Records Are Made to be Broken

By: Daniel Guttman / August 1, 2016

In the history of CFTC data, hedge funds are currently holding a record net short (bearish) position on gasoline. Why? Well, rising inventory levels of gasoline nation-wide are surpassing demand. Peak driving season is coming to an end, and historically a decrease in gasoline demand is upon us. Just last week the EIA lowered the implied May 2016 gasoline demand by 213,000 bbls/day. According to Reuters, refiner PBF for example; who is feeling the effect of lower than expected gasoline demand and increased supply levels, has had to cut crude runs between 6 and 7% to remedy the increased supply levels. According to the DOT’s Federal Highway Administration, miles driven numbers are up, however more fuel efficient cars could be impacting gasoline demand. Summary: the market is very bearish on gasoline. Demand is lower than expected and inventory levels are rising exponentially.Captureergerg.png

Last week’s Baker Hughes data revealed the 5th consecutive week that the U.S. active drilling rig count has increased. Last week’s addition of three rigs brought July’s total to 44. This monthly addition marks the biggest monthly increase in rigs in the last 2 years. During the first two quarters we witnessed a price rebound on crude from $26 to just over $51 in early June. This rally in crude oil prompted numerous oil producing companies to turn rigs back online. However, as we all know, an increase in production means an increase in the supply of crude. (See Bloomerg.com’s chart below detailing the relationship between U.S. crude production and crude prices.) During a time of a much needed re-balance in the overall crude market, an over-hanging supply glut, that could potentially get much bigger, coupled with refineries cutting their crude runs, is not what the doctor ordered.

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Finally, crude oil continues to flood the globe, and it may get worse. Supply from OPEC rose from 33.31 to 33.41 million barrels per day in July, and OECD inventories are well over “prime” levels. . In the past few months both Iraq and Iran have significantly increased their crude output, and no slow-down is in sight. Iran, whose post-sanction re-build is in full throttle, is on the verge of their new Iran Petroleum Contract (IPC), which incentivizes foreign investors to oil development in Iran. If “Supply-Glut” where a song title, it would be #1 on Billboard.

Crude prices are feeling the pressure. Crude is currently down $1.35 to $40.25, and refined products, RBOB and ULSD are down $0.0222 and $0.0485 respectively.

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Categories: Daily Market Update


Daniel Guttman

Written by

Daniel Guttman

With a background in wholesale and commercial sales as well as pipeline scheduling, Daniel is currently the Manager, Business Development in the Card Access Fuels department. He is tasked to find new and innovative solutions to increase sales opportunities for the sales team while managing and evaluating internal department processes. He assists with day to day personnel management, customer data analysis, as well as the daily Pacific Pride inventory and pricing direction.


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


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