Energy markets were flat yesterday as profit-taking saw WTI gain 35 cents to $58.61 a barrel while Dated Brent gave up 32 cents to $67.23, with gasoline and diesel slipping about half a cent on the day. Remarkably, even while WTI oil remains about $2 a barrel cheaper compared to this time last year, refined products are noticeably more expensive this year with gasoline holding a 2 cent a gallon advantage on the NYMEX over March 2018 values, while diesel commands an 11-cent premium. The year-over-year difference suggests fuels are in greater demand and the outlook for their continued rise in value confirms the summer driving season may turn out to be a lot more expensive than originally thought.
Wednesday’s bullish, if not surprising, weekly EIA petroleum report which featured unexpected draws across the liquids, has galvanized trades in both oil and products. Coupled with news that Saudi Arabia has exceeded its production cuts by 500,000 b/d below its agreed to recent OPEC cap and more evidence of Venezuelan output dwindling to a mere 1 million b/d, could be seen as supportive of oil reaching $60 a barrel for WTI and $70 for Brent in the near future.
For drivers, the gradual escalation in energy prices on the markets has now translated into pump prices that are effectively higher than this time last year. According to GasBuddy’s Live Ticking Average, at $2.539 cents a gallon, the cost to fill up is now 1 cent higher than last year, 6.7 cents higher than last week and 22.2 cents above what most paid just a month ago. Diesel, too, is mounting an early spring bounce moving up to an average of $3.019 a gallon which is 8.8 cents higher than on this same day last year and a 10.2 cent higher than only a month ago.
OPEC’s summit in Azerbaijan this weekend appears to be destined to confirm a willingness by members to extend production cuts in a move that is widely seen as a shot across the bow of U.S. shale producers, signaling that the cartel is willing to withhold or even exceed U.S. production growth. Conversely, the gathering may also be used to cement to resolve of members to once again flood global oil markets, should attempts by the U.S. to sue OPEC under anti-trust law, be successful. Markets are therefore going to watch these and other developments over the weekend, including renewed tensions in the Middle East with Israel responding to rocket attacks from Gaza. The shift in RVP to lower summer spec gasoline in the PNW and Chicago markets are also likely to see upward pressure on fuel prices beginning next week, setting the stage for a more expensive summer driving season as well as generally higher costs for all modes of transportation. Beware the Ides of March.