Crude oil’s longest streak in nearly two years appears to have halted this morning after yesterday’s gain of $2.58 which saw WTI rise to $52.36 a barrel, its highest price since December 13, while Dated Brent advanced a more impressive $2.72 to end the trading session at $61.44 a barrel, a level not seen in just over a month.
The recent gains may be seen as based on sentiment rather than fundamentals, but unlike December, in reverse. Although oil is thought to have been severely undersold in the final weeks of 2018, markets continue to see evidence of builds in products and no firm reports on global inventories declining. Even yesterday’s EIA weekly inventory report showed a less than expected draw in crude supplies of only 1.7 million barrels while gasoline and diesel data showed massive 8.1 and 10.6 million barrel builds respectively. Early morning trades today are therefore more cautious and taking a noticeable step back on valuations with the crudes down half a dollar a barrel, and refined products surrendering a fraction of a cent a gallon.
Drivers have continued to benefit from the two-and-a-half-month-long decline of the period from mid-October to Christmas, as fuel prices continue to remain at levels not seen since the first week of July 2017. At $2.24 a gallon, according to GasBuddy’s Live Ticking Average, pump prices are up slightly from the weekend, but still down 2 cents from last week, 18 cents compared to last month and now 27.1 cents a gallon below prices paid this time last year. On the other side of the barrel, diesel continues to shed weight, down 5.1 cents a gallon from last week to $2.948 a gallon and off 17 cents from the previous month. Considering diesel sold for $2.918 on this date last year, prices are a mere 3 cents higher today and likely to fall below last year’s cost by the beginning of next week.
Whether or not oil can be seen as re-entering a bull market remains to be seen with a trading day that is likely to yield few clues as to the upcoming trading sessions for the long month ahead. While cutbacks in oil production are taking effect globally, it remains to be seen if it will dent the overhang created when the Trump Administration tricked oil-producing nations to increase output for Iranian oil sanctions that never materialized with last-minute waivers by the State Department. A weaker global outlook and only talk of an easing of trade tensions between China and the U.S. is a far cry from the euphoria that gripped the futures markets last summer and into the early fall season when many expected oil to reach $100 a barrel. Markets today appear to be taking a breather from their 9-day advances, with a likely result of slight losses on the session.