As expected, energy markets had little reason to celebrate yesterday, especially with an emerging consensus on this morning’s EIA weekly inventory reveal that is expected to show a build in petroleum and crude products generally. Not surprisingly, WTI dropped 90 cents to $53.66 and dated Brent gave up 53 cents to fall through the $62 a barrel support, ending the day at $61.98. Meanwhile, refined products slipped as well with diesel shedding more than a cent a gallon while gasoline was off fractionally on mounting supply concerns that even steady seasonal demand and several refinery outages across the country is not enough to keep up with overall solid refinery output numbers.
The morning is seeing what is likely to be a third straight day of losses as the API estimation of today’s EIA report shows a 2.51 million/bbl build in crude inventories led by a near 900,000/bbl surge in stocks at Cushing, a 1.731 million/bbl increase in gasoline and a smaller but surprising, 1.141 million/bbl build in distillates. Concerns over a lack of clarity over the drawdown in Venezuelan exports due to U.S. sanctions is also given the crude oil complex little to cheer about at this time and with talk of Russia and Saudi Arabia formalizing their compact on oil production, smaller player like Qatar are feeling the squeeze. The shale revolution is indeed changing the order of the world’s oil rulers but its outcome and direction remains granular and uncertain.
For drivers, the lack of any clear direction by traders and the energy markets generally, continues to provide a boon for consumers who’ve seen average pump prices climb down and remain at prices that are 60 cents a gallon below their October highs and 68.8 cents under their Memorial Day weekend record of nearly $2.98 a gallon. According to GasBuddy’s Live Ticking Average, at 2.292 a gallon, prices have risen 1.2 cents from Monday and are up 1.7 cents compared to last week while being 6.2 cents higher than last month. Still, in contrast to last year on this day, the cost to fill up is significantly cheaper at 31.8 cents a gallon below. For diesel which has traditionally followed an upwards price with colder weather, with new maritime rules coming into force next year, regulating lower sulphur emissions, the cost remains firmly above gasoline on the markets and at the pumps. At $2.922 a gallon, diesel holds a 63 cent a gallon premium over gasoline prices but is slightly cheaper than when diesel cost $3 a gallon on this very day in 2018.
For the day ahead, expectations are solidly on the downside and markets are almost inevitably going to trade energy prices down as supply growth places fundamentals in bearish territory.