Market Report & Analysis for 2/6/2019 Morning Edition

by | Feb 5, 2019 | EMI, Fuels & Markets, FutureRack, Industry News

Morning Market Overview

Oil futures reversed lower in early trading Monday after West Texas Intermediate and Brent crude tested resistance, with WTI futures also under pressure from a stronger U.S. dollar. NYMEX March WTI futures settled down $0.70 at $54.56 bbl in an outside down session, with the contract reversing off a $55.75 nearly 11-week high on the spot continuation chart.

ICE April Brent futures settled down $0.24 at $62.51 bbl, reversing off a $63.63 better-than eight-week spot high while widening its discount to front-month WTI futures $0.51 to $7.95 bbl. NYMEX March ULSD futures settled down 0.53cts at $1.9074 gallon, reversing from a $1.9386 better-than eight-week high on the spot continuous chart. March RBOB futures ended 0.46cts lower at $1.4323 gallon after trading overnight at a $1.4850 7-1/2 week high.

The modest losses are realized one-week after the United States slapped sanctions on Venezuela’s state-owned oil company PDVSA, which are already causing havoc in Venezuela’s ability to produce and move out oil, reports note. The sanctions allow ongoing purchases of oil by U.S. companies through April 27, however, the revenue for those sales must go to blocked accounts in the United States and not to PDVSA directly, which is still controlled by Venezuelan President Nicolas Maduro.

The United States now recognizes Juan Guaido as Venezuela’s legitimate leader. PDVSA is demanding full payment upfront for U.S. buyers before loading cargoes. The U.S. sanctions also include the sale of light crude and diluents to Venezuela, which is blended into Venezuela’s heavy tarlike crude to make it marketable. Reports also indicate numerous oil workers aren’t showing up for work, as the opposition maintains momentum with mass demonstrations against the Maduro regime. These events have stifled crude movements in Venezuela, which are expected to worsen.

Several U.S. Gulf Coast refineries are scrambling to replace Venezuela’s heavy crude since their refineries are configured to process heavier blends, with the United States having imported more than 500,000 bpd of Venezuelan crude in 2018. The shortage of the dense crude grade have some speculating the United States would need to extend waivers from U.S. sanctions on Iranian oil that took effect in early November and run through May.