ISIS snap back; bearish oil traders react

Cride oil (NYMEX:CLU14) got hit hard as ISIS gets run over.

The U.S. air campaign and the Iraqi and Kurdish army has dealt a blow to this repulsive ISIS group that has shown no respect for human dignity and has shown no signs of moral decency. Reports that ISIS lost control of the country's largest dam in Mosul were welcome by bearish oil traders. Not to mention consolatory remarks by none other than Russian President Vladimir Putin and the promise of more oil from Libya was enough to feed the massive sell off. Of course how much of this bounty of bearish news priced into the market. Be on guard for a bounce as the recent drop in oil and products may inspire a bit of bottom fishing.

Products could bounce as a slew of refining issues could lead to draws in products in this week's reports. The drop in refining margins may inspire a rush to maintence as shoulder season fast approaches. U.S. refineries that had been running at record levels should ease off a bit. The Financial Times points out heap high quality oil caused a refining boom. They say that "U.S. petroleum product exports have more than tripled in the past decade, rising from 1.02m barrels per day in 2004 to 3.47m b/d last year, and have continued rising this year. The U.S. refiners' cost advantage is smaller now than it has been.

The discount for U.S. benchmark West Texas Intermediate crude relative to internationally traded Brent, which hit a record above $28 per barrel in 2011, has been falling as new pipeline capacity has eased supply bottlenecks, and was about $6 per barrel at the end of last week. In 2014, shares in the U.S. exploration and production sector have outperformed the refiners. Even $6 is still a useful advantage, though, and many analysts expect the spread to widen again as US production continues to grow."

Midwest heat and a strong U.S. industrial production number turned a sagging natural gas market. In the Atlantic there are 2 tropical disturbances that may or may not turn into something. The first and second disturbance according to the National Hurricane Center says that although development of this system is not expected during the next couple of days, some slow development is possible by the end of the week when the system approaches the Lesser Antilles and moves into the Caribbean Sea. The formation chance through the next 5 days is at about 20 percent. The second disturbance right behind it and has similar odds.

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