Gasoline futures are trading higher by around 1.5 cents this morning, which would mark their first gain in 7 sessions if they can hold, as news that Hurricane Jose could make a loop in the Atlantic and head towards the East Coast of the US or Canada keeps traders on their toes. Even though this system is not predicted to re-gain Major Hurricane status like Harvey or Irma, it’s a little exhausting to think we are now just ½ way through the 2017 hurricane season, and have another potential threat slowly churning not far off shore.
While damage assessments are still underway at several ports effected by Hurricane Irma, activity has resumed at fuel terminals in Tampa and Pt. Everglades, 2 of the largest fuel hubs in Florida. With those two ports avoiding major damage, it seems like the bigger hurdles in returning the state to a state of normalcy will be road conditions and power restoration. While the focus all weekend was on the potential damage of the category 4 winds on the West Coast of the state, it looks like the storm surge near East Coast ports like Jacksonville, Savannah and Charleston may have a larger influence on regional fuel supplies this week.
RBOB futures are trading more than 50 cents below their hurricane & expiration day induced spike on August 31, but could possibly find chart support between the 50 & 200 day moving averages which are straddling the $1.60 mark. On the other hand, those support levels were built during summer gasoline season, and there’s a strong argument that the EPA-allowed early transition to winter grade gasoline could inspire another 20-30 cents of downside as more US refiners delay maintenance in an effort to quickly resupply storm-ravaged markets, and take advantage of the best margins they’ve seen in years.
ULSD futures are also looking weak after failing to break $1.80 last week, and then breaking below the Pre-Harvey bullish trend line yesterday. The $1.70 range looks to be a key pivot point this week that may determine if the next stop is $1.60, or another try at $1.80. With funds already holding their largest net long positions in both refined products of the year, and with the worst of the Harvey supply scare behind us, it seems like the bulls will need some other event to keep prices from seeing another heavy wave of selling.
OPEC’s monthly oil market report is forecasting an increase in global economic activity and oil demand for the year, revising previous estimates higher, and predicting that Hurricane Harvey will have a negligible impact on long term US crude balances and economic activity. The cartel also reported that total OPEC oil output dipped during the month, although without a 112mb/day decline in Libya it would have been an increase, and compliance with the output cut targets continues to decline.