Two-Year Record Crude Draw and the B20 Mandate

Prices push higher across the board as the market remains focused on Iranian sanctions and U.S. inventories. Supported by a constructive API report, crude continued to rally during yesterday’s session closing above $70/bbl for the first time in a month. Crude gained $2.32 before closing Tuesday and has picked up another 65 cents this morning to trade at $71.18. For perspective, crude opened $5.57 higher this morning than a week ago.

Fuel prices are tracking crude higher, despite the small builds reported by the API. Diesel and gasoline prices traded higher yesterday, both gaining over 2 cents. Prices have maintained their momentum this morning with diesel up 1.7 cents at $2.1467 and gasoline up 2.2 cents at $2.0967 currently.

A combination of bullish factors are working together to send prices higher this week. After yesterday’s API report, WTI prices received a fundamental boost. The U.S. continues to push its allies to completely cut Iranian oil imports by November 4th and purchase American crude instead. Waivers on Iranian sanctions will not be extended.

Internationally, continued concern around Venezuelan and Libyan production has partially muted the impact of OPEC’s decision to increase production. As mentioned yesterday, Canada’s Syncrude operation has gone offline, taking an estimated 350,000 bpd off the market potentially through the month of July. Read more about how this outage is impacting prices.

The API reported huge draws in crude inventories this week and a small build in products. Crude drew by 9.2 MMbbls which if confirmed by the EIA will be the largest crude draw since 2016. Gasoline and diesel built by 1.2 MMbbls and 1.8 MMbbls respectively. Market participants eagerly anticipate the EIA data coming out later this morning.

B20 Minnesota Mandate Suspension Ends July 1

On May 1, Minnesota rolled out its B20 mandate which requires all diesel fuel to contain at least 20% biofuel. Due to supply constraints for biodiesel, the mandate was suspended through this upcoming Saturday, June 30. Diesel fuel could contain a minimum of 10% biofuel during the suspension period. On July 1, the mandate will be reinstated and all diesel fuel will be required to contain a minimum of 20% bio content. In preparation for the mandate reinstatement, obligated parties including gas stations and bulk delivery services should take steps to ensure tanks contain 20% biofuel by the end of June.

Market Condition Report - Disclaimer
The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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