The crude rally which took over most of March appears to be correcting itself back to fundamental supply and demand reality. This morning, the market is trading down about three cents on both Heating Oil and RBOB, reflecting expectation of further crude inventory builds in the U.S. Reuters surveys predict that crude oil inventories rose by 3.2 million barrels last week. With record inventory and rising stocks, talk about the production freeze meeting scheduled for April 17, and doubts about whether or not the meeting will take place or an agreement will be met, there is not enough sentiment to justify the latest rally.
With minor global news, the market is awaiting the API’s weekly supply estimates at 4:30 p.m. and the EIA data to be released tomorrow at 10:30 a.m. Market observers expect an overall drop in refined products inventories, but an increase in U.S. distillate stocks is likely.
Yesterday, WTI finished down $0.07 to $39.39/bbl. HO finished down $0.0178/gal to $1.1801. There was not much movement on RBOB yesterday, finishing up $0.0021/gal to $1.4680. Outright gasoline prices jumped up between +0.0500 and +0.1000 in some New York Harbor influenced markets as suppliers move to switch their gasoline inventories to the more expensive summer-grade blends.
In separate news, Kuwait and Saudi Arabia have agreed to slowly resume production at the joint-owned, 280,000 bpd Khafji Oilfield which could also put pressure on oil. In October 2014 the oilfield was shut down due to environmental reasons.