The Energy Information Administration weekly supply support seems to suggest that low gas prices are spurring demand! Drivers are saying fill it up again as they felt richer as gas prices(NYMEX:RBZ13) fall near $3 a gallon in many parts of the country. Gasoline demand increased by 2.6% last week, the highest level since last July as production fell due to refining issues. This led to a bigger than expected 3.6 million barrel gasoline draw that slowed the major sell-off in the petroleum complex.
Oil bounced as well, as the 1.58 million barrel increase in supply was not as strong as forecast. Still, oil supply (NYMEX:CLZ13) is at a record high for this time of year and the market was due for a bounce. Distillate also offered support as strong demand led to a 4.90 million barrel draw down.
The numbers caused the market to rebound and we may start to range trade. Product strength will give crude support but overwhelming supply should keep us grounded. With refiners coming out of maintenance, the anchor supply should tighten but high production levels will still be the bearish anchor.
Bloomberg reports that “The alleged fixing of oil prices is unlikely to sway traders from using Brent as a benchmark for buying and selling oil in the $5.7 trillion commodity market, according to analysts and brokers from London to Tokyo. Four energy traders claim in a lawsuit that some of the world’s biggest oil companies including BP Plc (BP/), Statoil ASA (STL) and Royal Dutch Shell Plc (RDSA) conspired with Morgan Stanley (MS) and energy traders such as Vitol Group to fix spot prices for Brent for more than a decade. The North Sea oil price as assessed by Platts, a unit of New York-based McGraw Hill Financial Inc., is used to price more than half the world’s crude including Australia’s Cossack, Malaysia’s Tapis and Castilla in Colombia.
“Brent is going to remain as the benchmark for the foreseeable future at least, because there is no real alternative to it at the moment,” said Osamu Fujisawa, an independent oil economist in Tokyo, who previously worked for 26 years at Shell and 17 years at Saudi Arabian Oil Co. “It’s very well established, and those who are exposed to it don’t really have a choice but to stick with it.”
The case is one of at least seven U.S. lawsuits alleging price fixing in the London-based Brent market. European Union antitrust authorities raided the offices of companies including Platts, BP and Shell in May amid allegations of collusion in setting prices of crude, refined products and biofuels. The probe comes as global regulators scrutinize financial measures around the world after fining banks about $2.5 billion for distorting other benchmarks. The oil companies and energy traders, which include Trafigura Beheer BV and Phibro Trading LLC, submitted false and misleading information to Platts, according to the proposed class action filed Oct. 4 in Manhattan federal court.