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Energy View: Wednesday September 5

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Markets discounted the potential effects of Tropical Storm Gordon which made landfall this morning, with traders trimming earlier bullish bets and leaving WTI oil at last Friday’s values of $69.87 a barrel, while Dated Brent gained a paltry 51 cents to finish the day yesterday at $78.17 a barrel. Gasoline was in flux as the switchover to October contracts and the approaching change to winter-spec fuel approaches next week. Diesel gained a couple of pennies as is normal at this time of year, but building on higher than usual summer prices, setting the pace for what could be its highest seasonal prices going back as far as 2013.

Traders this morning are digesting a number of macroeconomic negatives as currency devaluation among emerging markets are extending worries about a deepening rout of currencies, which is also causing a surge in the strength of the U.S. dollar as a hedge to the perceived widening risk. The rising greenback is also putting pressure on oil while reports of a 780,000 barrel build in stockpiles this week at the WTI delivery hub, Cushing, adds to oil’s downside. Products a fairing no better as WTI is down nearly a dollar a barrel, below $69 and Brent is now moving below $77.50. Gasoline is paring 2 cents a gallon and diesel over a cent and a half, as concerns over the effects of Tropical Storm Gordon are set aside in favor of the bigger headlines.

For motorists, according to the GasBuddy Live Ticking Average, median pump prices stand at $2.843 a gallon with a likelihood of slight upwards movement today, but so far no change from last week and indeed, last month’s averages. Last year’s effect of Hurricane Harvey sent prices skyrocketing around this time, but still, we note pump prices today across the country selling at a 20 cent a gallon premium to those elevated prices on September 5, 2017. Diesel too remains strong and likely to add over the coming weeks to its $3.17 a gallon average price and 51 cent premium over the same day last year.

Expectations for the day ahead show intense pressure on oil and petroleum prices which will only find a modicum of respite should this afternoon’s API inventory estimation of tomorrow’s EIA weekly data report show another draw in inventories. Nevertheless, any more positive economic reports could see oil firm up or at least limit any further declines until tomorrow’s inventory data gives clarity to onlookers, especially in light of talk that U.S. fuel demand remains robust and possibly record-setting.

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.