Review of Oil Trading Markets - 2024 - 26th to 30th August

Another very difficult week in with oil prices opening strongly after heavy rocket and drone exchanges between Hezbollah out of southern Lebanon and Israel from the north of the country last Sunday saw ICE Brent open the week $2.50 a barrel higher than Friday’s close and heading for $82 a barrel, but as the week moved into Friday much of the growing bullish optimism was extinguished as prices faltered primarily because of a leaked story Opec would soon announce the slow but sure claw back of supply cuts from October onwards.

Yet again market price direction was dictated by another rumour in the barrel of stories we’ve lived with for the last few weeks, stories with little context but when delivered at a moment of market dithering can have a significant impact.?

It seems normal these days that oil price volatility is created by the same old recycled rhetorical questions viz.

Is the American economy about to….?

Will the FED….?

What will OPEC’s next course of action be…..?

Will the?Chinese economy….?

When will the gasoline market …?

Libyan oil production disputes will …..?

Refiners may cut crude runs but….?

The predicted toughest hurricane season in years has fallen to a breeze, but is it over ….?

US non farm payroll correct or …?

These last few weeks oil prices have misfired around these questions again and again, surprisingly complacent towards any war related news that could change the World, never mind oil prices!

Oil markets have settled for these same recycled old stories as a market platform, with ever changing media comment skewing and spicing up their meaning almost squeezing the pips out of these questions to create speculative answers in a vain attempt to move prices!

The old adage still applies….

Sell the rumour, buy the fact !

However, one of those questions does look to have its?box ticked as Summer fades into the browning leaves of Autumn.

The much anticipated and expected American summer gasoline boom didn’t really happen even though demand remains good (but not record breaking), but supply is better and whilst there are hiccups in Mid West flows due to storms impeding gasoline production, the U.S. EPA solved the supply shortages by lowering the gasoline summer specification restrictions in the region.

An emergency waiver was granted for summer spec gasoline requirements in four Midwest states following the shutdown of ExxonMobil’s Joliet refinery in Illinois. The waiver for Illinois, Indiana, Michigan, and Wisconsin lifts the federal anti-smog rules that require more expensive summer gasoline to be sold in the U.S. during summer.?The waiver, first issued on July 31 after ExxonMobil’s Joliet refinery was closed on July 15, is now extended for a second time?until September 15.

Exxon’s Joliet refinery 40 miles southwest of Chicago is equipped to handle?275,000 barrels a day?of crude per day, producing about 11 million gallons of gasoline and diesel fuel every day.

Even with such a hiccup in supply, the tightness in Mid West supply hardly registered in global gasoline prices!

Gasoline’s Summer demise has featured heavily during the last few months, although that discussion will now become an addendum to market chat given the U.S. gasoline season is technically over…. as of today September 1st…..

In the land of guesswork this week we try to identify information perhaps a little more real than speculative, something we can rely on to help figure in which direction oil prices are destined to fly once all the smoke and mirrors have realigned and even cleared a little.

The overall American picture looks pretty ok with the EIA reporting total products supplied over the last four-week period averaged 20.6 million barrels a day, down?by 2.9% from the same period last year. Over the past four weeks, gasoline supply averaged?9.1 million barrels a day (with supply spikes in some weeks) , up by 1.1% from the same period last year. Distillate fuel supplied averaged 3.6 million barrels a day over the past four weeks, down by 3.6%from the same period last year. Jet fuel product supplied was up 2.6% compared with the same four-week period last year.

The distillate picture is becoming a little more interesting.

Whilst there is a sentiment building that distillate prices and demand will find a floor soon, a report by MarineLink suggest record volumes of Mid East and Indian distillate are still heading West of Suez on VLCC’s suitably spruced up in order to carry clean petroleum products more cheaply than their smaller specialised product carrying cousins.

Five supertankers have been identified carrying 9 million barrels + of diesel bound for European and West African markets….the vessels are Maran Leo, Sea Lion, Nissos Keros ,Nissos Nikouria, and Atherina.?

These cargoes are shifting West instead of finding their normal home in China due to lower distillate demand in that country.

This type of cargo flow is not new but it’s happening at a time when many expected these flows would slow down thus allowing the distillate market a chance to rebalance complimented by a much touted lowering of European refinery crude runs,( maybe more touted by traders and consultants than the refiners themselves!) as a result of gently falling distillate cracks which have seriously affected refinery owner’s profitability.

For those distillate bulls starting to polish their horns this isn’t good news, but may be the most interesting sector going forward into Autumn which officially begins today!

In Nigeria, the Dangote refinery project continues at a pace, but at what pace it’s difficult to say. A fully functioning West African refinery of 650,000 barrels per day capacity will impact European flows for sure but until a full and sustainable start up is in place the project will continue as a daily topic of discussion for many in the trades to when this will happen.?

The owners continue with optimistic forecasts and announcements but until the all important refinery reformer is working to 100% capacity the refinery will remain underutilised and unable to fulfil Nigeria’s gasoline needs.

This week’s closing guide prices:

ICE Brent 78.82

WTI 73.55

ICE gas oil 695.50

Euro Mogas swaps 730.00

Euro naphtha swaps 642.00

Nymex gasoline 2.0932

Lpg swaps 577.00

Opec basket 78.10

Credit - Robert Haynes - Silvergreen Energy Ltd.