Fed Cuts Interest Rates, Markets Under Pressure
October 31st, 2019
The DOE inventory report released yesterday said the crude oil stocks were up 5.7 million barrels. Stocks of crude oil at Cushing, Oklahoma were up 1.57 million barrels. Refinery runs have been low as refineries are in maintenance season so that is helping crude stocks to build and if they are not running hard, they are not making as much products, which makes the build in crude and draws in products understandable. There are concerns with the overall levels of stocks as they are on the low end but that is being gauged against potential for slow demand due to economic conditions.
Gasoline stocks were down 3.04 million barrels and distillate stocks we down 1.03milion barrels. Total gasoline stocks are at 220.057 million barrels and last year at this time there was 226.169, so the market is short 6.112 million barrels compared to last year. Total distillate stocks are at 119.754 million barrels and last year at this time there were 126.322 million barrels putting the market short 6.568 million barrels compared to last year. Gasoline stocks are at the lower end of the three-year average and distillates are below the three-year average. This is certainly something to watch but many traders see refineries coming back on line and demand soft due to economic conditions and trade war concerns. If a China and US phase 1 trade deal get signed and the economy is stronger than the current outlook that could create some upside for energy prices.
The Fed came through as expected and cut rates by 25 basis points. The Fed gave the indications that they are done cutting rates for now.
The market is also getting selling pressure today as Chinese officials say they doubt a long-term trade deal with the US is possible casting doubt on a deal getting signed under the Trump administration. Also, Chile has canceled the Asia Pacific Economic Cooperation summit due to civil unrest. This is where China and the US were going to sign Phase one of the trade deal so this news along with China concerns that any deal can be worked out has the market selling off today.
The DOE report demand strong in yesterday’s report, gasoline and distillate demand are up near the 10-year maximum for this time of year. Now, there are some debating these numbers from the DOE but for now they came out as positive for US demand.