Gasoline RBOB Futures Market News and Commentary
Oct WTI crude oil (CLV19) on Friday closed down -1.18 (-2.13%), Oct Brent crude oil (CBV19) closed down by -0.58 (-0.97%), and Oct RBOB gasoline (RBV19) closed down by -0.0192 (-1.24%). The energy complex sold-off Friday with Oct WTI crude at a 2-week low and Oct RBOB gasoline at a 1-week low as escalation of U.S./China trade tensions undercuts the prospects for economic growth and energy demand. Trade tensions intensified Friday after China's Ministry of Commerce said it will impose additional tariffs on $75 billion of U.S. goods in retaliation for U.S. tariffs on Chinese goods with some of the tariffs starting Sep 1 and the rest on Dec 15. Escalation of trade tensions sent the yuan down to a new 11-1/4 year low Friday of 7.1017 yuan/USD. Crude prices recovered some of their losses Friday after the dollar index fell to a 1-week low. Also, weekly data from Baker Hughes Friday was bullish for crude as the data showed active U.S. oil rigs in the week ended Aug 23 fell -16 to 754, a 1-1/2 year low. Friday's U.S. economic data was bearish for energy prices after Jul new home sales unexpectedly fell -12.8% to 635,000, weaker than expectations of +0.2% to 647,000. Comments from Fed Chair Powell Friday were supportive for crude when he said the Fed "will act as appropriate to sustain the expansion," which signals he may favor additional rate cuts to boost economic growth that would be positive for energy demand. Wednesday’s EIA data showed that U.S. crude oil inventories as of Aug 16 were +3.4% above the seasonal 5-year average, gasoline inventories were +4.2% above the 5-year average, and distillate inventories were -1.7% below the 5-year average. U.S. crude production was unchanged at 12.3 million bpd in the week of Aug 16, which was just slightly below May's record high of 12.4 million bpd. Big Picture Crude Oil Market Factors: Bullish factors include (1) the agreement by OPEC+ to extend its production cut agreement by 9 months until March 2020, (2) the -130,000 bpd decline in OPEC July crude production to a 5-1/2 year low of 29.87 million bpd, (3) heightened Persian Gulf tensions, and (4) the sharp drop in Iranian oil production from U.S. sanctions and in Venezuela oil production from U.S. sanctions and the economic crisis. Bearish factors include (1) the recent rally in the dollar index to a 2-year high, (2) global trade tensions that may drag global growth and energy demand lower, (3) the recent surge in U.S. oil production to a record high of 12.4 million bpd, and (4) ample current supplies with U.S. crude oil inventories +3.4% above the 5-year average.