Risk off everywhere but not in Oil

A risk off day here at mid-day london. Various bloggers have pointed out the downside risk so far this am, for eg, Gartman pointing out the triple top in EURJPY, Macroman on the eurusd put skew. EUR under pressure from low capital base banks getting hit big time, not to mention the 'stellar' performance of equities so far today in Europe. How does this translate into Oil? Given the financial aspect of this contract now, prices should be significantly lower. However, a surprise draw of 3.5mio bbl as reported by API yesterday is detering any major selloff, until the DOE report this afternoon. Consensus is for a build, which will be in line with the recent reports of refineries cutting runs. However, with the APIs reporting the draw in PADD 3, perhaps imports have also taken a nosedive and a big build may not materialize. Whatever the case, we need to look into the numbers with more caution, and SFOT would look at refinery utlization a litle more carefully, as refining margins seems to have strengthened with middle distillate cracks and Gasoline cracks leading the charge.

WTI refining margin

One thing of note, is this morning's news of a sabotage event on Iraq's export pipeline to Turkey. Any similar news last year would have sent timespread in Brent a lot stronger. However, it is not the case this time round, with timespreads in the prompt actually weakening since the news. Perhaps it is still a matter of too much floating storage globally. WTI prompt spreads, on the other hand, has strengthened a lot since early doors yesterday. This was before API numbers, and certainly before today's numbers in crude. Perhaps there is something the vast market knows nothing about but certain trade groups do. Whatever it is, SFOT has a sneaky feeling that we might be in for a Oil positive number. He is not short.

WTI prompt spread