Petroleum markets turned in a solid performance yesterday as green became a familiar color on trading screens with WTI picking up 80 cents to end the day at $53.90 a barrel and Dated Brent rising $1.21 to $63.61. On the refined products side, gasoline rose nearly 4 cents a gallon while distillates moved up over 3 cents as the EIA’s weekly inventory data pointed to reduced refinery rates for seasonal maintenance, especially in the northeast.
External events, such as ongoing trade talks between the U.S. and China, which featured prospects that President Trump may push back imposition of tariffs by 60 days helped markets overlook otherwise bearish EIA data. When added to observations suggesting the turmoil in Venezuela that has led to lower heavy crude exports, won’t be resolved in the short term and Canada’s inability to replace those lost barrels due to the successful campaign to block the building of its pipelines, a scenario of rapidly tightening heavy grades of crude is beginning to emerge, despite Texas oil output reaching levels not seen since 1972. Critically, the hike in petroleum prices on the markets may now be reflecting the absence of both heavy Venezuelan and Arab crudes, representing the potential beginning of tightening supplies, which also serve to explain the overall drop in refinery utilization rates to 85.9% that can’t be explained on seasonal maintenance alone.
For drivers, the bullish moves may signal the final days of stable, range-bound pump prices which have held in the vicinity of $2.25 to $2.30 a gallon for the last month. According to GasBuddy’s Live Ticking Average, at $2.291 a gallon, the cost to fill up may soon begin a gradual upward advance. Still, the price is a cent cheaper than last week and although 5.5 cents higher than last month, holds at 26.1 cents a gallon cheaper than this day last year. Turning to diesel, the fuel that runs the global economy, at $2.917 a gallon, prices are 2.4 cents less than last month and 6.6 cents below costs on St. Valentine’s day 2018.
Markets this morning appear to be taking a breather with the crudes on either side of par from yesterday’s benchmark, while refined products are slightly more decisive recording 1 cent a gallon gains so far. For the day ahead, traders appear to be considering an abundance of information that could see the trading session end in a draw with no conclusive outcome. Despite the weak retail sales roundup for December, its lowest showing in a decade, markets are also considering stronger Chines data that points to a 9.1% surge in exports compared to the same month last year. As such for every piece of negative news, there appears to be a positive report serving as a counterweight. Energy markets are therefore positively ambiguous for the foreseeable future.