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By: Harry Altham, Energy Analyst, Market Analysis EMEA & Asia
Brent and WTI have started the day 0.2% higher, as yesterday’s API data indicated a crude oil inventory shrinkage of 6.53M bbl last week. The API data are currently leading market moves, with the 2.64M bbl gasoline drawdown sending NYM RBOB’s December contract 0.37% higher ($260.41) and the 865k bbl build in distillate inventories dragging NYM Harbor down by 0.50% ($360.30). This week’s build in distillate inventories is likely to be insufficient to cool the East Coast diesel spot market, as DOE PADD 1 inventories hover close to all-time record lows [already at all-time seasonal lows] (data back to 1982). To that end, U.S. Gulf Coast spot diesel is 81.5c/gallon cheaper than in New York – which has resulted in an arbitrage opportunity for internal seaborne transfers of diesel to New York from the Gulf. With the end of the U.S. harvest season upon us, we expect diesel demand to drop between now and March, but with the end of the 1M bbd release of SPR stockpiles and diesel and gas-starved Europe also in the fray, we do not see an imminent end to pressure on U.S. diesel inventories – and indeed prices - over the coming few months.
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WTI and Brent crude are moving to different beats as a possible U.S. Iran deal reshapes the oil market. The two benchmarks are pricing Strait of Hormuz risk in their own ways, and the gap between them says a lot about where crude goes next.
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