Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Oil prices surged yesterday, and crude oil prices broke through the $76/b level. The surge was followed by a downward correction, and prices currently appear to be stabilizing within a new, higher bandwidth. WTI (West Texas Intermediate) crude prices in today’s trading session opened at $76.18/b, up by $1.06 from yesterday’s opening. WTI futures prices have not opened above $76/b since January 2014. Gasoline and diesel prices also opened with gains today. Currently, all three have fallen from yesterday’s peak prices, yet they have retained unusual strength.

The Energy Information Administration (EIA) released official statistics on U.S oil inventories yesterday, showing a massive buildup of crude oil stocks. The EIA reported a crude inventory build of 7.975 mmbbls during the week ended September 28th. Gasoline stocks were drawn down by 0.459 mmbbls, and diesel stocks were drawn down by 1.75 mmbbls. In total, inventories rose by 5.766 mmbbls. Earlier, the American Petroleum Institute (API) reported a 0.907 mmbbls increase in crude stocks, a drawdown of 1.7 mmbbls from gasoline inventories and a drawdown of 1.2 mmbbls from diesel inventories, for a net drawdown of approximately 1.993 mmbbls.

The EIA report was far more bearish for prices than the API report, but prices have been slow to react. Typically, such a large addition to crude oil inventories is interpreted as a sign of oversupply, and crude futures prices fall. The 7.975 mmbbls added to stockpiles last week was the largest weekly buildup all year.

Added to this, yesterday brought the revelation that Saudi Arabia and Russia had quietly agreed to ramp up production, independently of formal action from OPEC. The Saudi and Russian energy ministers met with the U.S. Secretary of Energy, who was aware of the agreement.

This morning, prices finally appear to be handing back some of their gains.