Cushing supply drop continues

Oil (NYMEX:CLN14) prices tired of geopolitics and devoid of any economic data will focus on oil inventories today.

The American Petroleum Institute in their weekly pre-Energy Information Agency status report appetizer seemed to suggest that supply in Cushing, Okla., fell yet again. This comes despite reports from DTN that scheduled tie-in work associated with the Seaway Pipeline and ECHO storage terminal expansion projects that began Wednesday, May 28, 2014 has been completed and transportation of crude oil resumed Sunday, June 1.

Some believe that that work could have impacted overall supply at Cushing. Yet while it may explain some of the drop it still does not change the fact that the fundamental make-up of the US oil industry is changing making Cushing not so much as a landing spot but more of a way station. The days bringing oil up from the Gulf of Mexico to the refiners in the Midwest are over and now the oil is flowing the other way taking oil produced in the Midwest back down to the refiners in the Gulf Coast reducing our reliance on imports and allowing us to export more oil products.

Over all the combination of the draw in Cushing and a 1.4 million barrel draw-down over all gave the WTI a little bounce and an edge over Brent. Cooling rhetoric between Russia and the United States and signs that Gazprom and Ukraine are close to a gas deal is taking risk premium out of Brent.

Dow Jones says that Ukraine is urging Russia to keep the price for natural gas supplies at a discount level agreed between President Vladimir Putin and ousted President Viktor Yanukovych.  On top of that rising OPEC production and even talk that Iran is selling more oil than they are supposed to under eased sanctions is giving the market a sense of being well supplied. The API also reported that gasoline stocks rose 800,000 barrels, and distillate fuels stockpiles, which include diesel and heating oil, fell 300,000 barrels as farmers went crazy planting.

Yet with a lot of uncertainty of the macro picture oil is not ready to giving in to the downside just yet. It seems to be waiting for the ECB and their decision and of course the big jobs number at the end of the week. The market is apathetic so much so that this apathy might start to slow the economy and hurt demand for oil. It is also hurting demand for gold.

Natural Gas (NYMEX:NGN14) is hanging in as renewed concerns about hot weather.

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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