Normally when oil makes a decisive move it is usually because oil inventories, or a headline out of the Middle East. Yesterday oil moved because of healthcare uncertainty.

Speaker of the House Paul Ryan may get a bit of a complex because as soon as his press conference began about the American Healthcare Act the stock market became unglued and sold off dragging the oil market down with it. The vow to block the repeal and replace Obamacare deal was not liked by the market because it is raising larger concerns about the ability of President Trump to push through his larger agenda of tax cuts and boosting infrastructure spending. Freedom Caucus Chairman Mark Meadows (R-N.C.) warned that House leaders did not have the votes to pass the American Healthcare Act and Speaker Ryan did little to assure the market that it would pass. After the oil market close, it did not help the bullish case when the American Petroleum Institute Reported (API) an increase in oil supply. Even against a backdrop of a big drop in gasoline supply and a modest drop in distillates.

A much larger than expected 4.53-million-barrel increase in weekly supply piled unto a stock market weakened oil market. The market also had to assesses yet another 1.97-million-barrel increase in Cushing Oklahoma supply. We will see if some of that increase is coming from the Strategic Petroleum Reserve sales in today’s Energy Information Administration (EIA) supply report later today. The API said that crude imports rose last week by 615,000 barrels per day to 7.9 million bpd after reported a big drop last week. On the other hand, we are seeing consistent drops in gasoline supply. The API reported that gasoline inventories fell by a sizable 4.93-million-barrel last week marking the fifth drop in a row. Refiners are drawing down winter grades of gasoline and gasoline exports out of the US are running at a record pace.

The drop along with rising Renewable Identification Number (RIN) market means that we will soon see pump prices start to rise after falling recently. RIN prices rallied again Tuesday on because the market expects that the EPA won't change 2017 volume obligations. The hopes are dwindling that the Trump Administration can shift the reasonability for RIN compliance from the refineries to the gasoline blenders. The EIA also reported an 883,000 barrel drop in distillate inventory. That marks the sixth week in a row that distillate inventories fell. Could imagine it being larger if it was cold over the last 6 weeks?

Oil prices saw some pressure from talk that oil exports from Libya may resume. But in the New York Times today they write an article that reminds us how tenuous that situation is. The Times warns of a potential ‘powder keg” as ISIS regroups in the country. The Times quotes Gen. Thomas D. Waldhauer as saying that instability in Libya and North Africa is the most significant near-term threat to the US and its Allies interests on the continent. There are estimates that ISIS and other militants could be around 5000 and the trecento fighting that we have seen reemerge in Libya may only be the beginning. 

Natural Gas continues its strength as the return of winter in March is reminding some of the structural shortage. We expect a -170 Bcf draw in the storage report for the week ended March 17. A storage report of -170 Bcf draw would be compared to a +13 Bcf injection last year and a -21 Bcf draw for the five-year average! This draw may be a record on Thursday.