If one takes a step backwards, though, and tries to get a better perspective of Wednesday’s winners
and losers, though, one is instantly struck by the large amount of green among Wednesday’s changes.
The deferred months were higher in crude oil and prices were higher in heating oil and gasoline,
suggesting that only the expiring contract in crude had experienced any real difficulty.
For years, now, we have had “fade days,” when prices react in one direction at first, often in reaction
to the weeky DOE report, and then move in the opposite direction into the close. It seems that
Wednesday’s activity may have fallen, at least partially, into that grouping. Prices opened near the level
they ultimately closed at, but they worked both lower and higher during the course of the day’s trading.
Refined products were in negative territory at one point on Wednesday, but they decided to rally into
the day’s close to end the session in positive territory.
We have no real trigger for this strength. More flights were allowed to leave Europe, as the ash
seemed to be stabilizing, but that was the end of a bearish event, not the start of a bullish one. And it is
hard to paint this weeks DOE report in any light other than a bearish one. We have noted recently that
refinery utilization has increased in recent reports. It did
again in this week’s numbers. The higher processing DOE Report
rates converted crude oil into extra refined products, and Crude Oil up 1.900 million barrels
these made it past relatively unspectacular demand to Distillate up 2.100
wind up as barrels added into storage. Traders might Gasoline up 3.600
have found it especially bearish to see that the higher Pct Operated up 0.3% to 85.9%
runs had added significantly to gasoline supplies, giving us
an unexpectedly large build in gasoline stocks, while failing to pull enough crude oil into the processing
stream to avoid having a stock build in crude oil stocks.
The bottom line is that this week’s DOE report was unexpectedly bearish, the dollar was higher,
equities had single digit gains and yet most prices still managed to make it to the final bell with gains.
That is a dramatic sign of hidden strength in this market; it did not come from any of its usual sources.