US Facing Ample Product Supply and Slow Demand

On June 28, 2013 by TradingDesk

As we begin the last trading day of the first half of 2013, ULSD futures are down 15 cents for the year, and RBOB futures are down 7 cents. Meanwhile, WTI crude is up more than $5.5 per barrel, as its spread vs. Brent crude has shrunk by $13 in the past 6 months. WTI was pushed higher again on Thursday following another spill on a Canadian crude pipeline, the 2nd of the week, while refined products managed modest gains after failing to break through technical support once again.

The back half of the year shapes up much like the start of the year did. The US is facing a period of ample product supply, and slow demand for refined fuels. Exports, Middle East Tensions, and Central Bank stimulus are the primary bullish factors in the markets, while a slowing global economy (Europe remains deep in a recession and BRIC countries are not growing) increased production from US Shale formations, and expanded refineries are all pointing to lower prices ahead.

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