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Energy View: Wednesday March 6

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Trader confidence in OPEC’s success in sticking to its 1.2-million-barrel-a-day oil production cuts, all but negated Libya’s largest oilfield beginning resumption of output and analyst consensus that today’s EIA report would see a 400,000-barrel build in domestic supplies for the week of March 1. Even before yesterday afternoon’s API report which anticipates a much larger, jaw-dropping, 7.29-million build in crude inventories in today’s Weekly Petroleum Status Report, markets had settled on a draw that saw WTI down fractionally by 3 cents to $56.56 a barrel while Dated Brent rose 19 cents to settle at $65.86. Refined products did even better against the headlines with gasoline jumping nearly 3 cents a gallon while distillates held on to its relative strength paring only a third of a cent on the day.

The much-anticipated EIA report later this morning is likely to maintain a check on energy commodity prices as markets digest the weight of higher U.S. domestic crude production and signs that overall global growth in petroleum product demand heading towards the early days of spring may not be as strong as domestic numbers. With Goldman Sachs noting in its recent research paper that “commodities have now reached a level where they are no longer significantly undervalued relative to their current fundamentals”, a pause or even temporary drop in energy prices are likely to ensue.

The upside momentum that carried oil and fuel prices back to current levels in February continues to have a delayed impact at the pumps with the cost to fill up remain strong. According to GasBuddy’s Live Ticking Average, the nation’s gas prices remain in the area of $2.44 a gallon, up 1.3 cents compared to last week and 14.5 cents higher than last month. Gas prices are currently tracking 9.1 cents less than last year and like diesel, which has managed to punch through the $3 a gallon threshold to $3.004, the cost to fill up continues to be at its highest for the year and back to prices not seen since December 29.

The American Petroleum Institutes guesstimate of today’s EIA weekly stockpile report has many hitting the selling button sending WTI down half a dollar a barrel and more modest losses for Brent. Products, too, are caught in the downdraft even as the API’s take actually pointed to a slight draw in diesel inventories and a modest build in gasoline. As such, a rally on the energy markets is not in the cards today and unlikely for 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.