Most energy contracts are trading lower for a 3rd straight day this morning after the International Energy Agency rained on OPEC’s parade in the monthly duel of international oil market reports.
Yesterday OPEC released its monthly oil market report that predicted robust demand growth globally for 2018, and declining supply. No word on whether or not the authors feared being arrested for “corruption” if they offered a less bullish outlook. The cartel showed a decline in production, as declines in Iraq (due to the issues with the Kurds) Venezuela and Nigeria offset increases in Libya and Angola.
The IEA disagreed with the cartel in its own report released today, predicting declines in demand, increased non-OPEC supply and a generally over-supplied market through March of next year. The IEA explained further that while, “…supply disruptions, geopolitical concerns, a growing expectation that the OPEC/non-OPEC output accord will be extended through 2018 at the end of the month…largely explain firmer prices…a fresh look at the fundamentals confirms the view we expressed last month that the market balance in 2018 does not look as tight as some would like, and there is not in fact a “new normal”.”
Ethanol RINs continued their decline, reaching a 3 week low of 86 cents/RIN in yesterday’s session, and opening up today’s well offered. With little news to explain the recent selling, it’s hard to say if the RIN decline is a cause or effect of the relative weakness in gasoline prices vs. the rest of the energy complex in the past week. NY Harbor spot gasoline prices saw another 2 cents taken out of basis values in yesterday’s trading, removing most of the remaining backwardation for November deliveries, and suggesting that the supply situation has finally loosened up in the area.
The selling is putting some key near-term technical support levels into play, which could erase the bullish trend lines started in early October. Peg $56 for WTI as a critical pivot point to determine if the bubble has actually popped, or if it’s just letting out a little air.