By Dr. Nancy Yamaguchi

 

Oil prices opened at a very strong $53.75 on Monday last week, but this was followed by a sharp downward correction. WTI prices shed 5.5% over the next two days, opening at $50.81/b on Wednesday. Some observers believed that the sell-off was an expected downward correction, getting prices back down into the $51 – $52 range rather than the $53 – $54 range. The rest of the week saw prices gradually creeping back up above $53/b. Friday is lackluster so far, and the week may end in the red.

 

Several factors also pointed to expanding crude supply: another increase in the U.S. active oil rig count, forecasts calling for a larger increase in U.S. output in 2017, Iran’s sale of approximately 14 mmbbls of crude from floating storage, Libya’s announcement of a significant rise in output and a planned sale of 8 mmbbls of light sweet crude from the U.S. Strategic Petroleum Reserve (SPR).

 

It was later announced that the SPR sale would be offered for March – April delivery, which removed some of the bullish supply pressure. Prices began to climb again on news that Saudi Arabia was meeting its production cut pledge. A number of Asian customers were informed that their supplies would be reduced in February. While company-specific data has not been released, Bloomberg noted two southeast Asian refiners who had supplies cut by about 30% and one Indian refiner who had supplies cut by 20%.

 

The EIA reported a massive buildup of inventories: 4.097 mmbbls crude, 5.023 mmbbls gasoline and a whopping 8.356 mmbbls distillate. The bearish impact was apparently moderated by year-end vagaries concerning tax strategies and by weather issues that created a short-term jump in imports.

 

WTI crude prices opened at $53.05/b this morning, a 1.3% decrease from Monday’s opening of $53.75/b. Prices ranged from a high of $53.83/b on Monday to a low of $50.71 on Tuesday. This is a range of $3.12. WTI prices are $52.64/b this morning, 41 cents below opening. Prices are hovering under $53/b.

 

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Distillate prices opened Monday at $1.7011/gallon. They opened this morning at $1.6758/gallon, a drop of 1.5% (2.53 cents) for the week. Prices ranged from a low of $1.6064/gallon on Wednesday to a high of $1.7031/gallon on Monday, a very large range of 9.697 cents. Prices are currently $1.6626/gallon, 1.3 cents below Thursday’s close.

 

NY Harbor ULSD (Click to enlarge)

NY Harbor ULSD

 

Gasoline RBOB prices opened Monday at $1.6297/gallon. Today’s opening price of $1.6158/gallon was a drop of 0.9%, or 1.39 cents, for the week. Prices ranged from a low of $1.541/gallon on Tuesday to a high of $1.6337/gallon on Monday and Thursday, a wide range of 9.27 cents. Prices are $1.6082/gallon currently, 0.26 cents below Thursday’s close.

 

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RBOB