News that the U.S. imposed sanctions on Venezuela’s national oil company PDVSA stemmed the decline in the petroleum price sphere which saw WTI oil fall $1.70 a barrel to $51.99 and a similar $1.71 loss for Dated Brent yesterday that ended the trading session at $59.93. Both gasoline and diesel handed back 5 cents a gallon in losses with more anticipated losses booked today were it not for news of the sanctions.
The morning sees something of a rally in the markets prompted by a de-facto crude embargo on Venezuela, calmed nerves over a possible Brexit plan B, and trade talks between the U.S. and China which some expect could see China make several key concessions to avoid further economic fallout from a trade war. With Gulf Coast refiners having apparently been given advanced notice of U.S. sanctions on PDVSA assets outside Venezuela, attention may be placed on alternative supplies to Venezuelan oil, including a possible release of the U.S. Strategic Petroleum Reserve. While slates of heavier crude are affected by the sanctions, it is unlikely that Canadian heavy oil can offset the disruption given its unique inability to get pipelines built, unlike any other oil producing nation. As such, Gulf Coast refiners may have to source from elsewhere, incurring higher costs to replace the Venezuelan imports. Another matter that could provide the energy markets further support is the rumored likelihood that the FED may relent on its tightening of monetary policy, giving consumers more breathing space as the economy enters more uncertain waters.
For drivers, the sideways move of petroleum markets may explain only slight increases seen at the pumps over the last week. Although gas prices rose 1 cent a gallon overnight, according to GasBuddy’s Live Ticking Average, pump prices that are currently at $2.268 a gallon are 1.1 cents cheaper than last week, on par with last month and still 32.2 cents below what most paid to fill up this time last year. For diesel, which continues its dominance in prices on the markets over gasoline, going back to September 2017, at $2.925 a gallon, the cost to fill up has drifted down substantially from its October 13, 2018 high of $3.301 a gallon and is now 5.5 cents a gallon less than on January 29, 2018.
Expectations are for energy markets to reverse course from yesterday and post modest but noticeable gains building on this morning’s $1 a barrel rise in the crudes and 3 to 5 cent a gallon improvements for both gasoline and diesel respectively.