Energy markets rallied yesterday registering the largest single-day gain not seen since October 1st, as WTI gained $1.21 a barrel to $51.63 and Dated Brent edged up $1.68 to end the trading session at $61.48. Refined product too cashed in on the post-Thanksgiving euphoria with gasoline and diesel earning 5 and 3 cents a gallon increases, respectively.
The upward momentum was based on the not-so-new reality that OPEC will meet to discuss and implement likely production cuts on December 6, in the face of being duped into higher output in light of U.S. sanctions on Iranian exports which didn’t quite materialize. Traders may have also been motivated to buy given the deep discounts in oil prices which many consider to be an over-correction in the face of a perceived global glut of oil. The too-low-too-fast, actions of the markets over the last six weeks, has many reconsidering the less than warranted bearish trades of late, but underscoring the high level of volatility and uncertainty in those trades.
For motorists, however, the relief is unmistakable as pump prices continue to reach back to the low prices seen this time last year. According to GasBuddy’s Live Ticking Average, median pump prices now stand at $2.538 cents a gallon, up half a penny from Sunday, but down 6.2 cents from last week and 27.9 cents below last month’s prices. And while today’s values are 3.8 cents higher than last year, expectations are that this will soon flip and U.S. drivers will likely pay less than last year, imminently. As for diesel which helps explain robust refinery runs and the current glut in gasoline as plants attempt to meet its lofty prices, at $3.194 a gallon, the vital transport fuel is 35 cents higher than on this same day in 2017.
A more somber mood pervades the markets this morning as the Trump Administration signaled its commitment to impose a $200 billion tariff on China in advance of the G20 meeting this week, with a further threat of placing tariffs on all Chinese imports, effectively rejecting China’s call for more time for negotiations. While the morning’s market activity swings between gains and losses, the day ahead is destined to see traders exercising more caution as related economic consumption affecting headwinds rule the day. Up and until a clearer picture emerges from OPEC and Russia at their December 6 meeting on the extent and reliability of tightening oil production quotas, increased crude output for November by both Saudi Arabia and the U.S. in the vicinity of record 11.2 million barrels a day, will continue to confirm and validate the energy markets’ bearish tilt.