The petroleum complex traded on the defensive following the DOE report. The report showed crude inventories rose by 2.8 mb compared to expectations for a 2.4 mb decline. Cushing stocks rose .5 mb. The rebuilding of crude inventroies helped ease concern over ongoing problems with exports from Venezuela due to ongoing blackouts at a key port yesterday. In products, inventory levels fell by 2.9 mb in gasoline and by 2.2 mb in distillate. Surprisingly the gasoline crack attracted good selling which might have reflected an overbougtht condition along with some disappointment gasoline product supplied was trailing year ago levels by .6 percent along with the appearance that the Houston ship Channel was beginning to reopen.
Near term the market will be monitoring global economic trends. The sharp downtick in interest rates has injected caution in the market and has raised fears that it reflects rising risks of a recession which ultimately would undermine demand prospects. In addition it has helped encourage some underlying strength to the dollar on the belief that the US is unlikely to be as weak as Europe or China. Nevwertheless we still see potential tightening of supplies in the near term should help underpin values and lead to underlying support that has potential to carry values up toward the 61.50 area basis May WTI Crude before succombing to renewed price pressure from the weak economic environment and a flattening out of demand growth when demand is seasonally weak due to refinery turnarounds.
The nat gas market continued on continued weakness to Permian basin and Waha Hub cash levels where prices held at record lows. With temps to remain moderate the next few weeks stock declines are expected to slow. Concern over low stock levels have been pushed into the background in advance of the EIA report with expectations pointing to a withdrawal in tomorrow’s report of 40 bcf compared to 66 bcf last year and 41 on the five year average. The expectation this might be the last withdrawal of the season seems to be undermining values.
Charts Courtesy of DTN Prophet X
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options ADMIS position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to. The authors of this piece currently maintain positions in the commodities mentioned within this report. Charts Courtesy of DTN Prophet X, EIA.
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