Energy Markets Flat This Morning
Energy markets are flat this morning, as the US takes a day to mourn a former president, one day ahead of what may be a pivotal OPEC meeting.
The recovery rally in petroleum futures seemed to run out of steam Tuesday, doubts over the Trade Truce and fears of a looming economic slowdown both domestically and abroad continue to build, sending US stock markets for another tumble. Although the correlation between equity and energy prices has been weak for the past few weeks, it certainly appeared that the stock market selling helped to stone-wall the buying spree in oil & products that we saw Tuesday morning.
US stock markets are closed today for a national day of mourning honoring George H.W. Bush, while energy markets are following their normal routine. The DOE weekly status report will be delayed until tomorrow.
The API was said to show inventory builds across the board yesterday, with oil stocks up more than 5.3 million barrels, diesel up 4.3 million and gasoline up by 3.6 million.
As the forward curve charts below demonstrate, the fall sell-off has also wiped out the backwardation (near term prices holding higher than longer term prices) that had become a mainstay for most petroleum contracts for much of the year. Given that the curves have flattened for a full 3 years, this suggests an expectation for ample supplies for an extended period of time, compared to a short term drop in demand (aka recession fears) driving the action.