As the oil market continues to digest, yesterday’s stats which showed a draw in crude and higher than anticipated builds in gasoline and distillates, we are seeing movement higher this morning based on the dollar index which is currently down approximately 0.50%. The downward dollar pressure can be attributed to the various conflicting news reports from China regarding slowing or halting the purchase of U.S. treasuries. While there seems to be little substance to those reports, the news was enough to move the dollar index.
Yesterday’s inventory stats from the Energy Information Administration showed crude inventories falling by 4.9 million barrels which exceeded expectations of a 3.9 million barrel fall. In addition, gasoline and distillates both rose, by 4.1 million barrels and 4.3 million barrels respectively, again higher than what was expected. “Refiners should be concerned with the continued increase in gasoline and distillate inventories, which will pressure refining margins,” said an industry analyst based in Houston. Refinery crude runs fell 285,000 barrels per day as utilization rates fell to 93.5% of total capacity.
As far as international production, the United Arab Emirates energy minister speaking to an energy forum in Abu Dhabi said, “the market fundamentals in 2017 have been good but we’re looking forward to seeing another healthy year of production in 2018. The concern is to achieve that balance between supply and demand and we’re not there yet.” As a reminder, in November of 2017, OPEC and non-OPEC producers led by Russia agreed to extend their production cuts and reevaluate progress in mid- 2018. UAE’s energy minister concluded, “I am expecting that we will still see corrections in 2018 and I think it’s the year of the market fully achieving the balance.”
As of now trading today all three indices (crude, diesel and RBOB) are solidly in the green.