With January moving to the front month of crude oil trading, the morning finds WTI and Dated Brent setting the pace for steep declines with both benchmarks down over a dollar a barrel with WTI trading near the $56 range while Brent is under $66, heading towards last Tuesday’s multi-month lows. The move down follows a day when oil gained marginal and more symbolic ground while refined products saw gasoline pick up a little less than a penny, even though diesel managed to add more than a cent to its value.
This morning a confluence of information is giving traders plenty to consider as definitive numbers on oil fundamentals remain elusive. Notionally, with U.S. oil production rising weekly, Iran benefiting from last-minute waivers despite U.S. sanctions, and OPEC cranking out more crude on the assumption that Iranian oil would be subject to a full U.S. embargo, the bears have managed to drive oil down $20 a barrel from its early October highs. However, assertions by the International Energy Agency yesterday that the possible 1.4 million barrel a day cut by OPEC at its December 6 meeting “could have negative implications for the market”. Even without Russian cooperation on those proposed cuts, as the country’s exports tend to fall during the colder winter months, news on Monday that the European Union could sanction Iran given involvement in a bombing plot last year in France, could have investors rethinking their bearish trades. Another wild card in today’s trades will be the mounting concern of a growing trade war between the U.S and China. So, for the markets, there’s plenty to digest and work out.
With Thanksgiving driving nearing, the big surprise for 2018 is that pump prices continue to fall in favor of consumers. Even though the average price is still the most expensive on average for Thanksgiving, going back four years, the recent drop in prices continues to impress and just in time. According to GasBuddy’s Live Ticking Average, the nation’s median gas price may have increased a penny since the weekend with gas bars moving up their retail margins, but at $2.611 a gallon they are down 7 cents compared to last week and some 23.6 cents cheaper than last month. And while gasoline is still 7.3 cents above prices last year, they are more affordable than diesel, which at $3.223 a gallon stands 39.5 cents a gallon higher than when drivers headed into this same holiday period in 2017.
With continued fears of an oversupplied global oil market, the energy commodities market is almost inevitably destined to maintain a lower-priced close by day’s end, regardless of the API’s prediction of tomorrows weekly EIA inventory data.