Market Reacts to Beirut Explosion, Stimulus Dealmaking
August 5, 2020
The API inventory report called crude oil stocks down 8.6 million barrels and the estimates for today’s DOE report from the Reuter’s survey is looking for a decline of 3 million barrels. Crude stocks at Cushing, Ok were up 1.6 million barrels on the API report. Gasoline stocks were down 1.7 million barrels and the estimate for toady’s DOE report is for them to be down 170,000 barrels. Distillates were up 3.8 million barrels and the estimate for today is that they will build by 123,000 barrels.
The estimate for today propane update from industry analysts is for stocks to build by 2.18 million barrels. The five year average for this reporting week is a build to stocks of 1.771 million barrels.
The hope that government officials are getting closer to another round of economic stimulus is helping to support energy price here in early trading.
There was a massive explosion in Beirut yesterday that killed dozens and wounded thousand. Most reports I have seen are saying it was some explosive materials stored in a warehouse. The explosion flattened Lebanon’s main port. There is no clear answer yet to what caused the explosion or if any group is taking responsibility. This has certainly raised awareness and will keep traders on guards. Let’s just hope it was a terrible accident and there was not some other motive. This could be offering a bit of support to prices but most of today’s upside seems to be optimism for a stimulus deal and China and US getting back to the negotiating table on trade in the near future.
US oil refining capacity this year could decline by the largest amount in nearly a decade as pandemic-related travel curbs and fire shut several plants, reversing years of small gains. Refiners globally have been idling plants as the COVID-19 pandemic cut fuel demand as much as 30%. In the US Marathon Petroleum Corp will close California, and New Mexico plants in response to the demand slump. Philadelphia Energy Solutions closed and sold its refinery to a property developer after a fire and series of explosions that tore through the plant last summer. These actions will at some point in the future create the next supply pinch when a strong economy and demand returns.
Technically the energy market corrected lower and tested the lower end of the recent trading ranges and is now seeing buying as traders try to run it up and test the top of the recent ranges.