Massive Explosion Amplifies Today's Rally

Crude oil futures are leading the pack higher today after the American Petroleum Institute published an estimated draw of over 8.5 million barrels yesterday afternoon. The API also showed a 1.7 million barrel drop in gasoline inventories, no doubt lending hope to buyers that demand is returning to the retail fuel market. The Department of Energy’s report is due out at its regular time today. 

While the massive explosion in Lebanon’s capital seems to be taking some credit for today’s rally, the cause of the blast is still undetermined with some pointing to an uncanny chain of accidents involving fireworks and fertilizer. While instability in the region could have sparked panic-buying 10 years ago, today’s global oil glut provides significant cushion comfortable enough for most traders to hit snooze.

Hurricane Isaias hit the Northeast with some wind and rain but was a non-event for energy infrastructure in the area as it passed almost directly over the terminal and refinery grouping in New Jersey. There is another tropical disturbance in the mid-Atlantic region but not much is expected in the way of development as it has a 10 percent chance of organization over the next 48 hours.

Yesterday’s positive finish plus today’s strong rally could result in an upward break out of this summer’s trading range for refined product futures. Prompt month RBOB futures will need to clear the 1.29 level in order to break what looks like a rounding top chart formation. HO on the other hand is on the edge of covering the gap set back in March, setting multi-month highs. If it continues, we could see $1.40 for the distillate benchmark in short order.

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