Inventories & Iran Continue to Pummel Crude Prices
Oil prices are continuing their tumble - and it doesn't look likely they'll rebound in any significant way any time soon.
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Oil prices are continuing their tumble - and it doesn't look likely they'll rebound in any significant way any time soon.
Last night API's set the early tone for todays rice action as preliminary numbers showed large draws in distillates. Those numbers were confirmed this morning with the EIA releasing a staggering 4.8mbl draw in distillates vs expectations of a mere 700k. Gasoline was down slightly at 345k and Crude showed a slight build at 375k bls. On the surface it appears distillate demand is on the rise, not only in the US, but also from an export position. Soon after the data released, pits jumped almost .04, and stayed in that range for most of the afternoon. Supporting the bullish price action was FED meeting minutes which appear to confirm last weeks chatter that we will start to see some significant unwinding of the Bond buying program in the months to come, as well as a positive retail report for October. The hope is that a positive October doesn't turn into a lackluster November and December which is often the case in the retail world. News hit mid afternoon of US-Iranian talks ended almost as quickly as it started, one report said the talks lasted less than 10 minutes with few words spoken. Even with the draw in distillates, the market appears to be well supplied as Crude actual lost .01 to close out at $93.33, RBOB added .0235 to $2.6630 and HO led the gainers settling up .0487 to $2.9545. Again, well within its comfort zone.
For many of us who log in to check the market on Sunday evenings at PM, it is often times like Christmas morning to see what the surprise will be. Last night we got a lump of coal to see Commodity futures skyrocketing on news of a Spanish banks receiving a $120 billion dollar bailout. Heating Oil was as high as +.07 at one point. The infusion of cash looks to signal that the Euro will be around for a while longer. As the sun rose, the speculative gains were peeled away and the wheels fell off the cart with about an hour left in the session. Crude finished less $1.40 to close at $82.70, RBOB slipped .0286 to $2.6566 and HEAT fell .0364 to $3.6357, a whopping .11 cents lower than Sunday evening. It appeared that the bullish appointments on the calendar just could not keep the rally going. Next week, Greece has elections, Iran is set to meet with a group of five Nations on its nuclear program with Israel going increasingly impatient and the scheduled FOMC meeting. Many have commented on the limit to the downside in the pits after retracing some 60 cents in the last 50 days. With Europe still not out of the woods, the trend is your friend.
With the Heating oil pit tacking on over 15 cents in just under a week, many are scratching their heads as to why. In a winter that has seen more 50 degree days than teens, most would assume the Heat pits to be tanking. As with the case with these types of patterns, shifts in the jet stream have caused the Northeast to have a mild winter yet Europe is caught in a bitterly cold spell for some time. Brent Crude has maintained its $20 premium to its cousin WTI, thus explaining the HO to WTI disconnect. As shown below, that disconnect has been in place most of the year. Longer term, you may start to see more US vessels head to European markets, signaling some shortfalls down the road. Many are still on edge as Greece is continuing to try and find a way to pay off creditors and with Iran and Israel in a stare down, the tightening supplies across the pond are having nothing but bullish affects on the trade. At the close, Crude added $1.50 to $98.41, RBOB slipped .0004 to $2.9275 and HO gained another .0343 to $3.1909. Again we have touched the top of the 18 month range for HO, then next 30 days have typically seen a healthy pull back. But again, what is typical anymore?