It looks like Hurricane Hermine has disrupted more than just morning commutes and outdoor activities. Yesterday’s American Petroleum Institute (API) report showed an unexpected decrease in crude oil stocks of a decade-breaking-record of 12 million bbls, which has caused the market to move higher this morning. Many sources believe this is due to Hurricane Hermine and the decreased production in the Gulf Coast ahead of its formation. Tropical depression Hermine formed around August 28th, became a tropical storm on the 31st, was categorized as a hurricane on September 1st as it hit landfall in Florida, and has since moved up the east coast as a tropical storm with severe winds and heavy rainfall. The EIA stats, a day late due to Monday’s holiday, will either confirm the API report and the severe impact of the storm, or will differ. Keep a keen eye on the market come 10:30 a.m. EST.
PVM Oil Associates has gone on record challenging both the IEA’s beliefs regarding market re-balance, as well as the outcome of this month’s Saudi-Russia production freeze talk. In 2015, the International Energy Agency (IEA) had reported that 2016 was going to be the year for a global balance of supply/demand of crude and finished products, as well as the year of crude’s price re-balance. Due to current market fundamentals and this year’s severe global supply glut, IEA has since deferred its prediction to 2017. This has caused PVM to question the IEA’s validity and has used words such as “misleading”. – OPIS
Additionally, the meeting in Algiers later this month has been the subject of discussion and the outcome is believed to be a “shot-in-the-dark” by most investors and analysts. The big dogs in crude oil are well versed in their power to sway the market as they please, and they have done just that, again. Merely talking about a meeting that will talk about production freezing results in the same price support as the actual event. The question still remains whether Saudi Arabia, Russia, and OPEC will make an agreement to actually freeze and/or cut production. Regardless of that outcome, however, we know for a fact Iran has no interest in doing so until it hits pre-sanction production levels.
As a reminder, we are one week away from the low-to-high RVP turnover. In our area, 7.8# gasoline deliveries will end at 11:59 p.m. EST on September 15. Historically, demand for U.S. gasoline slows down from the end of August to the beginning of October as heavy driving season comes to an end. With the decreased demand as well as cheaper higher RVP gasoline coming into play, consumers should see price reductions at the pump in the upcoming weeks.