A tidal wave of bad news throttled energy commodity values yesterday with fears over Turkish Lira currency contagion, a surging U.S. dollar, and a larger than expected build in domestic crude stockpiles beating down the entire energy complex. WTI lost $2.03 a barrel dropping to $65.01, while Brent didn’t fare much better losing $1.70 and falling to $70.76. News that oil inventories rose 6.8 million barrels over the past week and diesel saw a 3.8 million barrel hike in reserves, sent refined products tumbling several cents, even though gasoline inventories actually fell over 700,000 barrels compared to the week previous.
Amid the bad news and pessimism by traders, the EIA’s Weekly Petroleum Status Report offered a startling slice of critical information for big picture market movers; refinery utilization hit 98.1% and given the strength of the greenback, helped explain the nearly 1.1 million barrel a day surge in oil imports to 9 million per day. Not only is demand strong, with refiners working feverishly to keep up, but the generous crude-to-rack spreads for both diesel and gasoline, are incentivizing significant U.S. refinery production rates.
The morning sees a slight recovery from the lows that WTI posted, which harken back to June 6 but could still see nervous traders dumping energy bets on the assumption that trade tensions and currency woes will inhibit worldwide demand for oil and trigger a global economic slowdown. Whatever the reason for shedding active interest in commodities, strong fundamentals lay in the wait, including strong U.S. fuel demand and increasing global oil consumption against the backdrop of declining supply from Venezuela and Iran.
According to GasBuddy’s Live Ticking Average, pump prices across the country continue to register just under $2.90 a gallon, unchanged from last week and last month, but 54 cents higher than last year. Diesel too has seen little movement over the last month, holding at $3.15 a gallon or 63 cents above its value on this day in 2017. Not coincidentally, the unusual static price of fuels in the busy demand summer months may well be contributing to rising demand as drivers seem well adjusted to the new and unchanging normal.
The day ahead looks to be mater of wait and see as speculators look for more headlines to determine energy prices. For now, a neutral outcome is expected with gasoline losing some ground, while crude and its near cousin, diesel/distillates, hold within the range of yesterday’s settlement. Expect bad news to continue to pre-occupy markets for the next several days, if not week.