Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil prices remain strongly above $53/b this morning. WTI (West Texas Intermediate) crude forward prices opened at $53.35/b today, up by $0.88 (1.68%) from yesterday’s opening price of $52.47/b. Gasoline and diesel futures prices also opened higher today. Prices gained strength based on several developments: OPEC’s crude production cut, progress in U.S.-China trade negotiations, a likely avoidance of another U.S. government shutdown, and a possible drawdown on U.S. crude inventories. Currently, there appears to be a round of profit-taking that is pulling prices back down, but most news today is bullish, and price strength should be expected.

OPEC’s data for January showed a major production cut of 797 thousand barrels per day (kbpd) below December’s production level. The cuts were led by Saudi Arabia, but cuts occurred in all other OPEC countries save two. The International Energy Agency (IEA) believes that the cuts went even deeper and that OPEC output dropped by 930 kbpd in January. OPEC compliance exceeded expectations for January, while Russian compliance lagged.

The American Petroleum Institute (API) reported a drawdown of 0.998 million barrels (mmbbls) from U.S. crude oil inventories. Market analysts had predicted a build. The API also reported a drawdown of 2.481 mmbbls from diesel inventories and a build of 0.746 mmbbls in gasoline inventories.

Progress apparently is being made in the current round of U.S.-China trade negotiations in Beijing. U.S. President Donald Trump has said that he will be flexible about extending the March 1st deadline to raise tariffs on Chinese imports, depending on the outcome of the meetings. Chinese President Xi Jinping is scheduled to join the meetings in Beijing on Friday. This may be followed by a meeting between the two presidents if a deal is close.