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Energy View: Tuesday December 11

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A predicted down day on the energy markets yesterday saw losses across the screens with WTI crude giving up $1.61 a barrel leaving it at an even $51 while Dated Brent surrendered $1.70 to retrace its under $60 benchmark at $59.97. Gas and diesel weren’t putting up much of a fight with gasoline shedding over six cents a gallon to end below $140 on the NYMEX, followed by diesel which dispensed with any resistance and gave up 4 cents gallon to hold at $1.86, its lowest valuation since November 3, 2017 while gasoline retraced market prices not seen since June 26, 2018.

The morning sees more optimism among commodity traders who are factoring in the temporary loss of 300,000 barrels a day of Libyan oil and concern that lower crude prices may exert financial pressure on U.S. shale producers who operate on thin or even non-existent margins. The rise in the equities markets is also helping energy prices modestly retake some of their previous day losses, while expectations for a draw in crude and fuel stockpiles anticipated in tomorrow’s EIA weekly data reveal appear to be given some consideration.

Drivers too are seeing greater relief at the pumps across America with median fill ups now pegged at $2.42 a gallon, which while up a fraction from Sunday due to price cycling, are 2.3 cents below last week’s averages and 25.9 cents under last month’s values. And even though gasoline is still 3.3 cents lower than on this day last year, diesel at $3.112 a gallon is still 27.1 cents higher than last year and likely to remain there for the foreseeable future.

A market that seems more anxious than usual, may be unwittingly creating an environment for greater global demand for petroleum products, as prices remain low. Evidence of sustained U.S. and Chinese demand as well as cutbacks in output by OPEC, Russia, Canada and now Libya which has declared force majeure at one of its major oil fields hints at prospects for higher prices ahead. With oil trading up around a dollar a barrel for both benchmarks and refined products rising more than a cent a gallon, the day ahead is likely to end on a slightly higher note as markets await more hard evidence that fundamentals are in line with current pricing that is heavily tilted by bearish sentiment. Should tomorrows EIA report point to draws in supplies, look to markets rising slightly over the next few days, including today.

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.