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Energy View: Thursday March 21

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A massive drawdown which was the single biggest draw in petroleum stockpiles since July saw yesterday’s EIA weekly crude inventory fall by 9.6 million barrels against an expected build of 300,000 barrels. In concert with a 4.6 million barrel decline in gasoline inventories and a loss of 3 million barrels in distillates, markets reacted cautiously providing WTI an 80 cent bump to $59.83 while Dated Brent moved ahead 76 cents to $68.50. The restrained moves were also felt on the refined side of the equation with gasoline picking 2.6 cents a gallon while diesel finished up a cent and a half.

The anemic response to a glaring shortfall in supplies, which is well before the summer demand driving season, suggests many traders are still nervous over prospects of a global economic slowdown and uneasy over the outcome of trade talks between the world’s two largest economies, the U.S and China. Still, the apparent trend of markets of setting aside clear evidence of an ever-tightening undersupply outlook, whether through OPEC’s actions, the collapse in Venezuelan oil output affecting Gulf Coast refiners, U.S. sanctions on Iran or reports over the week of several refinery snags across the country, is cause for greater concern as price valuations appear disconnected with realities over the fundamentals and a disincentive for much-needed production.

Markets timidity aside, fuel prices for most drivers are noticeably higher across the country with pump prices now firmly above $2.60 a gallon and according to GasBuddy’s Live Ticking Average, 6.5 cents higher than last week, 20.3 cents above prices last month and now 3.4 cents higher than on the same day last year. Diesel for its part continues to build on its $3 space holding at $3.021 a gallon with the cost of the critical transportation fuel now 7 cents a gallon above last month’s price and 9.1 cents higher than on March 21, 2018.

Having touched $60 a barrel, markets appear unwilling to cross the $60 threshold for WTI and $70 for Brent, opting instead to take a wait-and-see approach, with residual concerns over the health of the global economy taking top billing. The morning trades initially pointed to building weakness generally across petroleum markets, but as the morning progresses, is likely to give way to neutral or slightly modest gains on the products side. Barring any bearish news, markets are therefore likely to support yesterday’s gains but unlikely to allow a breakout in prices for crude and refined products for the day ahead nor the balance of the week.

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.