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Energy View: Friday March 1

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Little in the way of energy-related news was reflected in trades on the markets yesterday which turned in a lackluster result that saw WTI gain 26 cents to $57.22 a barrel while its European counterpart, Dated Brent, actually lost 36 cents to finish at $66.03. Refined products saw similar moves with gasoline off less than half a cent while diesel picked less than two-tenths of a cent per gallon. Seemingly, traders appeared to ensure oil prices did not cross the same threshold last Friday which prompted a Twitter reproach by President Trump. Leaving prices capped in the $57 a barrel range is perhaps thought to make all sides happy for now.

Considering data suggesting a possible economic slowdown in China, the EIA’s revelation that the U.S. is now producing 2 million barrels a day more than a year ago and OPEC’s challenge in getting its new partner, Russia, on board cutbacks in oil production, markets are balancing the headwinds against suggestions by the EIA’s latest data of strong demand for petroleum products and supply disruptions from Venezuela, Libya and Canada. Despite the conflicting indicators, the result appears to be lending support to overall stability from the vantage of price discovery.

For motorists, however, the recent surge in gasoline prices which are a delayed reaction to market price hikes of a month ago, is anything but stable. According to GasBuddy’s Live Ticking Average, the cost to fill up has now reached $2.432 a gallon, a price not seen since December 6. Not only is gasoline now 2.7 cents a gallon higher than last week, but it’s also now 16 cents higher than last month and now only 11 cents below last year’s same day price. For diesel, at $2.99 a gallon, the cost is now 6.6 higher than a month ago and 3.4 cents higher than at the beginning of March in 2018.

This morning, a strong U.S. GDP reading which came in at a higher than expected 2.6% on an annualized basis is giving oil a boost allowing negative market data on China to be kept at bay for now. Other realities such as the dramatic drop in heavier slates of Saudi exports to the U.S which have dropped nearly threefold since last year could give markets reason to be concerned, if not today, then mid-week when another inventory report could show more dramatic draws in domestic oil stockpiles. While markets will land softly at the levels they attained last week, the week ahead is likely to see stronger gains especially if the U.S. and China can hammer out a comprehensive trade deal. A looming reduction in global oil supplies to meet anticipated demand for the year ahead will be given increasing weight by traders fearing global supplies may not be adequate for the summer driving season ahead.

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.