Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Oil prices eased yesterday, receding below $75/b. WTI (West Texas Intermediate) crude prices in today’s trading session opened at $74.67/b, down by $1.51 from yesterday’s opening. Yesterday’s opening price was $76.18/b. Gasoline and diesel prices also opened lower today. Despite drop in prices, crude and diesel prices remain up for the week. Crude appears to be headed for its fourth consecutive week in the black. Diesel appears headed for its third consecutive week in the black. Gasoline prices have surrendered most of their weekly gains.

The Bureau of Labor Statistics (BLS) just released the September jobs report. The seasonally adjusted unemployment rate (provisional) dropped to 3.7%, the lowest observed monthly rate since October 1969, nearly 49 years ago. It is possible that Hurricane Florence influenced the monthly data, which is preliminary, but unemployment is nonetheless extremely low this year. On an average basis, unemployment during the January-September 2018 period is averaging 3.9%, the lowest rate since 1969, when the rate was 3.5%.

Traders remain largely bullish on oil prices, based mainly on market tightness stemming from the loss of Iranian supplies. But finally some price relaxation set in when the Energy Information Administration (EIA) reported a massive buildup of crude oil stocks. Prices were slow to react, but the 7.975 mmbbls added to stockpiles last week was the largest weekly buildup all year.

Moreover, it became more widely known that Saudi Arabia and Russia in September 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. These plans should not be expected to fully calm markets, however, since the planned production increases do not appear to fully offset the forecast loss of Iranian supplied. The coming month will be one of back-and-forth adjustment.