The five week price run finally ran out of steam and started a correction Thursday and Friday. This extended into a choppy Monday AM session that ended firm again on Saudi production cuts are here to stay comments. We are getting follow through buying this morning.
A weaker dollar is also contributing to higher prices. The dollar weakness is tied to political uncertainty in the US making Crude less expensive to foreign buyers.
Another big factor is money is flowing back into oil commodities. Investors have a record net long position.
On the bearish side the EIA predicts record US production this year surpassing 10 million barrels a day. The US is now among the top three world producers.
It will be interesting to watch the tug of war between US production, liquidation of long positions, OPEC holding the production quotas, strong demand from a strengthen world economy.
On the US downstream side of the business the market will again look closely at the API and EIA reports this week. We finally saw a distillate draw last week and expect another this week. There has been significant generation demand. Although the now warmer than normal temperatures will weigh on heating oil demand we see power generators filling back up on DYED .15 PPM ULSD. The backwardation in crude prices continues supports another draw. Expect a build on gas stocks. It won't be long before the spring driving season is upon us and lower, more expensive RVP material makes its seasonal price move.
It's a difficult environment for gasoline retailers. With the lag time between daily wholesale price moves higher and retail street price margins are severely squeezed. Talk to us about buying on market dips like yesterday morning to help improve your margin and hedge against short term volatility.