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Energy View: Thursday December 6

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U.S. energy commodities markets were closed yesterday in observance of the passing of former President George H.W. Bush, but overseas electronic traders found little to indicate any form of enthusiasm and foreshadowed today’s steep losses with modest walk backs in values. The day ended with WTI down 36 cents a barrel to $52.89 while Dated Brent shared in the losses, down 52 cents to $61.56. But the news wasn’t all glum as both gasoline and diesel managed to hang onto their levels with small fraction of a cent gains to end the day in the green.

The much anticipated annual meeting of OPEC is now underway in Vienna and to the surprise of many, a proposed cut of 1 million barrels a day, is leaving traders unimpressed. Both bickering from members unwilling to follow and the overall modest cutback, falling well short of what many expected was to have been a 1.3 m b/d cut, has now sent crude futures tumbling over 3% with WTI falling nearly $2 a barrel while Brent is down similarly and now below the $60 a barrel threshold. With no agreement on any numbers and looming concerns of an economic slowdown, gasoline and diesel are also taking a beating with both, now registering 4 cent a gallon declines in early morning trading.

Another factor depressing markets is the reluctance by Russian producers to go along with the proposed cuts. A failure to have all OPEC and non OPEC nations on board for any cuts almost certainly guarantees the energy markets will continue to give way. Worries over the deterioration of U.S.– China trade and even the arrest of Chinese tech giant Huawei’s CFO in Vancouver appears to have both equities and commodity markets in a funk.

The news isn’t all bad though, for drivers the continued slide in pump prices continues to buoy consumers. According to GasBuddy’s Live Ticking Average, at $2.442, gas prices are 4.3 cents lower than last week, 28.5 lower than last month and 3.6 cents below prices on his same date last year. For its part, while diesel prices have moderated 13.8 cents in the last month, at $3.13 a gallon, he key transport fuel still ranks 28.2 cents higher than on this date in 2017.

There is therefore little doubt that short of last minute developments, petroleum markets will have little in the way of a silver lining to justify any moves other than shedding positions and overall values. While the day ahead isn’t likely to produce a rout, an anticipated bearish report from the EIA over its weekly inventory report later this morning should confirm for many that the devaluation of energy prices is warranted.

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.