After one year of Guttman Energy daily blogs I am sure you have reached the conclusion, and it is safe to say, that the market follows a pretty similar pattern. The oil market, from a macroeconomic viewpoint, changes with supply and demand, period. As seen over the last two years, the tremendous amount of supply (the “global supply-glut”) has pushed the price of crude from over $100/bbl to a low of $26/bbl—a pure example of how this is the single greatest component of price volatility. There are, however, micro-economic factors and events that trigger the market to react one way or the other, but ultimately the principal supply vs. demand global relationship moves the market accordingly.
Let’s take this week for example. After last Friday’s “Brexit” decision by the U.K., we watched the market crash. Monday’s settle was a direct correlation to this major geopolitical event. Fast forward to today, Brexit is no longer the main headline on news sites, TV stations, and internet blogs. Of course it is still important and relevant, but the oil market today is responding to the fundamental issues of supply and demand.
Today’s headlines are focusing on, and the market this morning is reacting to, a number of issues: Nigerian and Canadian output, Iraqi exports, Gulf Coast and Chicago refinery utilization, the busy driving weekend ahead, and fracking efficiency here in the U.S. shale industry. Supply and Demand.
Last night, WTI crude settled down $1.55 to $48.33, RBOB settled down $0.0234 and HO was down $0.0488. However, this morning Crude is relatively flat, HO is up $0.0032, and RBOB is down $0.0201. Keep in mind that we have rolled into a new trading month and we are now trading front month August futures.
In the Gulf Coast, CBOB fell 3cts on the day and ended 13cts lower than at the start of the month. However, with the hurricane season upon us, keep a keen eye on spot prices of all refined products. Additionally, the New York Harbor spot market price for CBOB also finished out the month down 10cts/gal.
Have a safe and happy 4th of July weekend. Reminder: rack prices are in effect from tonight 7/1 @ 6:00PM through Tuesday 7/5 @ 6:00PM and the NYMEX will not be open for trading on Monday, July 4th.