WTI crude pricing has escalated significantly over the
past two weeks, rising 2.7% or approximately $1.25 over the
period. A fluctuating US dollar, weather related
refinery production interruptions and the remote possibility
of an OPEC agreement on a production freeze all served to
influence market price over the past two weeks.
With regard to refined
products, a distinct escalation of both gasoline and
distillate prices has been noted over the period.
Refinery interruptions due to flooding and other unscheduled
issues effectively shut down approximately 1.6 million
barrels per day of production. During the period, DOE
documented gasoline inventory reductions and a reported YoY
increase in gasoline consumption of 2.3% combined to exert
upward pressure on wholesale prices. Additionally,
market concern over potential production interruptions due
to hurricane activity impacted wholesale purchase patterns
and ultimately market price. The onset of winter in
South America resulted in increased exports of distillates
to that region. Additionally, the bidding up of RIN
trading values made it more attractive to export distillate
production thus impacting domestic pricing.
On the positive, refinery
issues and storm risk are the primary reasons for the
pricing escalation observed in recent days and both issues
are subsiding, which should result in price moderation.
Additionally, high market prices should attract offshore
imports again ultimately leading to lower wholesale pricing.
The US Energy Department
("DOE") weekly petroleum inventory assessment, issued August
24, 2016, reported an increase in US crude stocks of
US gasoline inventories increased
by 36,000 barrels over the previous reporting period.
US distillate inventories increased by 122,000
utilization rates decreased by 1.0% to 92.5% of capacity.
Year over Year
Source: DOE August 24, 2016