Gasoline demand in the states has been tepid, but a potentially weaker US dollar should bode well for U.S. gasoline products and the global crude trade in general.
WTI Crude Oil (November)
Yesterday’s Close: Settled at 69.88, down -0.08
Overnight into this morning, Crude Oil futures are stronger, with WTI futures up +0.72 to 71.63 [+1.02%]. Brent Oil Futures are stronger by 0.78 to 74.43. Gasoline futures are stronger by 1.31% and US Diesel is up by +0.49%. The second month NYMEX 3-2-1 crack spread is little changed, standing at 15.933 / bbl this morning, but is showing signs it may be forming a tradeable bottom at these levels.
Refining margins (crack spreads) have been in steep decline since mid February, declining ~55% (rolling 2nd month basis). Gasoline demand in the states has been tepid, but a potentially weaker US dollar should bode well for U.S. gasoline products and the global crude trade in general.
The obvious topic of discussion throughout global markets is the Fed’s decision to cut rates by 50bps yesterday. Volatility following the announcement was fairly significant, especially in currency markets.
While the start of this easing cycle has been well anticipated and clearly telegraphed, the uncertainty in markets surrounding this initial cut, whether it be 50 or 25, was rare. Regardless, these types of cycle shifts will jar loose significant levels of liquidity and amplify global capital flows in the short / medium term. And, when the global money markets lurch into a new cycle, the ripple effects can be sizable.
We are keeping an eye on currency markets closely through the next week. The dollar is currently holding around a key long-term level. With the newfound liquidity coming into global markets and the potential for further weakening of the dollar from here, a strong bid could be placed under commodities.
On top of all this, geopolitical turmoil is ramping and the U.S. election draws near. Amplified volatility is to be expected across risk assets.
We are shifting our medium-term outlook on the Crude Oil space to a more bullish tone at this time. Contact the team for further details or info.
We have noted out upbeat attitude on WTI Crude Oil at these levels and as it attempts to create an inverse head and shoulders bottom, going back to 2022. This morning, price action is enjoying a broad risk-on tailwind that, but more importantly, yesterday’s weakness held major three-star support at…
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