Fueling Strategy: Please keep tanks topped today/tonight, Friday AM wholesale prices will jump UP 2 cents – Be Safe

NYMEX Crude $ 49.03 DN $.5600
NY Harbor ULSD $1.6389 DN $.0199
NYMEX Gasoline $1.6319 DN $.0129

NEWS
Oil futures gave up early gains to trade lower Thursday afternoon, as buying appetite faded and as investors awaited a highly anticipated OPEC meeting next week. News of the closure of an oil-linked hedge fund and doubts about sanctions against oil exporter Venezuela also contributed to the slump in crude.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September fell 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 during the session. October Brent crude on London’s ICE Futures exchange lost 35 cents, or 0.7%, to $52.01.

Although there was no fundamental catalyst for the retreat, the downturn occurred as news surfaced that prominent oil trader Andy Hall was shuttering his energy-focused hedge fund after wrongway bets that oil prices would climb faster resulted in 30% losses in 2017, first reported by Bloomberg News.

Oil has been stuck in a range for the past several months. Some investors speculated that the unwind of Hall’s Astenbeck Master Commodities Fund II may result in more oil contracts hitting the market, driving prices lower. Andy Lipow, president of Lipow Oil Associates, a Houston-based oil consultancy, said the market may be gearing up for a meeting of members of the Organization of the Petroleum Exporting Countries centered on compliance to an agreement to cap output. The two-day OPEC meeting to discuss compliance is set for Aug. 7-8 in Abu Dhabi. He said investors may also be reacting to disappointment over a lack of U.S. sanctions against embattled Venezuela, which would have been supportive to oil futures. Deepening turmoil in Venezuela has been the focus of the oil industry. The country is home to the world’s largest oil reserves and political chaos sparked by President Nicolás Maduro’s government’s redrafting of the constitution has been seen potentially pushing crude prices higher. “There’s probably some part of the market that [is disappointed] that the U.S. hasn’t imposed any sanctions [banning Venezuelan oil imports] at this point,” Lipow said.

Oil has experienced fitful trade over the past several weeks, but has managed to mostly drift higher within range of its 200-day moving average at $49.45 a barrel, as investors grappled with the efficacy of global production cuts against rising output from U.S. shale producers. Oil had traded higher in seven of the past 9 sessions, according to FactSet data.

A global agreement to curtail oil production expires at the end of the first quarter of 2018. “I think we are going to be relatively range-bound unless we see some kind of weather or political event,” said Tariq Zahir, managing member at commodity-trading adviser Tyche Capital Advisors. Zahir said oil futures would be sensitive to any news, given their recent uptrend. He said U.S.-traded oil has the potential to hit $51 if any supply disruptions or bullish news emerges.

Late Wednesday, the EIA reported a 1.5 million barrel drop in crude inventories last week, below analysts’ expectations. However, “a strong increase in demand was enough to appease the bullish investors,” said ANZ Bank. Refiners’ capacity utilization jumped to 95.4% last week, the government also said. Data from the American Petroleum Institute out on Tuesday showed stockpiles unexpectedly increased last week.

The mixed signals on U.S. supply come as market players globally await signs that production caps led by OPEC and Russia are making notable dents into still-historically high global supplies. ANZ sees tightness coming in the fourth quarter, pushing oil prices into the high-$50s.

Have a great day,

Loren R. Bailey, President
Fuel Manager Services Inc
“Serving the Trucking Industry Since 1992”