Shift In Wind And Rain Help Canadian Oil Producers Dodge The Latest Wildfire Threat

The rally in energy prices has stalled out temporarily following some bearish inventory data and signs that Canadian oil producers may have dodged the worst of the latest wildfire threat. Signs of a softer labor market also seem to be contributing to the slide, with RBOB futures dropping another penny following the release of ADP’s private employment report which showed the pace of hiring dropped to a 2 year low in May.

The pullback, which is very modest for now, keeps the downward sloping trendlines in place for RBOB and ULSD futures, and sets up another slide to test the May lows if those trends aren’t broken in the back half of the week.

The holiday hangover started showing up in the weekly inventory reports with the API estimating a large build of 4.7 million barrels of gasoline last week, while diesel stocks were reported up by 760,000 barrels. Crude stocks had an estimated decline of 3.3 million barrels for the week. The DOE’s weekly report is due out at its normal time this morning, offering a more clear look on the impact to production of the rash of refinery upsets that have been reported in the past 10 days, although it’s worth a reminder that the data released today was compiled for a week that ended last Friday, so any upsets later in the week or over the weekend won’t show up in the data until next week.

Canadian wildfires shut in an estimated 350,000 barrels/day of oil production over the past week, but a favorable shift in winds and some rain have helped alleviate the pressure on producers and prices. Reports late Tuesday suggest Cenovus may already be restarting its Christina Lake oil sands operation which makes up about 2/3 of the shut in production.

The storm system tracking off the Florida coast is now given 0% chance of developing by the NHC, but is still expected to bring heavy rain to the state and parts of the Southeast.