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Energy View: Friday December 21

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Energy markets took it once again on the chin as traders found little compelling reason to hang on to their positions, sending WTI down $1.32 a barrel to $45.88, its lowest close since Wednesday, July 12, 2017, while Brent retraced its Wednesday, September 13, 2017 lows, falling $2.89 a barrel to end at $54.35. The main reason continues to be the overhanging disappointment with the FED decision to raise interest rates on Wednesday and its spillover effect on the economic outlook. And while markets tend to shed a few pounds before the Christmas break, the steep declines of over 10% so far this week, signal a bearish market is firmly in place.

For refined products, most notably gasoline, its futures values appear destined for levels not seen since August 10th, 2016 and with ever-increasing domestic and global output, along with the emergence of newer refineries in Pacific rim countries and indeed, Saudi Arabia, prices appear to have little basis for recovery, well in to 2019. Diesel, on the other hand, is maintaining its 40 cent a gallon premium over gasoline and this, without a cold snap that often serves as a catalyst for higher prices, beginning with the official start of the winter season today.

Not surprisingly, Christmas holiday driving this year is now the cheapest since 2016 and should it fall 10 cents a gallon by boxing day, the result would be the least expensive since 2015. At $2.355, gas is now 3.1 cents cheaper than last week, 22.7 cents less than last month and according to the GasBuddy Live Ticking Average, 8.5 cents a gallon under prices this time last year. For diesel which has stood at a premium to gasoline, even during the warmer summer season, $3.06 a gallon places it 23.1 cents above last year on this date and its highest for this time of year since 2014.

Barring a major or significant geopolitical event, the energy market will cap the week on another down note with modest losses overall. In year that seemed to build towards petroleum prices reaching their 2014, pre-OPEC flooding day, 2018 will end with a thud in which external factors including trade tensions, dynamics in the equities markets, prolific energy production and fear of a global economic slowdown take center stage and sets the bearish tone for at least the first half of 2019.

Merry Christmas, Happy Holidays and our best to all for 2019.

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.