Written on: July 17, 2019

Crude and Refined Products Bouncing Back

Wednesday, July 17, 2019

Crude oil and refined products are bouncing back some on Wednesday, after heavy losses yesterday, amid weakness in the US dollar (down by 0.08%), but despite unsupportive to bearish inventory data reported by the American Petroleum Institute (API). While Asian and European equities are mostly lower, major US stock market index futures are seeing modest gains. The Energy Information Administration (EIA) is set to release its Weekly Petroleum Status Report this morning.

API data released last night were unsupportive for crude oil and gasoline, and bearish for distillates. The institute reported a withdrawal of 1.40mb from US crude inventories for the week ended July 12th, while analysts expected to see a 2.69mb draw. Crude stocks at the Cushing, OK delivery hub fell by 1.10mb. Also, gasoline stockpiles declined by 0.48mb last week, compared to an expected fall of 0.93mb, and heating oil inventories rose significantly, by 6.20mb, more than ten times the expected build of 0.61mb.

European stocks were trading weaker this morning following lackluster economic data releases for the region. The underlying Harmonized Index of Consumer Prices (HICP) for the Eurozone showed a 1.1% annual increase in core prices, in-line with expectations. The CPI in the UK stayed unchanged last month, matching expectations, after rising by 0.3% in May, but the PPI fell by 0.1% month-on-month, while the Econoday consensus called for a 0.1% increase. Market participants looked ahead to June housing starts for the US, as well as the June CPI and May manufacturing sales for Canada for further direction.

Crude complex futures tumbled across the board on Tuesday, as President Trump said that significant progress had been made with Iran and that he could increase tariffs on Chinese imports if he wanted to, and as the US dollar index shot up. In other news, the BSEE said that about 1.1mb/d and 1.4bcf/d of US Gulf of Mexico crude oil and natural gas production remained offline, respectively. WTI crude dropped $1.96 for a $57.62 a barrel settlement, Brent crude tumbled $2.13 to close at $64.35 a barrel, heating oil closed 4.67 cents weaker at $1.9049 per gallon, but gasoline lost 3.85 cents to settle at $1.8918 per gallon. Natural gas futures dropped 10.2 cents to close at $2.306 per MMBTU as continued resumption of US Gulf of Mexico gas production and decreased cooling demand expectations for the next two weeks.