An optimistic conclusion to preliminary trade talks between the U.S. and China seems to be propelling crude futures to a ninth day of gains with WTI now trade up nearly a dollar and a half to over $51 a barrel, while Dated Brent has broken through $60, helping gasoline and diesel to another 3 to 4 cents rise on the morning.
While many reasons explain the recent surge in crude prices, including a more optimistic stock market, the reality seems to center on fundamentals with declining output from OPEC to Alberta to Russia. Combined, determination not to allow oil to sink to uneconomical levels provides context for the recent surge and optimism. With the U.S. FED pledging to do what it takes to prevent the country from slipping into a recession and Saudi Arabia offering a unilateral, across-the-board cut of 800 thousand barrels a day, markets are noting the firm resolve and acting accordingly with greater confidence.
For drivers, the lag time between oil’s rise and what is being paid at the pumps is providing something of a temporary reprieve with average fill-ups across the country holding around $2.23 a gallon. According to GasBuddy’s Live Ticking Average, prices today are down 1.7 cents a gallon compared to last year, 17.6 cents below last month and still 25.7 cents under last year’s values. Turning to diesel, it’s over 16-cents-a-gallon fall compared to last month now puts its $2.957 value, 5 cents higher than on this same day in 2018.
With an anticipated draw in this morning’s Weekly Petroleum Status Report, crude prices are likely to continue a rally that now rivals an unbroken winning streak not seen since the summer of 2017. Even with the API’s forecast that product inventories are likely to see big builds, all eyes are on the crude data. Should the 6.1 million barrel crude draw predicted be confirmed, a 5.5 million barrel surge in gasoline stocks, and an eye-popping 10.2 million barrel bulge in distillates notwithstanding, crude disposition will continue to carry the day, especially if the Saudi’s make good on their commitment to shun exports to the U.S. For traders the report, if confirmed, could portend the beginning of a massive drain on U.S. oil supplies.
As such, we anticipate oil holding over its newfound benchmarks by the end of the trading session with further upward momentum for the week ahead.