Economic Reports Seesaw Energy Markets

Whiplash is the theme of July trading so far with energy prices back on their heels this morning, taking back a portion of Wednesday’s strong gains following a “good news is bad news” jobs report as the search for direction continues. 

After a quiet overnight session Treasury yield jumped while energy and equity markets dipped following the ADP payroll report that estimated 4970,000 jobs were added in June, more than double the consensus guesses. That strong number suggests tomorrow’s government payroll report might beat expectations as well and would all buy guarantee another rate hike at the July FOMC meeting.

The API showed increases in refined product inventories last week with gasoline stocks up 1.6 million barrels, while diesel increased by 604,000 barrels. Crude stocks dropped by 4.4 million barrels despite another 1.4 million barrels being released from the SPR as the DOE prepares to end its sales and begin its purchase program over the next few months. The DOE’s weekly status report is due out at 10am central today.  We should see some strong demand figures in the lead-up to the big holiday weekend.

Iran continues to try an alternate approach to prop up oil prices as its exports increase to the highest levels in 5 years. Yesterday there were reports that Iranian ships, attempted to seize 2 more oil tankers near the strait of Hormuz but were thwarted by the US Navy. While this sounds alarming, this type of attack has become fairly common over the past few years, and seems to be doing little to influence prices, in yet another sign of the bear market for petroleum we’re living in. 

In addition to the influx of Iranian exports, which are exempt from the OPEC output cut agreement, Venezuela has also seen oil exports steadily increasing since Chevron received waivers to restart operations in the country.

A year after its official commissioning, and just $8 billion over budget, the Dos Bocas refinery in Tabasco Mexico has started to operate and is expected to operate at roughly 1/4 of its original nameplate capacity of 340mb/day in the coming months. IF the startup goes to plan that facility will take some market share from USGC refiners that have been supplying products to much of the region for years, due in large part to Mexico’s inability to operate its refineries anywhere near capacity.

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