The oil market is saying sayonara to summer, jumping into shoulder season as refiners remain shut down, and the summer driving season has ended. It did not help oil when the Saudis cut the selling price for some grades of crude oil, suggesting weak demand and a sense that it is not going to get better until the snow starts to fly.
Concerns about rising supply are happening even as U.S. inventories plummet, and both Saudi Arabia and Russia say they are pleased with overall OPEC plus compliance to the historic production cuts.
U.S. petroleum stocks continue to plummet, and concern that President Trump wants to decouple from China is hurting the stock market.
Yet despite oil and products sharp price drop, the Labor Day weekend drive seemed to beat expectations. Reports by Gas Buddy suggested a surge in gasoline demand as Americans tried to salvage what was left of this COVID-19 summer. Patrick DeHaan tweeted that, “Pay with GasBuddy data shows gasoline demand Friday skyrocketing 15.35% over the prior Friday. A *very* strong start to Labor Day weekend and the highest Friday we’ve seen since March. Yet it seems none came home Sunday because demand dropped back off. The US has helped draw down the floating storage for oil and brought refining margins to their highest level since early March at around $6 a barrel, according to Argus Media.
The other issue with oil is the solid dollar rebound. The sudden strength in the dollar is weighing on oil today, and it looks like oil will have a hard time standing until we get a look at inventories. We expect big draws in crude oil and products, and that should help us find a bid.