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Energy View: Thursday December 13

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Profound disappointment in the API’s colossal miss in estimating a 10.2 million barrel draw in U.S. crude inventories as EIA data showed merely a modest 1.2 million barrel decline caused yesterday’s markets to tone down their enthusiasm, leaving the crudes with a 50 cent a barrel loss for WTI which ended the trading session at $51.15 while Dated Brent lost 5 cents to $60.15 a barrel. The news didn’t spare the liquids as gasoline shaved nearly 2 cents a gallon while diesel, reflecting a 3.2 million barrel draw according to the EIA weekly data, managed to escape the downdraft and posted a 2.3 cent a gallon gain.

In what can be best described as a market that can’t focus on fundamentals, the latest bearish news headlines are guiding trades while signs of a global tightening of crude supplies, accelerated by tumbling prices, appears to be given less emphasis. Despite the IEA’s confirmation that oil demand will rise in 2019 by 1.4 million barrels a day and yesterday’s EIA report which showed American petroleum demand at over 27 million barrels a day, the highest since July, markets this morning are signalling another day of declines with oil down 50 cents a barrel and refined products in the losing column with diesel down nearly two cents, while gasoline is down by a fraction.

For drivers, the volatility to the downside for oil and fuel is continuing to provide them with substantial savings at the pumps. Considering that only two months ago, oil was thought to be headed to $100 a barrel, its current $50 value is likely to make this Christmas the least expensive since 2016. According to GasBuddy’s Live Ticking Average, at $2.398 a gallon, gas prices are 3.9 cents below last week’s costs and 28.3 cents under last month’s average. Unlike diesel, which at $3.093 a gallon is still 25.7 cents above last year’s prices, gasoline is 5.4 cents cheaper than on December 13, 2017.

No expectations of change in the mood of markets are likely to be forthcoming today as the pessimism over yesterday’s API miss and ongoing concerns over the equities markets overshadows fundamentals in the petroleum space. With little in the way of any bullish news and ongoing talk of a global slowdown, few are interested in the ongoing reduction in fuel supplies either from strife in Libya, OPEC’s planned 1.2 million barrel a day cutback in production or Alberta’s move to curtail 325,000 barrels a day in output. As long as markets continue to set aside fundamentals, global supplies will lessen o perhaps critical levels in the future, made no less challenging by the reality that lower prices stimulate demand.

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.