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Energy View: Wednesday October 10

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Energy markets resumed their upward trek yesterday with oils gaining as well as diesel amid growing concern that U.S. trade sanctions on Iran will bite into global crude supplies at a time of strong demand. WTI gained 67 cents a barrel to end at $74.96, while Dated Brent picked up $1.09 to arrive at $85 a barrel even. For diesel, a gain of over 3 cents a gallon was achieved while gasoline fell nearly 2 cents on comforting inventory levels.

The day ahead for commodities traders is now focused squarely on the sudden and dramatic strength of Hurricane Michael and its implications for energy production, distribution and demand. The sudden strengthening of the storm, thought to be the most severe to impact the Florida panhandle at a Category 4 level could affect or even damage oil platforms with severe flooding or storm surges as was seen in 2005 with Hurricanes Katrina and Rita. The largest marine oil terminal on the Gulf Coast, known as the LOOP or Louisiana Offshore Oil Port, has also closed leaving what is expected to be about 40% of total Gulf of Mexico oil production offline or approximately 670,000 barrels a day in output in the wake of Michael. Concerns inland may also focus on some pipelines infrastructure which could be affected by flooding, in particular, parts of the Colonial and Plantation Pipeline networks, which the storm is expected to transect.

Not surprisingly, markets are taking a wait-and-see approach as crudes are down marginally about 30 cents a barrel, while refined products shed less than half a penny per gallon. Nevertheless, pump prices continue their slow but steady rise with the national median price now holding at just under $2.92 a gallon, the highest since June 9 and nearly a penny higher than last week, according to GasBuddy’s Live Ticking Average. Indeed, the price paid today is 8 cents higher than last month and over 45 cents a gallon higher than on his same day last year. Diesel too, is surging ahead of last year’s price, clocking in at $3.29 a gallon, or 56 cents a gallon higher than on October 10, 2017.

Traders will be eagerly anticipating the API’s prediction of tomorrow’s EIA weekly petroleum data report which was delayed a day due to the federal agency’s observance of Columbus Day. Depending of its estimates this afternoon, the energy complex could see a slight upwards tilt should there be a surprise draw in crude or gasoline stockpiles. Otherwise, expectations should be for slight losses and a day of watching developments surrounding Hurricane Michael.

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.