Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil prices are easing this morning, holding to some gains but not surging above $56/b. WTI (West Texas Intermediate) crude forward prices opened at $55.94/b today, up by $0.16 (0.29%) from yesterday’s opening price of $55.78/b. Gasoline and diesel futures prices were down at today’s market opening. Oil prices remain at roughly three-month highs, but further upward movement is being tempered by supply-side news.

Crude oil and refined prices ended last week with significant gains, with WTI crude up by $3.12 (5.9%,) gasoline prices up by 15.21 cents (10.7%,) and diesel prices up by 12.45 cents (6.6%.) The bullish outlook was based largely on optimism about the global economy, coupled with the expectation that global oil supplies would grow tighter. OPEC is making aggressive and speedy cuts to output. Geopolitical risks continue, including the U.S. sanctions on Iran and Venezuela. However, it appears that Iranian crude exports grew in January and February. Some of the countries who received temporary waivers from the U.S. appear to have ramped up their purchases before the waivers expire. The additional supply is thought to be in the range of 100-300 thousand barrels per day.

The loss of supply and higher prices are stimulating U.S. production. Yesterday, the Energy Information Administration (EIA) released its Monthly Drilling Productivity Report. The EIA expects that new-well oil production per rig will rise from 656 barrels per day in February to 661 barrels per day in March. Oil production is forecast to rise by 84 thousand barrels per day in March. Today’s news will include the American Petroleum Institute report on U.S. oil inventories. A drawdown of inventories typically is viewed as bullish for prices.