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Energy View: Wednesday April 10

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Markets took a breather yesterday on concern that Russia may exit the OPEC entente that saw them join the cartel over the last two years to rein in a global oil glut that threatened oil producing nations. The rumors, which remained unconfirmed, nevertheless sent WTI down 42 cents to $63.98 and Dated Brent down 49 cents to $70.61 a barrel, but with an API late afternoon report of a significant draw in refined products expected today, gasoline and distillates managed to gain by the end of the trading session. The news of a possible end to an agreement of cooperation was also matched with a report by the EIA that U.S. domestic crude production is expected to rise 1.43 million barrels a day in 2019 to an average of 12.49 m b/d, up from an earlier estimation of a 1.35 m b/d increase for the year.

Beyond looming trade issues, an bullish for refined products API report yesterday has energy markets reacting positively this morning with green arrows flashing upwards in anticipation of today’s official confirmation by the EIA that a significant 7 million barrel draw in gasoline stockpiles may be at hand. Already gasoline futures are up 3 cents a gallon in early morning trading, a sign that all is not well with refinery output during what has been a challenging season for refinery turnarounds in the Midwest and West Coast. Gulf Coast logistics, still affected by the fire of a chemical plant in Houston and problems with normal deliveries in the Houston shipping channels, are also contributing to production setbacks as the summer driving season approaches.

Drivers are only too familiar with the effect of production issues as the cost to fill up has now surged for eight straight weeks pushing up average pump prices to nearly $2.80 a gallon. Indeed, according to GasBuddy’s Live Ticking Average, at $2.769 a gallon, gas prices have risen an average of 52.3 cents a gallon since the beginning of the year and are 282.8 cents higher than last month alone. The lead over same day prices in 2018 has now advanced to 13.7 cents a gallon and is now outpacing the year over year spread of diesel prices which, at $3.05 a gallon today, are a more modest 7.7 cents higher.

Pending confirmation by the EIA’s weekly petroleum status report this morning, energy markets are almost certainly poised to see net gains on the day with gasoline trades leading the way and inevitably higher pump prices follow in hot pursuit.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded tomorrowsgaspricetoday.com to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.