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Energy View: Thursday September 27

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Wednesday crude prices finished soft losing under a dollar a barrel with WTI finishing at $71.57 a barrel while its European based counterpart, Dated Brent, dropped slightly to $81.34 on a day that saw U.S. crude inventories climb 1.9 million barrels along with a 1.5 million barrel uptick for gasoline, while diesel posted a 2.2 million barrel draw according to the EIA’s Weekly Petroleum Status Report.

The morning brings with it a complete reversal in fortunes with the crudes, both WTI and Brent trading up near 70 cents a barrel, while refined products are also finding traction with near 2-cent-a-gallon gains for both diesel and gasoline. The increases appear related to Energy Secretary Rick Perry’s comments that the U.S. will not dip into its Strategic Petroleum Reserve to supplement the decline in Iranian output in advance of the re-imposition of the Administration’s sanctions on that country. In Perry’s opinion, such a move would only have a temporary effect on a market. He suggested it was adequately supplied, even in the face of an Iranian oil embargo. Politics aside, energy pundits are conflicted with some suggesting crude has more room for growth in price, while others, notably Goldman Sachs believes that while there has been a sharp drop in Iranian oil exports already, their research indicates that there is enough spare capacity to keep Brent in the $70 – $80 range for the last quarter of 2018.

As the market continues its daily glimpse of the headlines and fundamentals to secure daily price outcomes, gasoline prices across the country appear to have gained a couple of cents to just under $2.88 a gallon according to the GasBuddy Live Ticking Average. This represents a solid 2 cent increase compared to last week, a near 4-cent-a-gallon rise in contrast to last month and a 31-cent premium over prices this day last year. For its part, diesel prices continue to test the $3.20 benchmark, commanding a 48 cent a gallon premium over its cost last September 27.

For the day ahead, energy markets are likely to post stronger gains, erasing the slight losses yesterday, while pushing values once again to their weekly highs and setting them on course to holding at levels not seen since OPEC began flooding global markets with crude in December 2014. As a consequence, the ensuing years of declining capital expenditures in oil production, may at long last be having the effect of driving up prices, even as the U.S. last week broke an all-time record of 11.1 million barrels of crude output.

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.