Energy futures are treading water this morning, recovering from some heavy overnight selling pressure after WTI managed to survive its first trip below the $50 mark in the past 2 weeks. It’s clear that the momentum gained in September was wiped out in the past week, but now there are some critical tests near term to determine if the bears are really in control, or if the bulls were just taking a break.
The API was said to show gasoline inventories increasing by more than 4 million barrels last week, while crude oil inventories declined by 4 million barrels. Those movements seem consistent with the theme of the ongoing Post-Harvey refinery restarts, and perhaps foreign gasoline cargoes booked during the price spike that followed the storm reaching their destination. Diesel stocks were estimated to have declined by more than 500,000 barrels last week, which is helping ULSD hold onto small gains this morning while crude and gasoline contracts remain in the red.
The DOE’s weekly inventory report is due out at 9:30am. Regional markets in the southeastern US are showing signs of being long on regular unleaded, suggesting we may see a large PADD 1 gasoline build that could put RBOB under more pressure today.
The $1.54 area looks to be a pivotal point for RBOB near term, having held support in each of the 3 trading sessions this week. The $1.54 area was also where we saw RBOB make a short term bottom on July 24 before rallying 17 cents in the next 5 trading sessions, and on August 17 before the Harvey rally took hold. The major difference this time around is that we’re trading winter RVP spec gasoline which could make that support level more difficult to hold. Charts suggest we’re heading for $1.40 if it doesn’t.
The national hurricane center is giving 90% probability of a tropical storm developing in the next 48 hours, and forecasts suggest that “Nate” will be the next threat to the US Gulf Coast over the weekend. Current models suggest the storm should stay East of most oil production and refining assets, although the New Orleans area is in the cone of possibility for landfall.