Energy markets held up fairly well Wednesday in spite of the largest sell-off in US stocks in months. Overnight however some fear seemed to set in as crude oil prices fell $1/barrel and refined products were off 3-4 cents before taking back half of those losses this morning.
Ever since the huge overnight sell-off 2 weeks ago that was the springboard for the May rally, the pattern seems to be that overnight weakness turns into day time strength. It’s hard to say if this means traders in Asia or Europe are long and having to liquidate, or if traders in the US are simply eager to buy any dips. Today’s response in the face of a suddenly fearful market may go a long way in determining if this rally can continue, or if this week’s highs will act as a price ceiling this summer.
Yesterday’s DOE report was relatively benign in terms of inventory changes. The estimate for US crude oil production dipped for the first time in 14 weeks according to yesterday’s report, and while that may have given the bulls some hope, will rig counts and production per well still increasing, don’t expect the decline to last for long.
Gasoline stocks are holding steady over the past 4 weeks while historically this is a time when stocks draw down as we approach the “driving season”. The demand estimate isn’t bad at 9.4 million barrels/day, although it is 200,000 barrels/day below last year’s pace, but gasoline production is simply better, holding north of 10 million barrels/day.
Refinery runs returned to their record setting pace, with the PADD 3 setting an all-time high with throughput rates north of 9.3 million barrels/day.