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Refined Products

Recap: Oil markets moved higher after the weekly release of the EIA's DOE Inventory Report yesterday morning, except for NYMEX RBOB (Gasoline) that moved lower on an unexpected increase in gasoline stocks, settling at 2.8601, down 2.06 cents. NYMEX (WTI) Crude moved higher 73 cents to $103.12 after a larger than expected 4 MMb decline of crude oil stocks, including a 1.5 MMb decline at Cushing, OK that brought stocks down there to 18.8 MMbs, a low not seen since November 2008 and 57% lower than last year at this time. ICE Brent moved higher on more geopolitical issues (including Ukraine/Russian tensions as 2 Ukrainian military jets were shot down) and Libyan supply issues at the closed Brega oil port yesterday. ICE Brent was up 70 cents to $108.03. NYMEX ULSD (HO) followed the crudes higher despite inventory data that placed a 1.6 MMb distillate stock build within expectations. NYMEX ULSD broke up through resistance at the $2.87 price point and closed up 2.12 cents to $2.8754. The last time ULSD settled above $2.87 was on July 14th. Let's hope this does not indicate a pricing reversal through the contract's expiration (along with NYMEX RBOB) next week, Thursday, July 31st.  

Currently, oil markets are mixed as the products are up, while the crudes are down. NYMEX ULSD is up 79 points to $2.8833, NYMEX RBOB is up 45 points to $2.8646, NYMEX Crude is down 24 cents to $102.88, and ICE Brent is down 15 cents to $107.88. Breaking news that an Air Algerie jet carrying 116 people from Burkina Faso (Africa) to Algiers went missing this morning may also impact global markets today.

DOE Inventory Highlights: The EIA reported in its weekly DOE Inventory Report (for the period ended July 18, 2014) that total refiner operable capacity percentages remained the same across the country at 93.8% this week. PADD 2 (Midwest) refined crude at 99.5% rate. This on-going strong refining utilization helped to maintain refinery runs at 16.6 MMbpd (Million barrels per day) as crude stocks declined 4 MMbs, about 1 MMbs more than expected. (See EIA's Weekly U.S. gross refinery input chart below) Cushing, OK crude stocks declined 1.5MMbs, and now stand well below 20 MMbs at 18.8 MMbs, representing the first sub-20 MMb level since 2008. As the Cushing tank bottoms are in sight, the result of Seaway and Keystone XL South pipelines opening at the beginning of the year "... highlights the shortness of barrels at the Oklahoma hub. And with the USGC [U.S. Gulf Coast] still pricing to attract barrels from Cushing with LLS [Louisiana Light Sweet] to WTI over $4/bbl, further WTI strength will likely be needed to retain barrels, especially if refiners continue to run at 95-100% utilization rates." (Citi Research 7-23-14)  In other words, NYMEX (WTI) Crude pricing could be resetting to move higher with the drain at the Cushing storage hub, at least in the short term as illustrated by the September-October NYMEX (WTI) Crude backwardation. September WTI settled higher, or at $1.47 premium to October, indicating the current demand for crude by refiners.

PADD 1 (East Coast) DOE Inventory Highlights: PADD 1 (East Coast) refiner operable capacity percentages increased to 88.7% from 86.8% last week as compared with 88.8% last year. PADD 1 distillate stocks increased .63 MMbs from the previous week and are now 4.7% lower than last year, but 19.5% below the 5-year average. PADD 1B (Central) distillate stocks increased the most, 2.24 MMbs from the previous week, and currently stand 4.9% lower than last year at this time, but are 20% lower than the 5-year average. PADD 1C experienced a large distillate draw of 1.79 MMbs, but are close to stock levels last year, down only .4%. Although PADD 1A (New England) distillate stocks gained .17 MMbs over last week, they are still low: 14.6% lower than last year, and 43% below the 5-year average.  Although total gasoline stocks increased a whopping 3.4 MMbs (2.4 MMbs more than expectations), PADD 1 stocks decreased .359 MMbs and are at a 4.7% deficit to last year, but are 2.9% higher than the 5-year average. Click here to view today's Refined Products MarketWatch.

Natural Gas

On Wednesday July 23rd, the August NYMEX Natural Gas Futures Contract opened at $3.796 – up more than two cents from Tuesday’s closing price.  Prices immediately dipped to the $3.79 level and August traded sideways until 11:30AM.  At this point, prices rose and by 12:25PM, Natural Gas was at $3.811 – the intraday high.  Profit taking followed and by 1PM August was trading below $3.80.  Prices continued to slide and Wednesday closed at $3.762.  Since becoming the front month, August has lost nearly 65 cents as fears about outsized demand have been quelled by cool temperatures.  This morning in Globex, WTI Crude is down 19 cents, Natural Gas is up three cents, and Heating Oil & Gasoline are both flat.

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 94 BCF injection to storage for the week ended July 18th.  This compares to a 43 BCF injection at this time last year and a five-year average injection amount of 47 BCF.

New England and New York cash prices were down.


Natural Gas Glossary 

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to or call 1-855-466-2842.