A gloomy day on the markets yesterday saw oil drop nearly a dollar for WTI which settled at $68.72 while Dated Brent fell 90 cents to end the trading session at $77.27 a barrel. Liquids followed the trend with gasoline falling a little over 2 cents and diesel shedding just under that same loss. Markets seem unimpressed with the prospect of a tightening global crude supply outlook while trade tensions make a renewed call for concern, along with jitters over currency devaluation hitting emerging markets, most notably, Turkey, Argentina and South Africa.
Nevertheless, in a pattern now repeated throughout most of the summer, what goes down usually goes up the next day and vice versa. This morning’s market signals looks remarkably optimistic, with oil advancing bet 10 and 20 cents a barrel, while refined products, especially gasoline are posting stronger gains, in advance of the EIA’s Weekly Petroleum Status Report, delayed a day due to the Labor Day holiday. In all likelihood, the cautious positives today are related to the API prognostication which estimated a 1.2 million barrel drop in crude inventories, even while gasoline grew 1 million barrels and diesel 1.8 million barrels. Now that refineries are entering the shoulder season, a time when demand slackens, thus allowing producers to switch to winter-spec gasoline, a draw in oil supplies implies fuel demand continues to be robust, further propelling energy prices upwards.
For drivers, as we predicted would happen, gas prices rose a little over 2 cents a gallon which, according to the GasBuddy Live Ticking Average, puts pump prices at just under $2.86 a gallon, up 2 cents compared to last week, on par with last month’s median and 20 cents a gallon higher than on this day in 2017. For diesel, the story remains impressive: at close to $3.18 a gallon, it holds a commanding 50 cent a gallon premium over last year’s same day valuation, despite the fact that diesel’s price rose in concert with gasoline a year ago in the aftermath of Hurricane Harvey. It’s a portent for more expensive diesel fuel as we embark on the more demand intensive period brought on by colder temperatures.
For the day ahead, setting aside trade and tariffs, a draw in the overall weekly petroleum data should be supportive of this morning’s light rally. Focus will be on the accuracy of the API’s estimation, export data and refinery utilization rates to better gauge and form the price patterns for the week ahead.