The Phil Flynn Energy Report
The oil market is saying sayonara to summer, jumping into shoulder season as refiners remain shut down. It didn’t help oil when the Saudis cut the selling price for some grades of crude oil, suggesting weak demand and a sense that it isn't going to get better until the snow starts to fly.
Concerns about rising supply are happening even as U.S. inventories plummet, and both Saudi Arabia and Russia say they’re pleased with overall OPEC+ compliance to the historic production cuts.
U.S. petroleum stocks continue to plummet, and concern that President Trump wants to decouple from China is hurting the stock market. Vice President Biden says that Trump hasn’t been tough enough on China. Biden in the past has dismissed the notion that the U.S. should be worried about China as a geopolitical competitor yet now all of a sudden sees them as a threat. Maybe even more significant risk than Russia!
Yet despite oil and products sharp price drop, the Labor Day weekend drive seemed to beat expectations. Reports by Gas Buddy suggested a surge in gasoline demand as American tried to salvage what was left of this Covid-19 summer. Petroleum analyst Patrick DeHaan recently tweeted that, "Pay with GasBuddy data shows gasoline demand Friday skyrocketing 15.35% over the prior Friday. A *very* strong start to Labor Day weekend and the highest Friday we've seen since March.”
Yet it seems none came home Sunday because demand dropped back off. The U.S. has helped draw down the floating storage for oil and brought refining margins to their highest level since early March at around $6.00 a barrel, according to Argus Media.
The other issue with oil is the solid U.S. dollar rebound. The sudden strength in the dollar is weighing on oil today, and it looks like oil will have a hard time standing until we get a look at inventories. I expect big draws in crude oil and products, and that should help us find a bid.
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