Oil finding support in Yemen threats, manufacturing rebound

Yemen Shut Down

The U.S. is telling all Americans to get out of Yemen. They have shut down the embassy as the vague Al-Qaeda threat is zeroing in on that part of the world. Yet the most significant threat from Al-Qaeda in years is failing to give a lot of support for oil (NYMEX:CLU13). Yemen has been the scene of oil pipeline attacks in recent days yet the market fails to get excited because Yemen is not a major producer. It seems to be slowing the steep downward momentum that oil received from the return of Libyan oil. It could also be a surprising rebound in manufacturing around the globe. 

We saw RBOB get hit as refiners came back from maintenance and the export window became a bit less attractive.  European refiners soon will get their hands on that sweet Libyan crude, so the RBOB export expectations diminished somewhat. Data overnight in the U.K. and Germany show that there is life in Europe's manufacturing sector. German factory orders hit a six-month high and in the U.K. industrial output raised 1.1 beating forecasts for a 0.7% jump. The factory output numbers also surged by 1.9%, increasing demand expectations for oil.

The API is going to release its version of weekly inventories! According to Bloomberg, oil inventories should hit the lowest level since the beginning of the year falling by 1.1 million barrels. U.S. gasoline stockpiles should fall by 500,000 barrels, according to the median estimate of nine analysts surveyed by Bloomberg. Distillate inventories, a category that includes heating oil and diesel, are forecast to have decreased by 400,000 barrels.

Bloomberg reports that Spot gasoline in San Francisco weakened for the first time in three days as Royal Dutch Shell Plc (RDSA) said the Martinez refinery in Northern California was running at planned rates. The 165,000-barrel-a-day refinery, northeast of San Francisco, reported an unscheduled unit shutdown early yesterday because of a lack of nitrogen at the site, a notice to Contra Costa County regulators shows. Destin Singleton, a Shell spokeswoman in Houston, declined to comment on the unit shut and said the refinery is "operating as planned." California-blend gasoline, or Carbob, in the Northern California area dropped 3.5 cents to a discount of 10.5 cents a gallon vs. gasoline contracts traded on the New York Mercantile Exchange, data compiled by Bloomberg at 4:14 p.m. New York time show. Prompt-delivery tumbled 7.91 cents to $2.8456 a gallon. Tesoro Corp. (TSO)'s 170,000-barrel-a-day Golden Eagle refinery reported unit startups on July 19 and July 20, separate notices to Contra Costa County show. Carbob in Los Angeles slipped 2.5 cents to a discount of 9.5 cents a gallon.

Chevron Corp. (CVX)'s El Segundo refinery, the largest in the state, plans to flare gases through Aug. 7, a notice to the South Coast Air Quality Management District shows. The flaring isn't due to a breakdown, according to the notice. The plant was scheduled to shut the No. 2 crude unit this month for maintenance, a person familiar with the work said June 13.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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