Latest Market Commentary

September 18, 2019

The inventory report put out by the private firm API yesterday afternoon showed that crude oil stocks were up 592,000 barrels and the crude stocks at Cushing, Oklahoma were down 846,000 barrels. The supplies of gasoline were reported to be up 1.6 million barrels and distillate were up 2.0 million barrels.

The estimates from the Reuters survey for today’s DOE inventory update are for crude to be down 2.5 million barrels. Gasoline estimates are for stocks to be down 538,000 barrels and the estimates for distillates is for supplies to be up 535,000

The estimates from the Bloomberg survey are for crude stocks to be down 2.069 million barrels. Gasoline stocks are called down 770,000 barrels and distillates are call down 51,000 barrels.

When the market opened Sunday night after the attacks in Saudi Arabia it gapped open, meaning the opening trade was much higher than Friday’s close and left a gap in the charts. In the case of crude that gap was $6.63 per barrel higher and gasoline was $0.0839 cents per gallons and diesel was $0.1246 higher. I point this out because the market yesterday gave back most all the gains seen after the Sunday night open but that gap in WTI crude oil, RBOB gasoline and ULSD has not been closed. So, despite the big sell off and most of the gains being taken back the market is still higher than Friday’s close because of the jump up at the open Sunday night. Now traders will be interested to see if that gap can be closed and if it can it would be a very impressive move for the bears in this market as it would confirm that a major attack on oil infrastructure in the Middle East was a very short term event that the market rallied on initially and then sold right back off seem almost hard to believe. I guess it is a different world.

The Saudi energy minister held a press conference yesterday afternoon and essential said that 70% of production was back on line and the rest would be up and running by the end of the month. The market tool that as good news and sees the disruption at this pint as very temporary and prices sold off as the information was being talked about in the press conference.

The Fed is expected to announce another quarter percentage point reduction in the interest rate. The Fed is meeting, and this announcement is expected at the end of the meeting along with a Jerome Powell press conference. 

Saudi Arabia said that they would provide evidence that links Tehran to the attack on their oil infrastructure. Both Saudi Arabia and the US have said that there is no rush to retaliate and that caution needs to be used. But if true evidence is shown that links Iran to these events it will put a lot of pressure on the US and Saudi Arabia to have some response. Despite the quick turnaround in prices the market must have a risk premium as tension in the Middle East are certainly higher now.

Tim Danze, MFA Oil Company Hedging Manager