Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil futures prices continued to rise at today’s market opening, but prices are now flattening. WTI (West Texas Intermediate) crude forward prices opened at $57.00/b today, up by $1.05 (1.88%) from yesterday’s opening price of $55.95/b. Gasoline and diesel futures prices also rose at today’s market opening, and they appear to be stabilizing currently. Prices received support from bullish oil inventory data and the U.S.-North Korea nuclear talks in Vietnam yesterday. The talks were quickly curtailed with no agreement, and global stocks fell.

The U.S. Department of Commerce just released 4th quarter 2018 data on U.S. GDP growth. The agency reported that U.S. GDP increased at a 2.6% annualized rate in the 4th quarter, after expanding at 3.4% in the 3rd quarter. In total, the U.S. economy grew 2.9% in 2018, the highest growth since 2015. Although the 4th quarter rate of 2.6% missed the administration’s target of 3%, still it exceeded what many economists had predicted.

Oil prices received a boost yesterday when the American Petroleum Institute (API) reported that U.S. crude oil inventories fell by 4.2 million barrels (mmbbls) during the week ended February 22nd. Gasoline inventories were estimated to have fallen by 3.8 mmbbls, and diesel inventories rose by 0.4 mmbbls. The net was a drawdown of 7.6 mmbbls from oil inventories. In contrast, industry experts had predicted a build of 2.8 mmbbls crude and drawdowns of 1.7 mmbbls gasoline and 2 mmbbls diesel, for a net drawdown of 0.9 mmbbls.

The Energy Information Administration (EIA) then released official statistics showing an even more significant drain from inventories: 8.647 mmbbls of crude, 1.906 mmbbls of gasoline, and 0.304 mmbbls of diesel, for a total stock draw of 10.857 mmbbls. During the eight weeks of 2019, crude inventories have been drawn down only once before, and this week’s draw of 8.65 mmbbls was by far the largest.

The oil inventory data supported oil prices, as did global market optimism over the U.S.-North Korea nuclear talks. However, the talks were curtailed, and President Trump left, leading market watchers to conclude that the talks were mainly theater. Global markets also fell upon the release of Chinese manufacturing data for February, which showed a third month of contraction in the purchasing manager’s index.