WTI Drops to Lowest Level Since July

On October 23, 2013 by TradingDesk

WTI dropped to its lowest level since July 4th Tuesday, as stockpiles in the US increased and the EIA released a report showing that the Eagle Ford shale formation had beaten the Bakken in the race to 1 million barrels/day of production. The rapid growth of onshore crude production in the US continues to surprise many market watchers and has sparked another rally in the Brent/WTI spread. RBOB and ULSD are weaker, but as has been the case over most of the past 3 years, they are showing relative strength by taking the lead from Brent crude, rather than from WTI.

The increase in the spread has also caused a widespread sell-off in cash basis values East of the Rockies, in both gasoline and distillates, as many expect inland refiners to run harder now that their advantage of running disadvantaged crude has returned. Today’s DOE report – which gets us back on the regular schedule – will be watched closely for any increase in PADD 2 refinery runs.

Technical studies are pointing lower for all of the energy contracts, with $2.50 and $2.90 the next downside targets for RBOB and ULSD respectively.

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