|May 25, 16 Oil Note-|
EIA prints a large draw coming in at -5.137mm on WTI. This sent spot on a wild roller coaster closing in at the 49 handle. Seasonally, draws are expected, so we weren’t concern, except for the large gasoline build. RBOB drew on the east coast, but convention grades were up. Refineries and storage facilities remain in a massive glut of crude and crude products. The advancement of WTI due to reflation by FED in suppression of the USD serves no justice in rebalancing, but more supply side gimmicks. Just look to the east, as China spends a Trillion USD in reflating their commodities, which in 3 months has now gone bust adding to global overcapacity. The strong USD theme is back as the FED turns hawkish for June. Renewed stress in EM/FX, EM, HY, commodities, and equities is worrisome. US Shale could cap the WTI rally on the 50 handle which would serve as a floor to come back online. As, we’ve stated before speculators run the market, and at some point fundamentals will readjust.