Morning Energy Comments
Energy Outlook:
The energy complex is coming in moderately higher this morning with the
exception of front month RBOB which is hovering around a penny below
settlement. Weakness in the greenback coupled with geopolitical tensions are
helping to motivate the gains seen early on. The conflict between Turkey and
Syria remains on traders’ radar as the fear that one of Turkeys terminals which
transport oil produced in Northern Iraqi is vulnerable to attack. On the economic
front there is not much in terms of reports due out today with traders left to look
at the Beige Book data along with the weekly DOE figures. Yesterday’s API
report showed a much bigger than expected draw in distillates which is helping to
support the heating oil contract ahead of heating season. Crude and gasoline
inventories both posted draws of 1.65 million bbls and 2.47 million bbls,
respectively. Look for a choppy session today with the market likely to remain
relatively well supported ahead of the DOE report.
Basis Commentary:
NYH gasoline cash markets finally took a bit of a breather yesterday from its
climb as all grades dropped substantially; traders stated the selling interest came
into the market due to the overvalued differentials we have been seeing. The
Colonial Pipeline put a freeze on shipments heading the IMTT terminal yesterday
which caused some downward pressure on the market as this 16 million bbl
storage facility is close to being full which is a good sign for inventory along the
Gulf Coast. Gulf Coast distillate cash markets were also seen trading slightly
weaker as the European arbitrage is a tight window and export demand has been
waning. The gasoline supply situation in the Midwest helped to depress cash
markets yesterday pushing Group III slightly lower and Chicago markets off
nearly 12 cents as inventories appear to be ample due to weakening demand.
Group III distillate cash markets were seen trading weaker yesterday after running
up to differential highs not seen since 2006 late last week and early this week.
Traders stated that constant demand and a tighter inventory situation is to blame
for the run up while the Chicago distillate market was also dragged down with the
Group III market Wednesday. Yesterday the API report showed a 6.2 million bbl
draw in distillate and a 1.6 and 2.4 million bbl build in Crude and Gasoline
respectively.
