Energy markets regained most of their Monday losses after the U.S. imposed a de-facto embargo on Venezuelan oil, leaving some Gulf Coast refiners having to make do with scarce alternative supplies. Two-day talks between the U.S. and China beginning today over trade has some cautiously optimistic that a deal to avert an all-out trade war may be at hand, despite reports that the two economic superpowers may be far apart. At the same time, both the EIA’s weekly petroleum data reveal and the FOMC meeting on the course of interest rates has attracted the attention of many traders.
Not surprisingly, oil is trading up this morning with WTI enjoying a 70 cent a barrel increase to $53.99, up two dollars since yesterday morning, while Dated Brent is testing $62 a barrel on similar optimism. Gasoline seems to be moving up decisively as well with a 2 cent a gallon gain while diesel, which jumped nearly 6 cents a gallon on news of the polar vortex gripping much of the Midwest and eastern states is up nearly a penny.
For drivers, the effects of the past week in which refined products have not seen much movement means relatively lower pump prices are the norm. According to GasBuddy’s Live Ticking Average, at $2.271 a gallon, the cost to fill up dropped a cent from yesterday and 2 cents from last week. However, gas prices are up 2 cents in contrast to last month, even while they currently stand at 32.2 cents less than last year. For diesel, which usually rises in tandem with colder weather, the $2.925 currently paid is 7.4 cents a gallon below last month’s average costs and even 5.5 cents a gallon below the cost to fill up on the vital transportation fuel this same day in 2018.
With API estimates for a small 2.1 million-barrel build in crude stocks and a marginal increase in distillate inventories, if confirmed by the EIA, markets could well find additional incentive to support current values and depending on headlines, build momentum to the upside for the balance of the week. Noting that this will be the first time since 2005 that crude prices rose in January, fundamentals aside, the rise in petroleum market values may well reach the late March price swoon in early February. Look, therefore, to a modest but noticeable gain on the energy markets generally by the end of the trading session.