Written on: September 19, 2019

Crude and Refined Products Rebounding

Thursday, September 19, 2019

Crude oil and refined products futures are rebounding on Thursday, led by Brent crude, as the US, Saudi Arabia, and other Gulf countries discussed possible responses to the attack on Saudi oil facilities that took place this past weekend. The gains, which are of over 2% across the board as of this writing, also came amid weakness in the US dollar index and strength in European stock markets, but despite losses in US stock market index futures. The US and China are set to resume trade negotiations, in Washington. Energy traders are looking out for US economic data releases including weekly jobless claims, the Philadelphia Fed, and existing home sales for further direction.

Reuters reports that the US, Saudi Arabia, the United Arab Emirates and Kuwait are discussing possible responses to attacks on Saudi Aramco oil facilities that took place on September 14th. US Secretary of State Mike Pompeo has described the attack as an act of war against Saudi Arabia, but President Trump has said there are many options short of war with Iran. The UAE and Saudi Arabia both joined a global maritime security coalition that the US has been working on following explosive attacks on tankers that took place earlier this year. Tensions remain high and Houthi rebels in Yemen yesterday said they have listed dozens of sites in the UAE as possible targets for attack.

Asian shares saw mixed trade last night, but the Nikkei posted modest gains. The Bank of Japan kept monetary policy settings unchanged in its September meeting, consistent with expectations. European shares are rising this morning. UK retail sales fell 0.2% in August, matching expectations, but July sales growth was revised up from 0.2% to 0.4%. The Bank of England kept monetary policy settings unchanged this month, in a unanimous vote, and consistent with market expectations. US stock market index futures are in the red as of this writing, despite the restart of US-China trade negotiations. Talks are set to take place today and tomorrow in Washington and to focus on agriculture.

Energy prices lost further ground on Wednesday, amid bearish US crude oil and gasoline inventory data from the Energy Information Administration. The losses came despite the President ordering Treasury to “substantially increase” sanctions on Iran, but amid weakness in the major US stock market indexes. The FOMC announced a 25-basis point rate cut yesterday, putting the target federal funds rate range at 1.75-2.00 percent, consistent with expectations. Brent crude fell 95 cents yesterday, settling at $63.60 a barrel, WTI crude dropped $1.23 to close at $58.11 a barrel, gasoline settled 1.74 cents weaker at $1.6577 per gallon, heating oil closed down 1.63 cents at $1.9733 per gallon and natural gas futures shed 3.1 cents to settle at $2.637 per MMBTU.