President Trump’s tweet that “oil prices were too high” and warning OPEC to “take it easy”, sent energy commodities crashing, registering their single biggest day loss since December 18 as WTI tumbled 3% falling $1.78 a barrel to $55.48 and Dated Brent, handing over an even more damaging $2.32 a barrel to end yesterday’s trading session at $64.76. Refined products were also ensnared with gasoline surrendering nearly 6 cents while distillates walked away with a 7 cent a gallon loss. The upheaval had traders concerned that the U.S. President’s tweet was likely to be backed up in several ways, including a further release of oil stockpiles from the Strategic Petroleum Reserve (SPR) or yet another extension in waivers to countries buying oil from Iran. Whatever the fear of traders may have been in response to the now familiar Presidential tweets, OPEC’s kingpin, Saudi Arabia was having none of it, suggesting they had already been double-crossed and that a shortfall in oil investments were insufficient to meet future oil demand growth.
With many markets in the southern part of the U.S. shifting over from high to low RVP in California and the Gulf Coast, expectations are that gas prices will begin to climb moving higher from what has already been an across the board increase of 15 cents on average across America since the beginning of February. According to GasBuddy’s Live Ticking Average, with gas prices now at $2.406 a gallon, the cost to fill up is now a cent higher than yesterday, 4 cents above prices last week and 14 cents higher than just a month ago, but still 10.9 cents cheaper than on this same day last year. For diesel, the fuel that is often seen as a proxy for the overall health of a given economy, at $2.974 a gallon, the cost has risen 3.6 cents since last week and up 5 cents compared to last month. That means diesel is now 2 cents a gallon higher than last year and likely to increase that gap the next week.
Despite yesterday’s disruptive shock tweet by President Trump to pour cold water on oil’s gradual rise from its Christmas Eve lows, markets appear to be re-asserting a degree of confidence in their energy markets evaluations this morning with crude trading up a few cents and refined products regaining between 1 and 2 cents a gallon. Undoubtedly, a re-assessment of global trends and a closer look at the fundamentals will permit markets to set aside the politics for a moment and re-establish a focus on fundamentals which should give an upside lift on the day while tomorrow’s weekly EIA inventory report draws trader’s attention to hard numbers rather than intrigue.