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Refined Products

Recap: Traders, who woke to the shocking news that Britain voted to leave the European Union, took flight from commodities across the board. Oil prices were not spared from this risk aversion. WTI experienced its largest one-day decline since February, falling $2.47, or 5%, to settle at $47.64, down 1.8%, or 92 cents on the week. Brent for August delivery settled down 4.9%, or $2.50, at $48.41 a barrel. This is down 1.5% on the week.    

Yesterday, we mentioned the widening contango conditions of the Jan17/Jun17 crude oil spread. Today's sell-off sparked continued selling; widening this spread by 15 cents, to settle at -$1.01, its lowest level since April. 

Oil prices were still holding within a 20-day average, at well above $45 a barrel. A stronger supply and demand outlook has helped elevate prices over the past few weeks, with global outages helping to curb the oversupply which has weighed on Brent and WTI.

July RBOB fell 7.9 cents, or 4.9%, to $1.525 a gallon-still ending around 1.3% higher for the week, while July heating oil lost 6.5 cents, or 4.3%, to $1.455 a gallon-for a loss of roughly 1.8% on the week.

Fundamental News:
Britain's Prime Minister, David Cameron, said he would resign by October after Britons voted in a referendum to leave the European Union.  He said negotiations would begin under a new Prime Minister.  He said the people's will must be respected.  He said he would reassure markets and investors that the UK economy is fundamentally strong.  Britain's Prime Minister also stated that he will attend the European Council next week. 

European Parliament leaders said Britain must launch the process of leaving the EU immediately and allow the rest of the bloc to move forward with greater unity. 

The Bank of England said it would take all necessary steps to shield Britain's economy from the shock decision by voters to pull the country out of the European Union.

US President, Barack Obama, said he respected Britain's vote to leave the European Union and added that the US' relationship with Britain would endure. 

The Russian Energy Ministry expects oil price volatility to increase in the short term in response to Britain's vote in favor of leaving the European Union. Russia's First Deputy Energy Minister, Alexei Texler, stated a fall in oil prices may not be significant and added he saw no need for any large oil producers to take any actions due to Brexit.

Baker Hughes reported that the number of rigs searching for oil fell by 7 to 330 in the week ending June 24th

The annual forecast from the Canadian Association of Petroleum producers indicates Canadian oil output will decline this year for the first time since 2009 due to the northern Alberta wildfire curtailing more than one million barrels a day for a month. Total Canadian oil output will drop to 3.82 million bpd in 2016, less than the 3.85 million bpd produced last year. 2017 production is expected to reach more than 4 million bpd.

Oil minister Eulogio Del Pino said Venezuela will recover 200,000 bpd in oil output in three to six months.

The US Commerce Department reported that new orders for durable goods in May fell by a seasonally adjusted 2.2% in May from the previous month. The drop was led by a 34.1% decline in military aircraft orders.  The Commerce Department reported that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell by 0.7% last month following a revised 0.4% decline in April.   

Early Market Call - as of 9:00 AM EDT

WTI - Aug $46.62, down $1.02
RBOB - July $1.4990, down 2.60 cents
HO - July $1.4297, down 2.56 cents 



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Natural Gas

Friday, June 24th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.646, more than five cents below Thursday’s closing price of $2.698.  With little change in the weather outlook for the coming weeks, the oversupplied market weighed on prices overnight.  Jumping higher out of the gate, the contract slowly marched upward from $2.655 into the morning until reaching the intraday high of $2.688 at 11:10AM.  Enduring modest sell-offs through the afternoon, July ultimately gave way to close lower on Friday at $2.662.

This morning in Globex, WTI Crude was down 90 cents; Natural Gas was up two cents; Heating Oil was down two cents; and, Gasoline was down three cents.  Additionally, cash prices were lower in New York and New England.

Natural Gas Glossary

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