Latest Market Commentary

July 17, 2019

The average estimates for today’s DOE inventory update from the survey conducted by Bloomberg is looking for crude oil stocks to be down 3.785 million barrels. Gasoline stocks are estimated to be down 2.421 million barrels and distillates are called up 780,000 barrels.

The estimates from Reuters are calling for crude stocks to be down 4.1 million barrels. Gasoline supplies are estimated to be down 1.4 million barrels, and distillates are called up 500,000.

The API report that crude stocks were down 1.4 million barrels and Cushing crude oil stocks were down 1.1 million barrels. Gasoline supplies were down 476,000 barrels and distillate supplies were up 6.2 million barrels. Trades will wait to see how today’s DOE numbers come out before taking much action.

Prices were higher in early morning trading as report were out that and oil tanker near the Strait of Hormuz disappeared. Over the weekend it stopped transmitting its position as it travelled through the Strait of Hormuz. There was speculation that Iran was responsible for all this and that added some upside pressure to the market. I have seen no updates on this tanker or anyone claiming responsibility.

Despite last week’s draw to stocks the concern for propane oversupply is still alive and today’s report will hopefully shed some light on last week being and outlier. The outlook currently is that stocks are going to continue to build as crude production and natural gas production are strong.  If that is the case then any change to inventory looks like it will have to come from the demand side. Demand should get a boost in the next three months as Enterprise has been working to expand their export facility on the Houston Ship Channel and it scheduled to open in the next three months. Estimated to be able to export and additional 175,000 barrels per day of combined propane and butane. If they can get this additional capacity up and running that should offer some support to prices. Estimates for today’s inventory number are for a 1.3 million barrel build.

The energy markets were higher in early trading but as the day wore on comments from President Trump that progress was being made with Iran and that he was not looking for a regime change. This news sent the market the other direction and the selling began as the Iran risk premium was being taken back out of the market. Secretary of State, Mike Pompeo also added that Iran was now willing to negotiate on its missile program. The market saw these comments as tensions lessening with Iran and as a result the market was trading lower. Reports this morning are conflicting these reports. Iran UN Mission Spokesman said it missile were under no condition negotiable, period. The volatility should continue.

Federal Reserve Chairman, Jerome Powell, in comments yesterday reiterated pledges to “act as appropriate” to support the US economy. In his speech he seemed to indicate that the plan for a rate cuts is very much still in play.

Also putting some selling pressure on the markets was news that Barry had done little to no damage and most refineries and offshore rigs were getting back up and running.

Tim Danze, MFA Oil Company Hedging Manager