Wake Up Calls

Oil is getting a big wake-up call after the American Petroleum Institute (API) reported a big draw in crude oil and refinery outage plagued gasoline. This comes as Chinese oil imports come in at near record levels and the name calling between the U.S. and Iran heats up. U.S. President Donald Trump threatened on Tuesday to obliterate parts of Iran if it attacked “anything American.” Exit strategy? We won’t need an exit strategy. Iranian President Hassan Rouhani angerly complained that sanctions on his Supreme Leader Ali Khamenei were "outrageous and idiotic" and that sanctions were “mentally retarded.” The back and forth shows that President Donald Trump can out name call Iran any day of the week. If I were them, I would just give up. 

It looks like the massive crude builds have come to an end and now it’s payback time. The API stunned many in the market by reporting that U.S. crude supplies plunged by 7.55 million barrels last week. That reverses some of the crazy adjustment builds and it may be a sign that the oil market has been too confident about supply. More talk of shale oil production leveling off along with stronger than expected demand in the U.S. and now China, according to data released yesterday, is causing a major rebound. With demand strong, refiners have a lot of work do.

Gasoline supplies suddenly look a lot tighter after the API reported that U.S. gasoline supply fell by 3.17 million barrels. This looks more ominous as U.S. gasoline demand hits records. Now it looks like after the refinery explosion at the Philadelphia Energy Solutions Refinery, the refinery may be closed permanently. No one wants a refinery in their backyard until their gas prices start shooting up 6 to 10 cents a gallon. Distillates held in only rising by 160,000 barrels, yet is getting caught up in the oil and gasoline rally.

Reuters Is reporting that Philadelphia Energy Solutions (PES) is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex, two sources familiar with the plans said on Tuesday. Shutting the refinery, the largest and oldest on the U.S. East Coast, would cost hundreds of jobs and squeeze gasoline supplies in the busiest, most densely populated corridor of the United States. The refinery, which could still change its plans, is also expected to begin layoffs of the 700 union workers at the plant as early as Wednesday, the sources said. The layoffs could include about half of the union workforce, with the remaining staff staying at the site until the investigation into the blast concludes, the sources said. PES is expected to file a notice of intent with state and federal regulators as early as Wednesday, setting in motion the process of closing the refinery, the sources said. 

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