Trade Deal Optimism and Equity Markets Moving Higher

Trade deal optimism has energy and equity markets moving higher to start the day. Prices were treading water overnight, but started to rally around 3am following reports that China was “open to a deal”. Energy and equity prices moved sharply higher over the next hour and have been holding around those levels ever since.

The EIA’s monthly short term energy outlook was highlighted by a forecast for a warmer winter that will limit heating demand across the US. This news came just in time for the first big winter storm of the season to sweep across most of the US.

The report also noted the brief reduction in US oil production due to Hurricane Barry and expects output to continue to grow beyond 13 million barrels per day in 2020. That rising production, and sluggish demand has the agency forecasting lower prices next year, and we’ll just get to wait and see if they’re better at predicting price than weather.

The API was said to show a build in crude oil stocks of 4.1 million barrels, but draws in products of 5.9 million barrels of gasoline and 4 million barrels of diesel. The gasoline draw would be the largest in 6 months if confirmed by today’s DOE report.

West Coast gasoline stocks continued their tumble from extreme highs, and are now trading some 50 cents/gallon below their peak levels of a week ago. Ironically, Tuesday’s large drop in gasoline basis values came despite reports of 2 unplanned refinery issues that had diesel values rallying by a nickel. Watch the gasoline import numbers in the DOE report to see if any cargoes were able to divert and take advantage of the $1/gallon opportunity.

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