With yesterday’s loss of $1.37 a barrel for WTI and 73 cents for Brent crude, July will record the biggest monthly drops for oil in two years, as both fell around 7%, the biggest decline since July 2016. The loss on Tuesday is related to growing confidence that the world supply of crude is more than adequate to deal with drop-offs in Venezuelan production and an oil embargo on Iran, a bearish API report on U.S. petroleum inventories and high-frequency traders responding to the latest headlines of unease over a litany of trade issues.
Unsurprisingly, oil is trading down yet again this morning with WTI under $68 at $67.76 a barrel, off a dollar, while Brent has slipped $1.40 to $72.81. This is also causing a serious downdraft for gasoline which lost nearly 4 cents a gallon yesterday and is already off to a poor start, down 2.4 cents a gallon in early trading. Diesel is not faring any better and is off nearly 3 cents a gallon after recording a near 4 cent a gallon cut yesterday.
Despite the API’s legacy of being imprecise when it comes to foretelling actual EIA numbers in the Weekly Petroleum Status Report, which appears regularly on Wednesdays, the 5.59 million barrel oil draw predicted has money managers spooked and hitting the “sell” buttons this morning. Their moves are in no small way aided by reports today that the U.S. is considering a doubling of tariffs on China. Such a move would be seen as hobbling oil demand and sending energy prices tumbling, even though depressed prices would only lead to greater consumption in the long run.
For drivers, pump prices remain relatively stable but to the upside according to the GasBuddy Live Ticking Average, which shows this morning that the median price to fill up remains just under $2.89 a gallon. That’s in contrast to last week when prices were 3 cents cheaper and 4 cents more than last month. Looking at this day same day last year, a fill-up would cost 56 cents a gallon less, while diesel at $3.15 a gallon is priced 68 cents above August 1st, 2017.
If the API numbers hold up, look to losses mirroring yesterday’s with gasoline breaking its fall and diesel prices coming back into line with other refined products. The bears are in control of prices, at least for the day ahead.