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Energy View: Wednesday December 12

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Building on a symbolic gain on the energy markets yesterday that saw crude move up marginally, with WTI gaining 65 cents to $51.65 a barrel and Dated Brent recovering the same to end at $60.20, traders are pouring over the latest estimation by the API that today’s EIA weekly petroleum stockpile report will be a barn burner. If correct, the API is guessing that crude inventories fell a near record 10.2 million barrels and will be the second week in a row that oil inventories have posted substantial draws. Gasoline and distillates which also followed along with the crude parade gained a little ground too and are moving up confidently by nearly 3 cents a gallon in early morning trades, complementing the $1 a barrel advances by the crudes.

News of Libya’s main oil field being closed due to internal strife and markets still considering the OPEC and Russian commitments to lessen oil output agreed to at last Friday’s OPEC summit are also contributing to the morning rally for the petroleum price complex. Nevertheless, a growing chorus of analysts and investment banks appear to be suggesting that current market valuations are appropriate given the increase in U.S. oil output and prospects of waning global demand in the face of prospects for a global economic slowdown.

For motorists, however, the near 30% decline in crude prices since early October is giving way to more money in their pockets with every visit to the pumps. A quick glance at the GasBuddy Live Ticking Average shows median prices across the country at $2.41 a gallon which is the lowest drivers have seen since Tuesday, August 29, 2017. At this 15 month low, gas prices are now 3.2 cents cheaper than last week, 27 cents below last month and 4.4 cents a gallon less than on this same day last year. Conversely, while diesel has dropped 14.3 cents in the past month, at $3.105 a gallon today, the cost to fill up the vital transport fuel is still commanding a 26.4 cent premium compared to December 12, 2017.

For the day ahead, a hike in energy prices on the markets is already in play, subject to confirmation later this morning of the substantial draw many now anticipate. Any deviation which would see a more modest draw could send this morning’s bets tumbling and keep market valuations meek. A strong draw extending to refined products, on the other hand, would also carry into Thursday’s sessions and provide energy markets with their first real gains in 9 weeks. All eyes this morning will be firmly focussed on the EIA’s Weekly Petroleum Status Report at 10:30 am Eastern.

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.