September 11th is a somber day for the US, and today perhaps more than in years past as we remember the terrorist attacks 16 years ago, while assessing the damage done by another major hurricane still making its way across the South East.
Early reports suggest that while damage is widespread across the state of Florida, the major ports seem to have weathered the storm fairly well, and could begin to resume operations in the next couple of days. If that proves to be true, we should see the fuel situation heal up in a matter of days instead of weeks.
RBOB gasoline futures are trading lower for a 6th straight days as it appears that supplies are healing, while demand may suffer from this latest storm. WTI is holding onto small gains as gulf coast refineries continue to make slow but steady progress towards business as usual.
On Friday the Department of Homeland Security temporarily waived Jones Act restrictions on vessel movements between US ports, partially to ensure that as much fuel as possible could get to market in the aftermath of Harvey and Irma. It’s difficult to say whether this will have a material impact on product flows given the short time frame, and logistical constraints, but it’s definitely a sign – along with the widespread product grade waivers issues by the EPA – that the feds are serious about getting energy markets back on their feet as quickly as possible.
While Irma moves out of Florida, hurricane Jose continues to spin relatively harmlessly out in the Atlantic and away from land. New forecasts suggest that storm could be pushed back towards the East Coast next week however, so we’ll be stuck watching another system for at least the next 7-10 days.
The net long positions for WTI and Brent held by money managers were little-changed last week, but refined products both saw their net long positions reach their highest levels of the year as funds placed bets on higher prices in the aftermath of Hurricane Harvey.
The number of active oil rigs dropped by 3 last week according to Baker Hughes, the 3rd time in 4 weeks the count has declined after reaching a 2 year high. The slow but consistent plateau effect suggests that current prices are hovering around the break-even level for US shale plays. Something to watch for the rest of 2017 is whether or not the re-opening of the Brent/WTI spread beyond $5/barrel will drive enough demand for exported crude to influence the behavior of the drillers.