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Energy Futures Slipping Into Red

Wednesday, Jan 16 2019
Market Talk

Energy futures are slipping marginally into the red to start Wednesday’s trading after a strong showing Tuesday as more soft fundamental data for refined products seems to be countering a sigh of relief in global equity markets after the Brexit defeat was largely shrugged off by investors.

The API was said to report another large build in gasoline inventories of 6 million barrels last week, and distillates built by 3.2 million barrels. Crude stocks were off slightly with declines of 560,000 barrels nationwide. A week ago we saw prices largely ignore large inventory builds in the EIA’s weekly report in the midst of the recovery rally, so it will be interesting to see the reaction today should stocks build now that the momentum has faded.

It’s energy data deluge week. Yesterday the US EIA published its monthly Short Term Energy outlook (STEO). Tomorrow we’ll get OPEC’s monthly oil market report, and Friday we’ll see the IEA’s monthly report.

The STEO report is forecasting that global fuel supplies will continue to hold slightly above demand for 2019 and 2020, creating modest inventory builds, but the agency is still predicting a modest increase in prices during that time. This report also predicts that sometime in late 2020 the US will cross over into a net exporter of petroleum on a consistent basis, something it did for one week in 2018 for the first time in roughly 75 years.

Talk about uncertainty: The EIA’s prediction for crude oil prices one year from now, “…suggest that a range of $28/b to $101/b encompasses the market expectation for December 2019 WTI prices at the 95% confidence level.” It sure is a good thing the EIA wasn’t caught up in the government shutdown or we wouldn’t have received that tidbit of wisdom.

CLICK HERE for a PDF of today's charts

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