Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil futures prices are strengthening this morning, in recovery from Wednesday’s sharp collapse. WTI (West Texas Intermediate) crude prices in today’s trading session opened at $56.58/b, a recovery of $0.56 (1.00%) from yesterday’s opening price of $56.02/b. This is the second day that WTI prices have risen, following a 12-day losing streak. Wednesday brought the year’s largest single daily drop at market opening. It also was the lowest opening price in nearly three years. Gasoline futures prices opened with gains in today’s trading session, while diesel prices opened lower. Crude and product prices are strengthening this morning. However, it would take a major buying spree to reverse fully the week’s decline. The oil complex currently is heading for another week in the red, with crude prices down by 5.1%, gasoline prices down by 2.6%, and diesel down by 3.9%.

Today’s trading session is continuing as a respite from the long series of losses which culminated in Wednesday’s price collapse. As of Wednesday, WTI forward prices had crashed by $20.91/b (27.4%) from the peak opening price of $76.18/b on October 4th. OPEC will meet on December 6th in Vienna, and Saudi Arabia will likely call for a cut in output of approximately 1.4 million barrels per day (mmbpd.) Russia, a participant in the OPEC-NOPEC cuts, has not committed yet to cutting production.

The market is showing unusual optimism when looking at the weekly fundamentals. The recovery in crude prices came despite an increase in U.S. crude production and a major increase in U.S. crude oil inventories. The U.S. Energy Information Administration (EIA) reported that U.S. production rose by 100,000 bpd during the week ended November 9th. For the year-to-date, U.S. crude production has climbed by 2.2 mmbpd.

The EIA also reported a massive addition to crude oil stockpiles—10.27 million barrels (mmbbls.) This was partly offset by a drawdown of 1.411 mmbbls from gasoline inventories plus 3.589 mmbbls from diesel inventories. The net addition to stockpiles was 5.27 mmbbls. U.S. crude oil inventories have expanded for the last eight weeks in a row, and this week’s build was the largest of the year. Over the past eight weeks, 47.92 mmbbls of crude have flowed into storage.