Today we reached another 3-month low on HO and RBOB with both trading at $1.3022 and $1.3222 respectively. Yesterday, the market was fairly flat across the board, with HO only settling up $.0032, RBOB up $.0116, and crude down $0.21. Crude fell to as low as $42.51 today, which is under the threshold of $43.00 that was broken yesterday for the first time since late April.
The API statistics released yesterday showed a drop in crude inventories of an estimated 825,000 barrels, whereas Cushing, OK, showed a build of 1.4 million barrels. Expectations for today’s EIA report were a draw on crude of 1.6 million barrels, with Cushing expected to build by 1.0 million. For gasoline and distillates, the APIs showed a draw of 425,000 barrels on gas and a 300,000 build on diesel. Per usual, the EIA was expected to show a million barrel draw on gas and a million barrel build on diesel today
The EIA report was released and the market has dropped on crude and refined products. Starting with gasoline, there was a 452,000 barrel build, which was fairly close to the APIs. Diesel showed a 780,000 barrel draw which did not mirror the APIs. Crude built 1.6 million barrels, taking nearly a 180 degree turn from the API number, and Cushing built 1.1 million, as expected.
Reuters had an interesting take on why oil prices haven’t fallen further than they have as of late. “Hedge funds and other money managers have begun to amass another large short position in futures and options contracts linked to the price of crude oil. But the current wave of short-selling has been associated with a much smaller decline in WTI prices than last summer, at least so far.” “The rise in short positions by nearly 88 million barrels in the span of just seven weeks is one of the largest increases in short positioning in such a short period on record.” That time period was May 31st-July 19th. For those of you who are not familiar with the term “short” when discussing commodities, short simply means selling more of a commodity with the expectation that the commodity’s overall price will continue to decline. It is mainly prompted by speculation, which could bring on high risk.