Yesterday’s trading session ended with crude closing down $0.85/bbl to $45.83 on Oct expiry, RBOB up $0.0133/gal to $1.4164 and HO up $0.0180/gal to $1.5320. Last week, WTI was $1.24 less expensive at $44.59, RBOB was $0.0835/gal less expensive at $1.3329, and HO was $0.0320/gal less expensive at $1.50. Currently, WTI and both refined product futures are trading higher than yesterday’s settlement prices.
Product futures fell at the beginning of yesterday, but recovered and closed up after news of a Colonial pipeline closure. The Colonial pipeline had to shut down a line with an 850,000 bpd capacity to carry gasoline and distillates from North Carolina to its New Jersey hub. The line closure was to investigate odors of gasoline in Virginia, as reported by Colonial.
The Colonial Pipeline begins in Houston, Texas and ends in Linden, New Jersey.
OPEC is predicting bullish crude prices, with U.S. production falling and strong demand. They assume crude prices will rise to $80/bbl by 2020. Evidence of declining U.S. production can be seen in the falling U.S. rig count. Baker Hughes reported the number of operating U.S. rigs has fallen from 1421 at the beginning of the year to 644 last week. The peak of operating rigs occurred in October 2014 with 1609 rigs.
The increase in the market is a reflection of the data released by the API last night. The API data released show that U.S. crude inventories had a 3.7 million barrel draw, 490,000 barrels of which was in Cushing, OK. There was a build in gasoline of 2.2 million barrels and a build in distillate of 300,000 barrels. This was supported by DOE numbers today that have the market rallying further on a surprise crude draw and large distillate draw. The DOE statistics show crude inventories had a 1.9 million barrel draw, 462,000 barrels of which was in Cushing. Gasoline inventories had a build of 1.3 million barrels and distillate inventories had a 2.1 million barrel draw; however, PADD 1B distillate inventories had a build of 224,000 barrels.