Oil waits on Fed, but may decline regardless

The recovery from the preemptive shut-ins ahead of hurricane Isaac continues and are almost complete. As of yesterday afternoon there is now just 57,439 bpd or 4.16% of GOM crude oil production shut in and just 213 mmcf/d or 4.73% of GOM Nat Gas production shut down. The industry will be at normal operating levels in the next day or so..

At the moment there is nothing in the near term coming from the tropics that is a threat to the energy operations in the Gulf of Mexico or US land for that matter. There is a tropical weather pattern located in the central Atlantic between the Cape Verde Islands and the Lesser Antilles that is showing signs of organization.  At the moment this pattern has been upgraded to TD14 and is projected to move west then north into the North Atlantic. At the moment this pattern does not look like it will be anything that threatens the US.

The API report showed an unexpected build in crude oil stocks a larger than projected build in distillate fuel stocks but a much larger than expected decline in gasoline stocks. The API reported a build (of about 0.2 million barrels) in crude oil stocks versus an industry expectation for a modest draw as crude oil imports increased modestly while refinery run rates also decreased modestly by 2.8%. The API reported a large build in distillate stocks. They also reported a larger than expected draw in gasoline stocks.

The report is mixed but more biased to the bearish side for everything other than gasoline. The market is higher across the board in overnight trading and ahead of the EIA oil inventory report at 10:30 AM today but more due to the approval of the ESM in Germany (see above).  The market is always cautious on trading on the API report and prefers to wait for the more widely watched EIA report due out this morning at 10:30 AM. The API reported a build of about 0.2 million barrels of crude oil with Cushing, Ok declining about 0.4 million barrels but a build of 0.765 million barrel in PADD 2 which is neutral for the Brent/WTI spread. On the week gasoline stocks decreased by about 4.2 million barrels while distillate fuel stocks increased by about 2.5 million barrels. 

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