The strong energy market rally yesterday morning was KO’d by growing panic over prospects of spreading currency troubles touched off last week by the Turkish Lira. A bearish API guess that crude inventories rose 3.3 million barrels didn’t help either, adding to WTI’s loss of 16 cents a barrel to $67.04 and a similar loss which saw ICE Brent settle at $72.46. Diesel also fell in reaction to the API report which did feature a positive draw for gasoline, which gained a couple of pennies and emerging as the only winner in the petroleum price complex on the day.
The morning continues to see a modest sell-off for oil which is down over 60 cents a barrel for both WTI and Brent while gasoline is barely moving and diesel down 1.5 cents a gallon. As is almost always the case, the API guesstimate is rarely precise and only a hint at the direction the EIA Weekly Status Report will take. As such, there may be surprises in numbers that could change the mood in markets. However, currency contagion fears which seem to be impacting other emerging economies such as India and even Argentina may well weigh on markets until the situation can be brought under control. Even trade tensions continue to dog traders as the metals markets appear to be reeling from heightened tariffs initiated by the U.S. on aluminum, steel and electronic components. Until the twin-headed hydra of trade and currency can be resolved, the bears, fuelled by fear will continue to hold sway, setting the stage for lower oil prices and longer-term strains on global supply.
With the apparent demand for gasoline remaining robust, pump prices across the country may explain the continued rise in domestic consumption. According to the GasBuddy Live Ticking Average, median costs for a fill-up stand at nearly $2.89 a gallon, up a penny from last week, unchanged from July and still 54 cents a gallon higher than this time, pre-hurricane season, last year. Diesel, the darling of the refined liquids remains strong at $3.15 a gallon or 62 cents higher than on August 15, 2017. It is noteworthy that diesel began its year-long ascent in concert with Hurricanes Harvey and Irma at the end of August 2017, and never looked back on their trek to their new $3 a gallon plus levels throughout most of 2018.
For the day ahead, look to currency and a bearish EIA report to hamper energy commodity prices as gasoline may emerge the only item that doesn’t record a loss on the day. The bears are back, shaking at the knees.