Oil prices are pulling back this morning after reaching their highest levels in nearly 3 years Thursday. There’s little in the way of news to pin the 50 cent/barrel drop on for crude oil prices, so this move looks like a natural correction of the ongoing bull market. Refined products on the other hand were given plenty of reasons to sell-off in yesterday’s DOE report, but have not been able to make any sort of convincing move lower, in another sign that the bulls are firmly in control of the petroleum complex for now.
The DOE report showed a 7th straight week of crude inventory declines and refined product builds as US Refiners cranked up to record rates and demand estimates dropped sharply. Gasoline and diesel prices started selling off sharply in the immediate aftermath of the report but that move lower quickly stalled out and prices drifted higher the rest of the session.
Several reports released later in the day expressed confusion as to how gasoline & diesel prices could move higher after such a bearish report, which could explain some of today’s move lower as a delayed reaction.
The weekly build in diesel inventories was the 3rd largest in the past 16 years of data published by the DOE. The table below shows the 10 largest weekly builds, which all happen within a week of the new year, which may explain why ULSD is still trading within 3 cents of its highest level in the past 3 years.
No major refinery disruptions have been reported yet from the winter storm at this point, and NY Harbor cash prices showed slightly weaker differentials yesterday suggesting that the supply side of the equation came through relatively unscathed. We’ll have to wait and see how demand recovers from the snow and cold combination, and there may be a short window for it as another storm system is tracking across the country this weekend.
The December Jobs report was a bit softer than November, with only 148,000 jobs added vs 252,000 a month ago. The headline unemployment rate was unchanged for a 3rd month at 4.1% while the U-6 rate (the unemployment rate before the remove the unemployed people from the calculation) ticked up to 8%