Latest Market Commentary

August 17, 2017

The inventory report sent out from the DOE was a confirmation of the API with crude down 8.945 million barrels and the market’s reaction was nothing. It was a bit of a head scratcher for me when you see a huge decline in crude stocks and the market sells off. Some market analyst said the market already had this price in, others said the jump up in production continues to concern traders, and others still are saying the reports of more oil being sold out of the Strategic Petroleum Reserve is putting selling pressure on prices. Call it what you want but it confirms that there is still some downside left to come out of this market with $45 a big support level that is rapidly coming into sight. Another question that arises is that crude was down 8.9 million barrels and a large amount of that went into refineries but the results of this are not showing up in big builds in the products, this might suggest that there is a portion of crude being put on ships most likely for exports or possible storage, but the storage play is not very profitable right now. 

The stocks of gasoline were up 22,000 barrels, and distillates were up 701,000 barrels. US production was 9.502 million bpd up 79,000 bpd which is a big jump and near record highs. There are concerns about US shale production but so far US producers have managed to keep it at a high level and the number this week was bearish for prices.

Another number that stood out in the DOE report was refineries running at 96.1% of capacity which lead to them imputing a large amount of crude oil into those refineries at 17.6 million bpd but as mentioned above not an excess of products coming out. 

The EIA reported that gasoline demand fell by 275,000 bpd down to a total of 9.522 million bpd. US gasoline demand in now down by 0.3% over the past 4-weeks versus last year down by 2.3% based upon a cumulative daily average versus last year. Total distillate demand fell by 288,000 bpd down to a total of 4.222 million bpd. US distillate demand is up by 15.9% over the past 4-weeks versus last year and up by 9% based upon a cumulative daily average versus last year.

The propane inventory report showed that total stocks were up 1.609 million barrels. The Midwest stocks were up 369,000 barrels and the Gulf Coast was up 1.303 million barrels. Total stocks now sit at 69.239 million barrels still 24.505 million barrels behind last year and the concern that the market continues to struggle with.

Tim Danze, MFA Oil Company Hedging Manager