved higher even with gas and diesel showing slight increases.  Furthermore, product demand showed down again year over year by about 5%.  A fair amount of talk and politicizing of a looming Government shutdown will have on financial markets and heavily regulated industries like air travel.  All providing support to pricing.  Still, it looks as though we may have topped out in the last few weeks as we move into the winter season. 
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Thank you Cpt. Obvious, Banks Say Lower Production Means Higher Prices

Coming off the Monday Holiday, prices surged higher Tuesday as OPEC+ heavyweights Russia and Saudi Arabia confirmed they would extend voluntary production cuts through the end of the year.  Fueling the rise from the Cpt. Obvious department, big banks publish reports to expect $107 Crude if cuts maintain.  Buy the rumor, sell the fact.  Diesel had a nice sell off going, but remember, one day doesn’t reverse the trend.  Wednesdays intraday action erased almost all of the gains only to settle down slightly.  While we still sit almost $1 higher in pricing than the beginning of the Summer, you would have to think better days are to come.  Current JUNE 24 Diesel future pricing is $.45 less than front month October 23. 

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July Rally Continues into August

Starting off this week it appeared that we may have seen the top of the recent rally in the Commodity sector.  That changed Tuesday morning as the EIA released a guidance report that they expect US crude production to increase an additional 200,000 barrels per day based on….. yep, higher prices.  This fueled the indexes in a self-fulling prophecy sort of way and turned around what was a $.05 down day to a $.07 up day.  The buying carried over to Wednesday as the inventory report showed a solid increase in crude stocks with the products showing losses.  Key note on the crude gains is that it looks to be largely due to slashing exports.  Something we have been saying might be a prudent step for a while now.  Distillates are now $.80 higher than July 1st, erasing the steady 8 month decline that we have enjoyed.  Sentiment is fixated on Saudi led OPEC cuts and appears to shrug off any fundamental data.  It’s almost like mob mentality really.  Crude builds, soft demand, economic uncertainty, should all push prices lower. 

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