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Energy View: Friday September 28

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Prompted by continued concerns over the tightening of global oil supplies with U.S. trade sanctions set to take effect on Iran in early November, as well as reports of growing Chinese crude demand for August, markets traded up crude and refined products values yesterday. WTI gained 55 cents a barrel to $72.12 with Dated Brent pulling off a 38 cent gain to settle at $81.82. Refined liquids went for the ride with diesel and gasoline notching up 2 cent plus advances and giving the energy commodities an overall win on the day, reversing Wednesday’s slight declines.

With more evidence of OPEC not being able to fill the void caused by the U.S. oil embargo on Iran, Reuters reports that according to a survey of 50 economists and analysts, crude prices are being revised upwards to the mid-$75 range for Brent meaning higher prices which “is really bad news for the supply side and especially for the consumers – as prices could go up even further”. The report also re-affirmed what has been written here repeatedly – that little consideration is being given by traders to the longer term effects of the growing trade war between the U.S. and China.

Consequently, this morning’s trades appear to be firmly in neutral with WTI holding at yesterday’s closing values, while Brent is making modest strides, up 40 cents a barrel thus far. Mirroring the ambivalence, gasoline is hardly moving while diesel looks to follow the Brent breakout, mindful of the early forecasts for a colder than usual fall, especially in the Midwest.

As fall officially arrives, gas prices appear to be sustaining their slight increases this week holding at $2.87 a gallon according to GasBuddy’s Live Ticking Average. That puts pump prices up 2 cents over last week and over 3 cents compared to last month, with a premium of 31 cents a gallon in contrast to what drivers paid this time last year. Diesel too has gained traction, up a penny from Wednesday to $320 a gallon and 47 cents higher than what was seen for September 28, 2017.

The day ahead isn’t likely to register any significant advance and trading may soften prices throughout the day. Nevertheless, the week will post a third consecutive week of gains with markets poised to give stronger support to crude oil next week as the true effects of decline oil inventories come under closer scrutiny with sanctions on Iranian oil approaching. Little doubt the ongoing tensions with Venezuela and its crumbling output will be ignored. If as some analysts suggest $100 oil is a possibility, next week’s market activity will begin to confirm those bullish prognostications.

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.