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Energy View: Wednesday January 16

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As suggested here yesterday, energy markets would have to take into account the effects of a defeat of the Brexit vote in the UK’s Parliament yesterday, which saw the government’s deal go down in flames by a historic margin. The uncertainty over the future of Britain and trade with the European Union has prompted a reversal in commodity prices this morning after a day which saw crude climb over a dollar and a half a barrel placing WTI at $52.11 and Dated Brent at $60.64 a barrel. Despite what may be a bullish EIA weekly inventory report for crude, markets are transfixed with the deadlock in Europe and re-visiting weaker economic data emanating from China, where authorities there injected over $30 into the banking system to fend off a slowdown.

If the API’s forecast is anywhere near reliable, a draw in crude supplies including the WTI oil hub at Cushing, Oklahoma, could re-establish some support for crude’s early morning drift, however refined products appear to be showing a dramatic build which could spare drivers any meaningful increases at the pumps for the next several days.

As such, while GasBuddy’s Live Ticking Average indicates that at $2.248 a gallon, average prices are up nearly a penny from yesterday and indeed, last week, they remain 11.4 cents a gallon below last month and 30 cents less than a year ago. Diesel, too, has begun to moderate noticeably and at $2.931 a gallon, is off 2.6 cents compared to last week and down 37 cents from its 2018 high on October 12 of $3.301 a gallon. Compared to the same day last year, diesel is now, for the first time in a year, cheaper than on the same day in 2018.

This morning’s anticipated API report could help provide support for crude but leave products struggling to cope with an ever-increasing build in fuel stockpiles. The increase in refined product inventories could be interpreted as evidence of slackening demand or even hints at a global economic slowdown. Whatever the market’s ultimate interpretation, the days ahead appear to be defined by conflicting data and perspectives which are likely to see the energy complex remain in neutral for the balance of the month with gains some days, losses on others. Given today’s stimulus by the Chinese government into its lending network and a probable decline in oil inventories, expectations are for a slight positive outcome on the day that may not be repeated for a third straight day.

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.