Searching So Long
Search so long to find an answer. Will the Federal Reserve have one? Oil, like every other market, is chopping around waiting for the Federal Reserve decision on interest rates. While it seems unlikely they will raise rates, the suspense has been killing liquidity in the market. Oil prices swing on obscure headlines and sometimes move with the dollar and some times not. Other markets also seem to be on hold as it tries to get inside of the Fed’s head. While the Fed has tried to sound more hawkish, the odds of a September hike is small.
Oh sure, the market is watching what is going on in Libya as it wants to see if Libya can resume oil exports. Khalifa Haftar’s rebel group clashed with UN backed government forces delaying the restart of Libyan oil exports. Though later in the session reports that an oil tanker was going back into the Ras Kanuff port for loading helped oil take away its dollar plus gain. It is clear that the drama and the reliability of Libyan exports is going to be a day to day or hour by hour thing.
RBOB futures also weighed on prices as Colonial Pipeline reported that its gas leak in line one has been fixed and should start to get back to full capacity in the coming days. Colonial has done a great job minimizing shortages and keeping a lid on prices by trucking and shipping in more supply.
China's oil production continues to fall. Hellenic Shipping News reported that China’s crude oil output fell 9.9 percent year on year in August. This is the biggest monthly drop since 2003, as refineries slashed production amid sluggish global oil prices, data from the National Bureau of Statistics showed Monday. Imports, on the other hand, have trended upward after private refineries were given permission to import crude last year.
In the first eight months, China’s crude oil imports rose 13.5 percent compared with the same period last year, while refined oil output gained 2.1 percent. China’s oil giants plan to reduce oil output due to flagging prices. Sinopec (NYSE:SHI), the largest oil refiner in China, and Petrochina (NYSE:PTR), the largest oil and gas producer, have both lowered their oil production targets for 2016.
Other than the Fed we will await weekly inventories. The American Petroleum Institute releases its report today. We expect to see crude oil supply increase by 3 million barrels. As for gasoline, we could see a drop of 3 million barrels due in part to the colonial pipeline issues. In Cushing, Oklahoma, we should see supply fall by 500,000 barrels and distillates dropping by 3 million barrels as well. Refinery runs will fall by 1.0.