Fuel Sheds 3+ Cents on Lost Unemployment Benefits

Following a long holiday weekend, fuel markets are opening this morning with moderate losses. Repair efforts continue in Louisiana and Mississippi – nearly half a million remain without power, and 84% of offshore crude oil production is offline. For refiners, a bit over half of the 2 million barrels per day taken offline by the storm is being restored, though refinery restarts can extend for weeks.

Broadly, financial markets may see some effects from expiring unemployment benefits over the weekend. Approximately 9 million people will lose their unemployment benefits, while another 3 million will lose their $300/wk incremental pay. Simultaneously, the end of the eviction moratorium could impact millions. With the latest jobs report showing 10 million job openings in the US, there seem to be many jobs available. Economists will be watching closely to see how well employment supply can line up with demand.

Saudi Arabia cut its official selling price for crude oil, though analysts are unsure of the implication. On one hand, cutting prices typically suggests the global exporter sees weakening demand among its key clients, primarily Asian countries. Conversely, OPEC+ expects rising demand for the remainder of the year, so Saudi Arabia could simply be fighting to grow its market share by undercutting the competition.

China’s imports increased in August by 8% over July, which led hedge funds to rush to buy oil contracts at the second-fastest rate this year. Hedge funds seem to be “buying the dip,” suggesting they believe oil prices will further before the end of the year. Notably, the bullish trend was strongest for middle distillates such as diesel, where long purchases outpaced short-selling 8.6 to 1.