Energy futures are finally taking a breath after a relentless 6-day rally to end July that added 11% to prices, while reaching their highest levels of the summer.
Yesterday’s rally was aided by two major stories, an unplanned shutdown of Europe’s largest refinery due to a fire, and sanctions (both real and imagined) levied against Venezuela. Today’s pull back seems like the market now wants to wait and see what the lasting impact of those 2 events will be before making the next move. The $50 mark for WTI looks like it may become a pivot point this week and may well determine where prices go in August.
The impact of any sanctions on Venezuela have been hotly debated lately, with some expecting the move could push oil prices towards $60, while others suggest the global market will simply adjust the flow of oil to offset the typical import/export flow. There are also rumors that any sanctions on the oil industry may coincide with a release of the US SPR to minimize any physical impacts. For his part, the Venezuelan president has been humorously defiant in the face of the sanctions leveled on him yesterday by the US Treasury.
Meanwhile, the Shell Pernis refinery may be restarted later this week, which should calm down markets in the ARA hub where it’s located, and likely in the US Gulf coast where basis values have rallied in anticipation of increased export demand.
RIN Prices continued their strength, trading as high as 90 cents for D6 ethanol RINs Monday. Here too the industry seems a bit confused as to how the EPA will reconcile the court’s ruling, when the impacted years have already past. While it’s not clear how exactly refiners will be expected to re-comply with the law retroactively, there is some consensus that this will be the latest headwind for several beleaguered plants.