Oil and refined petroleum products rallied yesterday after the weekly EIA inventory report revealed a draw in stockpiles with oil down 2.8 million barrels, including a less than expected bump in Cushing oil supply, while gasoline dropped 1.8 million barrels and diesel, 800k. Onlookers had anticipated a more modest drop in supplies, including a large build in diesel, causing prices to firm up convincingly with WTI up nearly a dollar to end yesterday’s trade session at $69.51 a barrel, while Dated Brent scored an impressive $1.19 a barrel gain to reach $77.14. The news also brought gasoline up 2.5 cents a gallon, while diesel’s surprise draw earned it a 3.5 cent gain.
Interestingly, Brent is up 10% from its summer lows, while WTI has picked up about 6%, showing that while headlines over trade and tariff threats are a constant concern, the physical oil market is tightening despite macroeconomic jitters. So new reports this morning that Citgo is the subject of a $1.6 dollar claim might well prove another catalyst for higher oil prices as Venezuela’s ability to maintain oil output continues to reel from costly legal enforcement of judgments against its core assets and source of national finances.
Steady gas prices across the U.S. over the last month may help explain the strong demand portrait offered in yesterday’s EIA report, which noted a 446,000 barrel a day increase to a confident 9.899 million barrels a day consumed, while refinery utilization slackened somewhat in anticipation of seasonal maintenance, down 1.2 % from the previous week. At a median price of $2.84 a gallon which drivers are paying today on average across the country, according to the GasBuddy Live Ticking Average, a fill up at the pumps remains unchanged from the previous week and in fact down 2 cents a gallon from the same time at the end of July. A comparison to gas prices this time last year still holds a 40 cent premium from the pre-hurricane pricing which ensued in the first week of September 2017 and saw a net 27 cent jump in light of the disturbances. Like gasoline, diesel too still holds at $3.15 a gallon or 60 cents above prices last year on this date and with September contracts ending tomorrow, diesel will emerge the winner in value officially over gasoline, a rarity for summer fuel prices.
Affirmation of declining Iranian oil exports which dropped by a third in the past month due to the advent of U.S. sanctions, a possible breakthrough in NAFTA trade negotiations with Canada and robust economic data in terms of a better than expected GDP report along with growing consumer confidence, will likely lend support to prices across the energy complex today, albeit more modestly than yesterday as many now contemplate taking to the roads and airways for the last weekend of the summer driving season.