Market Report & Analysis for 7/3/2018 Afternoon Edition

Afternoon Market Overview

Oil prices ended Friday’s trading higher with the complex finishing with a weekly gain after increasing in value the previous week. Last week WTI crude oil increased more than the spot Brent contract after a larger than expected draw in US crude oil inventories and an increase in OPEC production which will impact Brent more than WTI.

The August Brent/WTI spread narrowed strongly last week with Brent still trading at a strong premium to WTI. The August 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 Aug WTI contract increased on the week and has broken out of the downward sloping linear regression trading channel to the upside. The August Brent contract increased less than WTI resulting in the August Brent/WTI spread narrowing by $1.68/bbl or 24.1 percent to $5.29/bbl by the end of the week. The Aug Brent/WTI moved into a lower technical trading range last week. The Aug WTI contract increased $5.57/bbl or 8.12 percent as total US crude oil stocks decreased outside the market expectations. The spot Aug Brent contract increased by 5.15 percent or $3.89/bbl.

The HO and RBOB crack spreads both depreciated versus WTI for the week as refined product inventories were higher with refinery run rates increasing.

The widely followed 3-2-1 crack spread narrowed last week driven by the ULSD component. On the distillate fuel front the July Nymex HO contract increased for the week by 3.95 percent or $0.0839/gal after a build in distillate fuel stocks. Gasoline prices increased after gasoline inventories increased on the week. The July Nymex gasoline price increased by 5.25 percent or $0.1086/gal this past week.