Latest Market Commentary

February 22, 2018

The API released their inventory report yesterday a day late due to President’s Day on Monday and it showed that crude stocks were down 907,000 barrels. The outlook for today is for a 1.8 million barrels build. Crude stocks at Cushing, Oklahoma were down 2.6 million barrels. Gasoline stocks were up 1.5 million barrels in the API report and the market is looking for a 283,000 barrel build. Distillate stocks were down 6.8 million barrels and the expectation for today is a 1.5 million barrel decline.

For today on the propane stocks the outlook is for stocks to be down million barrels. The five years the years the average for this reporting week is a decline of 2.73 million barrels.

The release of the Fed minutes were seen as hawkish (more likely to raise rate), despite the fact that they continued with their plan for only 3 rate hike this year. The release of the Fed minutes did help the US dollar trade to a one week high, which should put some downside pressure on energy. Energy has been fighting this dollar pressure so it will be interesting to see if it eventually sure comes to the pressure.

Paul Horsnell, the head of commodity research at Standard Charter, made the following comment with regard to inventories. “Clearly inventory cover is much less than it was a year ago. The lower inventories are, the market will worry about geopolitical disturbances.”

The markets continue to trade in a tight range looking for direction. The inventory report today will give traders some near term data to react to. The bears need to get to work and get some follow through lower. The longer this market congest and trades sideways the more likely the bulls attempt another run higher.

Bank of America Merrill Lynch forecast an average Brent crude oil price of $64 per barrel I 2018, compared with a previous estimate of $56 per barrel. It expects Brent prices to pullback in 2019 to $60 per barrel as US supply responds and OPEC starts to unwind the output cut agreement.

Tim Danze, MFA Oil Company Hedging Manager