Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil prices are trading up-and-down this morning, with a downturn quickly following a rally yesterday. WTI (West Texas Intermediate) crude forward prices opened at $52.00/b today, up by $1.22 (2.4%) from yesterday’s opening price of $50.78/b. Gasoline and diesel forward prices also rebounded yesterday, handed back the gains, then began a range-bound trade this morning.

The American Petroleum Institute (API) reported yesterday that U.S. crude oil inventories were drawn down by 0.65 million barrels (mmbbls) last week. This was well below industry expectations of 2.5 mmbbls. The API reported that gasoline inventories rose by 5.99 mmbbls and diesel inventories rose by 3.214 mmbbls.

The Energy Information Administration (EIA) is scheduled to release official data on oil inventories later today. Some data releases are being curtailed because of the federal government shutdown, including business inventories and retail sales data. The EIA released its Short-Term Energy Outlook, and it assumes a WTI price of $53/b during the first quarter of 2019. The STEO also forecasts that U.S. crude production will rise to an average of 12.1 million barrels per day in 2019.

Although the API inventory report was bearish, and the EIA report anticipates additional supply from the U.S., oil prices received support from a U.S. State Department announcement that no new waivers would be granted on imports of Iranian crude. This may serve to tighten the market, which had been prepared for the sanctions to remove approximately 1.0-1.2 mmbpd of Iranian crude from the market last fall. The Trump administration granted waivers to eight countries, who collectively accounted for around 75% of Iranian sales.