Yesterday’s oil market seemed to be a good snapshot of the market gyrations over the last few months. From the time the market opened at 9:00 a.m. ET until it closed at 2:30 there was a steady decline. The Heating Oil market declined from an intraday high of $1.3800 to eventually settle at $1.3287. The RBOB market had a similar path after hitting a high of $1.5336 to settle at $1.4914.
Since February of this year we have seen the markets rally behind OPEC meeting rhetoric, a decline in U.S. production, cuts in output from Nigeria and Columbia and increased gasoline demand. That rally is being tempered however by the global crude glut as well as the anticipated gasoline glut after the summer driving season. When those factors are coupled with Iran’s new supply, Saudi Arabia’s market share strategy and China’s all-time-high exports, the bears have the upper hand right now. As one analyst in London stated, “Oil fundamentals are improving but the market is still apprehensive. Only when refiners start complaining about the lack of supply will we see a sustainable recovery.” A second analyst said that “oil is ripe for a consolidation or correction into the mid-to-low $30’s.”
Today after opening in the red, the market is rallying, primarily based on the wildfire in Fort McMurray, Canada and rising political tension in Libya. As of the time of this writing heat and RBOB are both up approximately a penny.