Energy markets shrugged off early morning doubts yesterday on the strength of OPEC’s resolve to continue daily oil production cuts of 1.2 million b/d until June and acknowledgment by Russia that it too, as part of the agreement with OPEC, pulled back on output by over 230 k b/d in February. The news and conclusion by traders were enough to propel WTI up 61 cents a barrel to $59.09, it’s highest close since Monday, November 12, while Dated Brent picked up 38 cents to end at $67.54. Refined products were also in an upbeat mood with NYMEX gasoline picking up over two and a half cents a gallon with diesel moving up half a cent.
Building on yesterday’s modest momentum, markets are once again coming out strong this morning, setting aside warnings of a weakening global economy and waning crude demand, with emphasis on supply challenges from Libya to Venezuela. Indeed, with tomorrow’s weekly EIA petroleum inventory report rumored to be showing a 1 million barrel drop in crude inventories at WTI’s hub at Cushing, Oklahoma, traders are in a buying mood. Already, crude futures are up nearly half a dollar a barrel while petroleum products are up half a penny with distillates pulling ahead of the pack with a 2 cent a gallon increase.
The modest euphoria in energy markets has now taken full control of pump prices and drivers are now noticing the cost to fill up is taking a bigger chunk out of their wallets. According to GasBuddy’s Live Ticking Average, the national average cost for gasoline this morning stands at $2.563 a gallon, up 4.7 cents from last week and 19.7 cents compared to last month. If last year was considered an expensive year to drive, the fact that today’s pump prices are a third of a cent a gallon higher than last year on this same day, underscores the reality of the cost of fuel breaking out to levels not normally seen at this time of year since 2014. For its part, diesel is also maintaining its drive upwards with average prices now at $3.022 a gallon, up a cent from last week and 9.4 cents above its cost last month, and like gasoline, is now 8.1 cents more expensive than last year.
The day ahead is therefore likely to confirm positive morning trades and with the success of OPEC+ mated with a growing belief that the global economy has past through its worse phase, many appear to be betting on a breakout of energy prices as spring begins.