Market Report & Analysis for 5/8/2018 Afternoon Edition

Afternoon Market Overview

Oil prices ended last week’s trading session strongly higher with the complex finishing with a weekly gain (except for RBOB) after increasing in value the previous week. Oil prices increased across the board for the week.

Last week WTI crude oil and the spot Brent contract were higher July WTI contract increasing more than Brent even though there was a larger than expected build in US crude oil inventories and a surprise build in Cushing inventories. The July Brent/WTI spread narrowed strongly last week with Brent still trading at a strong premium to WTI. The July Brent premium to WTI remains wide enough to keep the arb window open for select US crudes to work into the export market. The spot June WTI contract increased on the week and remains in the upward sloping linear regression trend channel. The July Brent contract increased less than the July WTI contract resulting in the July Brent/WTI spread narrowing by $0.52/bbl or 8.95 percent to $5.29/bbl by the end of the week. The July Brent/WTI remained in its current technical trading range last week. The June WTI contract increased $1.29/bbl or 2.38 percent even as total US crude oil stocks increased versus a market expectation for a smaller build. The spot July Brent contract increased by 1.46 percent or $1.08/bbl.

The HO and RBOB crack spreads both depreciated versus WTI for the week even as refined product inventories were mixed with refinery run rates increasing. The widely followed 3-2-1 crack spread narrowed last week driven by the RBOB component.

On the distillate fuel front the June Nymex HO contract increased for the week by 0.92 percent or $0.0197/gal after a modest draw in distillate fuel stocks. Gasoline prices decreased after gasoline inventories increased on the week. The June Nymex gasoline price decreased by 0.65 percent or $0.0139/gal this past week.