After Monday’s tweet by President Trump lecturing OPEC on production cuts took the proverbial wind out of the energy market’s sails, prices recovered somewhat as OPEC and its largest member, Saudi Arabia chose to ignore the missive and continue unaltered towards continuing the oil output cuts agreed to in November. WTI held virtually unchanged from Monday’s sell-off clocking in at $55.5 a barrel while its European counterpart, Dated Brent managed to rise 45 cents to $65.21. Refined products also began to shake off the impact of the tweet and managed to resume their upward moves with gasoline and distillates gaining over 4 cents a gallon.
OPEC’s commitment to fulfill its supply cut agreement to the five year inventory average comes amidst concerns that with healthy global demand and potential ongoing issues limiting some global suppliers like Venezuela and Iran, the balance in total world production and consumption may come as early as April, when the cartel plus Russia meet again to decide whether to end or continue the 1.2-million-barrel-a-day cutbacks. Signs of a more challenging oil outlook may begin sooner than expected if, as suggested by the American Petroleum Institute, today’s Weekly Petroleum Status Report by the EIA confirms their prediction of a 4.2-million-barrel draw in American oil stockpiles. The API assumption here is in stark contrast to analysts’ projection of a 3 m/b draw and could finally indicate that the decline in Saudi and Venezuelan exports, especially heavier crude slates, to the Gulf Coast are starting to take a bite out of overall inventories.
Amidst the volatility on the markets, drivers too are beginning to feel the pinch at the pumps. According to GasBuddy’s Live Ticking Average, the cost to fill up now sits at $2.413 a gallon, a price not paid since December 9 and up a full 15.5 cents a gallon compared to last month, making last year’s same day $2.534 a gallon price within reach. For diesel, a similar story appears to be unfolding. At $2.98 a gallon, diesel prices have risen 6.2 cents in the past month and are now 2.7 cents higher than last year’s same day costs. Undoubtedly, diesel will cross the $3 a gallon threshold by week’s end or early into next week and return to prices last seen at the end of 2018.
Morning trading is up confidently with both benchmark crudes advancing near and over a dollar a barrel with products gaining over 2 cents a gallon in early moves. Should today’s EIA report show a stronger draw on inventories than analysts’ predictions and confirm the API’s bullish estimation, the day could prove to be one of the strongest showings of the year. Conversely, a read from today’s data in line with expectations will yield only a modest gain by the end of the trading session.