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Energy View: Tuesday November 6

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The U.S. embargo on Iranian oil now appears to be considerably less than expected which helped propel crude oil to their end of September highs. The October sell-off that saw the hydrocarbon lose over $12 in value, or roughly 20% from its highs of over $76 a barrel for West Texas Intermediate (WTI) and $86 for Dated Brent, back on October 3rd, appears once again to be under pressure as 8 countries are now exempt from importing Iranian oil, including China, South Korea, India, Japan, Turkey, Italy, Greece, and Taiwan. The move yesterday by the State Department to issue the temporary waivers means Iran will actually need to produce more oil than thought, leaving traders to react with predictable moves that see the energy complex trading lower this morning.

Others matter too that are affecting the fate of petroleum pricing is the unmistakable effect of tariffs between the U.S. and China, which are likely linked to recent reports of a possible global economic slowdown and drop in demand. Higher comparative energy costs too in Europe may also be causing reduced demand there and as such, some are suggesting a “tidal wave” of crude supplies is at hand.

For drivers, the news continues to be optimistic as pump prices are trending lower and now sit at a current average across the country of $2.738 a gallon, down 6.2 cents versus last week and according to GasBuddy’s Live Ticking Average, down 17.6 cents compared to last month. Still, gasoline is selling at a 19.6 cent a gallon advantage to prices last year, although much narrower than the 47.2 cents a gallon premium drivers are forking over for diesel, which now stands at an average of $3.268 a gallon.

While all the stars have aligned for the crude bears of late, including the U.S. Administration’s release of crude from the SPR, waivers to several large oil-consuming nations from sanctions on the Islamic Republic to trade tirades which, for now, threatens to sap global demand. What happens subsequent to today’s mid-term elections could trigger a reversal in the downward trek of oil. Early indications of a reduction in floating oil inventories, heavy demand for distillates and lower stockpiles for both diesel and propane in advance of the colder winter season ahead, could prompt a review of the current trade trends. A more broader, long-term analysis of fundamentals, may begin to see the end of declines in the petroleum pricing complex and a possible rebound next week, once this week’s EIA Weekly Petroleum Status Report reveals, as expected, a final weekly increase in crude inventories tomorrow.

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.