Market Report & Analysis for 6/7/2019 Morning Edition

by | Jun 7, 2019 | EMI, Fuels & Markets, FutureRack, Industry News

Morning Market Overview

Oil Futures Bounce off 5mos.Lows, Bearish Outlook Persists WASHINGTON, D.C. (DTN)

Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged higher in overnight trade amid consolidation after Wednesday’s selloff that pressed West Texas Intermediate and Brent into bear markets, as concerns over slowing fuel demand spurred bearish market sentiment.

NYMEX July WTI futures were up $0.30 near $52 bbl at 9 AM ET, with ICE August Brent $0.45 higher near $61.05 bbl. NYMEX July RBOB futures were 0.25cts higher near $1.6955, with July ULSD futures flat at $1.78 gallon.

Oil futures hit five-month lows on Wednesday after government supply data showed U.S. crude inventories surged to a nearly 22-month high last week, while refinery run rates remain below average for this time of year. Surging inventories in the United States heightened concern over a slowing economy and lost demand.

ADP released on Wednesday a shockingly bad employment data, showing the U.S. private sector added just 27,000 jobs in May, well below expectations for 173,000 jobs. While some economists warn that ADP’s latest figures look grossly understated, it points to a broader slowdown in the domestic job market. U.S. government is due to release official employment data for May at 9:30 AM ET Friday.

The latest downbeat data has caused angst for analysts bracing for a slowdown in U.S. economic growth and oil demand. Morgan Stanley lowered its forecast for growth in oil demand for 2019 from 1.2 million bpd to 1 million bpd. “Demand is weakening much more rapidly than we had expected,” Morgan Stanley said on Wednesday. Oil futures fell more than 20% from mid-April highs, as U.S. government released several bearish reports detailing larger-than-expected builds in domestic crude inventories and record high production rates.

Energy Information Administration said on Wednesday U.S. stockpiles jumped 6.8 million bbl in the week ended May 31, while also detailing a surprise increases in refined products stockpiles. U.S. gasoline stocks jumped 3.2 million bbl, and have increased a steep 9.1 million bbl from May 11 to May 31.

Distillate stockpiles gained 4.6 million bbl, while implied demand in the profiled week plunged 895,000 bpd to reach one of the lowest weekly demand rates of 2019 at 3.387 million bpd. Demand weakness for distillates aligns with weakening manufacturing, with the Institute of Supply Management reporting an unexpected 0.7% decline in the U.S. manufacturing index during May to a 52.1 32-month low.

Flooded fields in the Midwest have also delayed plantings, reducing diesel demand used in the agricultural sector. Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, www.dtn.com. (c) 2019 DTN. All rights reserved.