Earlier this morning it looked as if the market was struggling to hold onto last Friday’s gains; since, however, the market has rallied. Crude is currently up $1.16 to $45.65, and both RBOB and ULSD are up $0.0245 and 0.0366 respectively. This rally in crude, pre-maturely reacting to speculation about a production freeze, is in fact the highest level WTI has seen in a month.
We may be beating the dead horse, but talks about an informal OPEC meeting to discuss a production freeze has been the main market mover this past week. The U.S. dollar index is in fact down to 95.52 and this weakness is helping to prop WTI prices up, however, the news that Saudi Arabia, Russia, and other OPEC members may “entertain” the idea of a production freeze is the force behind this market movement. All it takes is a little talk of market stabilization to bring the bulls out of the woodwork. According to Bloomberg.com, the CFTC reported an increase of 17,154 net long future and options positions last week.
The funny thing about markets is that they move based upon information, and typically, the bigger you are and the better information you bring to the table, the easier you can sway the market. Could this be the case right now? Did Saudi Arabia see detriment when crude closed under $40 earlier last week, and therefore pump information into the market to raise the price? In a Bloomberg.com article posted yesterday, Daniel Yergin of IHS Markit went on record saying “The Saudis are very conscious of the financial markets and how they exaggerate price moves,” when referring to Saudi Arabia’s oil minister stating his willingness to discuss actions to stabilize the markets. “The statement certainly achieved its purpose” – Daniel Yergin to Bloomberg.com. Only time will tell whether their proposition holds true, or whether it was a ploy.
As for products, gasoline demand is seasonally slipping. The U.S. heavy driving season is coming to an end as vacationing winds down and kids go back to school. Weaker demand coupled with the coming RVP transition as well as the abundance of supply domestically, could potentially result in lower gasoline prices. As for ULSD, this is the time of year to start thinking about heating oil and making that push to fill storage tanks before prices follow-suit with the carry in the market.