For the eighth day in a row which included six trading sessions, crude prices appear to be slowly gaining momentum after its Christmastime funk which ended a 12-week run of losses which saw WTI fall from near $77 a barrel to a little over $42 on Christmas Eve. This morning, prompted by hard evidence of OPEC and Canadian oil output cutbacks, declining American rig counts and perhaps, more importantly, more positive signals coming from the U.S. – China trade talks, WTI is trading a little under a dollar gain to $49.35 a barrel, while its European counterpart, Dated Brent, is advancing 94 cents to $58.27. As far as streaks are concerned, it would represent the longest, albeit modest, consecutive daily gain in 19 months and with it, slight improvements for gasoline and diesel prices on most regional markets.
Reports that Saudi Arabia may have, on its own, agreed to cuts of 1.2 million barrels a day by OPEC and other non-aligned producers such as Russia, allows markets to return to fundamentals as opposed to sensational postulations of a global recession. If as expected, Saudi exports are curtailed, especially those destined for the U.S. Prospects for a rapid rebalancing of crude supply to demand are improving, and with it, oil prices.
For drivers, the steep decline of 68 cents a gallon in average pump prices since October 10th, when a typical fill-up cost over $2.91 a gallon, may soon be ending with yesterday’s $2.23 a gallon being the low for the next several weeks, or even months. For the first time in 12 weeks, gasoline prices actually recorded an increase which, while only a small 1 cent hike, may signal a gradual period of steady increases. According to GasBuddy’s Live Ticking Average, pump prices are now $2.241 a gallon, the same as last week, but still 17.9 cents lower than last month and 25.3 below last year’s costs. For diesel, the news for consumers continues to improve and although not likely to follow the lows seen for gasoline, at $2.962 a gallon, they’ve dropped over 33 cents a gallon from their 2018 high of $3.301 a gallon on October 12 and are now only 5.2 cents higher than last year on this same day.
The signal shift in traders approach to fundamentals bodes well for crude to regain former milestones over the next trading sessions, especially if as expected, tomorrows EIA weekly inventory report shows a draw in crude supplies. It is quite possible that WTI will break through the $50 threshold, while Brent may take a stab at $60. Although January and February are considered slow and uneventful months for fuel futures, the deep losses before Christmas are now being reversed as talk of $70 oil by Memorial Day is back on.