By Brian L. Milne, Energy Editor, Schneider Electric
Short covering underpinned a push by New York Mercantile Exchange crude futures to a $98.25-barrel nine-month high on the spot continuation chart ten minutes after the start of regular session trading Friday (6/14), with the contract settling up more than a dollar a day at $97.85 pre barrel.
This price surge came less than 24 hours following the Obama administration’s statement that Syria used chemical weapons in its plus two-year civil war, with the White House now saying the United States would provide rebels in the fight with weapons.
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The mid-month rally came the same day Iranians went to the polls to elect a new president, while tensions between Sudan and South Sudan have again escalated, threatening oil supply off the market. Geopolitical tensions are again moving the oil market higher, with the ICE Futures Brent contract gapping up 20 cents Friday and rallying to a 2-1/2 month spot high at $106.64 per barrel.
U.S. economic news has been mostly upbeat, including a greater-than-expected decline in initial weekly jobless claims the first week of June, although consumer sentiment in June turned down from May’s high. The U.S. dollar slumped to a 3-1/2 month low Friday, with those inflationary effects also pushing up U.S. oil prices, while the Commodity Futures Trading Commission showed open interest for NYMEX crude futures setting another record high on June 11.
NYMEX RBOB futures posted a one-month high Friday, and the charts are bullish for crude. Gasoline prices are set to gain on these features, although rack postings for the second week of June were down across most of the major metropolitan markets across the country except for the West Coast.
Upper Midwest drivers will see relief at the pump despite the bullishness in paper prices, with postings down 30 cents to more than 40 cents in Chicago, Cleveland, Detroit, Indianapolis, and Milwaukee during the week-ended Friday. The postings are set for a further fall after a 20.5 cents drop in value for CBOB spot in second cycle trading in the Chicago market Friday, and 69.5 cents plunge during the second week of June. Confirmation from Phillips 66 that planned maintenance at its 322,000 barrel per day (bpd) Wood River refinery in Illinois, was completed agitated for selling; converging with reports other refineries in the region are also concluding maintenance. Run rates in the Midwest have been historically low during the second quarter.
Growing U.S. oil supply argues for lower crude prices, although monetary easing policy by the central bank drives demand for crude futures contracts. The Syrian civil war is cause for concern for market bears, with Syria provided support from Iran and Russia, with the US now stepping into the volatile mix. The bull-bear checklist tilts towards the bulls.
About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at [email protected]