Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil prices are moving down again this morning, weakened by unexpectedly large additions to inventories, and so far, at least, unperturbed by the turmoil of two presidents in Venezuela. WTI (West Texas Intermediate) crude forward prices opened at $52.45/b today, down by $0.50 (0.94%) from yesterday’s opening price of $52.95/b. Gasoline and diesel futures prices also opened lower today. Crude and product prices declined yesterday, and they continued to slide gently overnight. Markets are watching Venezuela today, wary of possible supply disruptions that could bring prices back.

The American Petroleum Institute (API) reported an unexpectedly large addition to inventories of crude oil, gasoline, and diesel for the week ended January 18^th. The API reported an addition of 6.55 million barrels (mmbbls) to crude inventories, 3.64 mmbbls added to gasoline inventories, and 2.57 mmbbls added to diesel inventories. This totaled a major addition of 12.76 mmbbls to stockpiles. Market experts had expected a small drawdown in crude stocks, and smaller additions to product inventories. Prices dropped on the news. The Energy Information Administration (EIA) is scheduled to release official statistics later today.

U.S. refiners are stocking up on Venezuelan heavy crude, and if this continues, U.S. stockpiles could continue to grow. The turmoil of two Presidents in Venezuela could boost prices for these mainstay feedstocks. Yesterday, the Trump administration recognized the opposition leader Juan Guiado as the country’s interim President, stating that the re-election of Nicolas Maduro was illegitimate. President Maduro severed diplomatic relations with the U.S. and gave U.S. diplomatic personnel 72 hours to leave the country. The Trump administration has threatened to impose sanctions that could further hinder Venezuela’s already-limping oil industry. Venezuela’s oil production fell from 1911 thousand barrels per day (kbpd) in 2017 to 1339 kbpd in 2018. Incumbent President Maduro, however, still controls the state oil company and the military, so it is not clear whether a regime change is possible.