After the IEA and EIA reports led to some heavy selling Thursday, energy prices have bounced right back today as the complex continues its struggle for direction.
A large increase in Chinese oil imports, which reached their highest level since May, is the often cited reason for the overnight buying, although that doesn’t seem to explain why gasoline and diesel prices are up $1.50/barrel, while WTI and Brent are only up about $1.00.
The concerns over political posturing with Iran, and Kurdish oil exports from Iraq are both getting credit for the overnight strength in prices, but again, neither story does much to explain why products are out-pacing crude oil in the run-up. It’s certainly possible based on the relative strength in time and crack spreads for products that there’s a refinery issue somewhere in the US that’s yet to be widely reported. Whatever the reason, today’s rally could be significant from a technical perspective as it may eliminate some bearish potential from the charts.
If ULSD futures can get back above the $1.80 mark, they’ll be back into the bullish trend that carried diesel prices up by more than 50 cents/gallon since June before faltering last week. If RBOB can break back above the $1.63 mark, this week’s action will be a bullish reversal pattern after gasoline prices reached their lowest level since July Monday morning, opening the door to another counter-seasonal rally.
If you reversed the signs on the API report this week, you’d have been pretty close to the DOE figures as the two data sets diverged in nearly every headline category.
Refinery runs are not yet back to pre-Harvey levels, but they are still higher than they were a year ago, or during any other year on record for the first week of October. As the refinery throughput charts below show, usually we see large declines in run rates at this time of the year due to fall maintenance, and since many plants deferred that maintenance after the storm, we may continue to see runs stay above their normal levels throughout the month.
Crude oil exports declined sharply last week, dashing hopes for those calling for a 2 million barrel/day export figure. That said, at 1.27 million barrels/day, this was still a top-5 week for US crude deliveries to international destinations.
US Crude output ticked just slightly lower, as the pre-Nate shut-ins were just starting when the weekly data was collected last Friday. We should see a dip in next week’s report, but that is likely to be the only noticeable feature from the least-impactful hurricane to make US landfall in recent memory.