Fueling Strategy: Please fill as needed tonight and Tuesday AM, Be Safe!

NYMEX Crude $ 47.37 DN $1.1400
NY Harbor ULSD $1.5712 DN $0.0492
NYMEX Gasoline $1.5841 DN $0.0399

NEWS
Oil prices settled lower Monday for the first time in three sessions, giving back most of the gains they saw in the previous session. No major news emerged from producers who were scheduled to meet Monday to discuss compliance with the OPEC output-cut agreement, which reportedly weakened in July. Traders also awaited data on U.S. supplies and production due later this week.

September West Texas Intermediate crude oil fell by $1.14, or about 2.4%, to settle at $47.37 a barrel on the New York Mercantile Exchange, ahead of its expiration at Tuesday’s settlement. WTI prices gained 3% Friday, with the bulk of the rise seen near the end of that session in the wake of refinery troubles and a weekly fall in active U.S. oil drilling rigs. October Brent crude the global benchmark, fell $1.06, or 2%, Monday to $51.66 a barrel on ICE Futures Europe.

“Friday’s big rally essentially created a ‘gap’ in the market as the bulk of the move occurred in less than an hour and on very light volume,” said Tyler Richey, co-editor of the Sevens Report. “That set things up for a reversal and because news wires were very quiet today, algos and technical traders took control of the market and largely filled the gap as we ended the day near where Friday’s rally began.”

The Organization of the Petroleum Exporting Countries was scheduled to hold a technical meeting with non-cartel members in Vienna Monday to discuss compliance levels with the cartel’s production cut deal. OPEC didn’t provide any update on the closed-door meeting before the Nymex settlement. “The previous extraordinary meeting [held earlier this month] was a nonevent and the market is beginning to shrug off OPEC-related headlines more and more as they have been largely ineffective in recent months,” said Richey.
OPEC and 10 producers outside the cartel, including Russia, first agreed late last year to cap production at around 1.8 million barrels a day lower than peak October 2016 levels, with the goal of reducing the global oil glut and boosting prices. The deal was later extended through March 2018. But OPEC compliance with the agreement fell to its lowest level this year in July, at 75%, according to the International Energy Agency’s latest monthly report.

Investors Monday were also awaiting the latest weekly U.S. crude supply and production data, due Wednesday. The U.S. Energy Information Administration said last week that crude inventories had been reduced by roughly 9 million barrels in the week ended Aug. 11, bringing the total draw down since March to 69 million barrels. The EIA also reported, however, that U.S. crude output rose to a two-year high. Oil-field services firm Baker Hughes Inc. said Friday that the number of rigs drilling for oil in the U.S. fell by five in the previous week, a further sign that drillers are responding to the lower price environment by pulling back. “As far as the longer-term trend in oil goes, [Monday’s] session was rather insignificant and the market remains in a broad, sideways range with the $50 mark continuing to act as a stubborn resistance level,” Richey said. “Fundamental focus remains on OPEC discord and the resilient rise in U.S. production so far in 2017, both of which are material headwinds on the market.”

In more price-bullish news, however, a report from the Federal Reserve Bank of San Francisco Monday said oil demand from China could be “entering a period faster growth” that has the potential push prices above the $100 mark in 2025.

Have a great day,

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