Energy Market Updates

EIA Inventory reports for the week ending March 22 indicate that Crude inventories showed a build, while finished products (Diesel & RBOB) showed draws. 

Reports indicate a 2.8mmb build in the period for Crude, draws on gasoline of 2.9mmb and a smaller draw of 2.1 mmb on distillate inventories. 

We have seen WTI trending toward the $60 benchmark, where it continues to trade today after inventory levels were announced. Gasoline on the other hand, was down over 5 today after the news.

At first blush the drop on gas seems surprising, given the draw down, but production levels are still very high (9.7 million barrels per day) and very much outpacing projected demand, even as the U.S. heads toward "driving season".

Of note among analysts, diesel has remained relatively stable in the face of fluctuating inventory and international headlines, and the thought is that this period of calm is caused by (and will be short lived because of) the IMO Bunkering regulation changes set to take effect in January. Refiners, marketers, and end users are all eyeing potentially huge upcoming shakeups in the market there and the anticipation is putting a damper on major swings or selloffs in the current market. Or that's the prevailing theory, anyways. 

So what is IMO 2020? The short version is that as of January 1, 2020 marine fuels will be subject to a global cap of 0.5% sulfur (the current level is 3.5% in non-ECA/Emission Control Areas). Since this is global, it will impact essentially all refiners and supply point inventory options out there, in addition to the obvious end-user impact. 

(If you want a more in depth version of exactly what IMO 2020 is about and its anticipated impacts, Sea Trade Maritime News has a fantastic explanation here: Seatrade Maritime News: The 2020 IMO Fuel Sulphur Regulation  )

At the close, ULSD closed off $-.0093 to $1.9806 while RBOB shed $-.0602 to close out at $1.8955. WTI closed out at $59.41/bbl, continuing to hover around the $60 benchmark. 

Stay Tuned!

EIA weekly petroleum report showed inventory gains across the board.

Analysts had expected much smaller builds in CRUDE than the actuals, and had anticipated drops in both gasoline and distillate inventories - neither of which came to fruition. (Who are these "analysts" anyways - not even CLOSE, guys!)

• CRUDE: inventories jumped 5 million barrels. (Expectation was a build of 1.9 million barrels)
• Gasoline: inventories jumped 1.2 million barrels, while the EIA showed a drop in consumption of 1.3%. (Analysts had anticipated a 900K barrel drop)
• Distillates: inventories were up 400K barrels. Both production and consumption levels dropped for distillates. (Analysts had antipated a 1.2 million barrel drop) 

Retail gasoline prices in the US have been trending downward big time, spurred on by the drop in CRUDE prices, as well as weakening demand. The reported average for last week was 3.41/gal in September which is almost 30 cents below the average price 4 months ago. AAA is reporting that the current average gasoline price is $3.267 - a little over 8 cents a gallon cheaper than this time last year. 

Lower global demand, high supply, and a bleak global economic outlook (we're looking at you Europe) dropped Brent Crude to lows we havent seen in years - September was the first time Brent traded under $100/bbl in 2 years, and last week saw Brent hit $92, close to a 27 month low.

WTI is trading down as well, having broken through several resistance levels, and hit $86.20 after the EIA report hit this morning. (At the moment its -1.53 to 87.32 on the electronics)   

The NYMEX is trending down today again, currently ULSD is down over 3 cents (-.0326 to 2.5747) and RBOB is down over 4. (-.0466 to 2.3217)

Stay Tuned!