Market Report & Analysis for 2/22/2019 Morning Edition

by | Feb 21, 2019 | EMI, Fuels & Markets, FutureRack, Industry News

Morning Market Overview

Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied Wednesday, with the March West Texas Intermediate contract advancing for a sixth consecutive session and expiring at a 3-1/2 month high on the spot continuous chart. Brent crude and the RBOB contract also ended the session at their highest settlements on the spot continuous chart since Nov. 12, 2018, with the ULSD contract holding below last week’s $2.0203 gallon three-month high settlement.

Backwardation in the ULSD forward curve is unwinding, with the gasoline contract in a seasonal uptrend. The rally remained underpinned by production cuts by the Organization of the Petroleum Exporting Countries, optimism for a U.S.-China trade deal, expectations the Federal Reserve will hold interest rates at current levels, and supportive chart formations.

Growing U.S. oil production weighed on oil futures in early trading, along with expectations domestic commercial crude supply increased by about 2.5 million bbl last week. Energy Information Administration data shows commercial crude stocks in the United States having increased for four consecutive weeks through Feb. 8 to a 15-month high at 450.8 million bbl, and 28.7 million bbl or 6.8% above the comparable year-ago period. Oil product inventories are expected to have been drawn down amid the refinery maintenance season joined by unplanned outages.

Gasoline stocks are seen to have eased by about 250,000 bbl and distillate stocks drawn down 1.5 million bbl during the week-ended Feb. 15. The U.S. dollar softened in afternoon trade, although edged off a two-week low traded early afternoon ahead of the release of January minutes of the Federal Open Market Committee.