Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil futures prices are retreating today, following news of an addition to U.S. crude inventories, a downward revision of U.S. GDP, and another tweet by President Trump calling for OPEC to pump more oil. WTI (West Texas Intermediate) crude forward prices opened at $59.40/b today, down by $0.63 (1.05%) from yesterday’s opening price of $60.03/b. Yesterday was the first time since November 12^th that WTI forward prices had opened above $60/b. Gasoline and diesel futures prices also opened with losses today, with gasoline prices slumping significantly. Prices currently are easing, with WTI crude prices falling back below the $59/b level and product prices falling below opening levels.

The Energy Information Administration (EIA) reported an addition of 2.8 million barrels (mmbbls) to U.S. crude oil inventories during the week ended March 22^nd. Gasoline inventories were drawn down by 2.883 mmbbls. Diesel inventories were drawn down by 2.075 mmbbls. The total was a 2.158-mmbbl reduction in oil inventories. The official statistics were considered bearish relative to the earlier report presented by the American Petroleum Institute (API.) The API had reported an addition of 1.93 mmbbls to crude oil inventories, a drawdown of 3.469 mmbbls from gasoline inventories, and a drawdown of 4.278 mmbbls from diesel inventories. The net result was a 5.817-mmbbl reduction in oil inventories. Initially, prices fell only modestly, but the EIA data confirmed the direction of the API numbers and then went beyond them. Petroleum statistics continue to be complicated by weather conditions and by restrictions on the Houston Ship Channel.

Yesterday, the U.S. Commerce Department released its third reading of U.S. GDP growth in the 4^th quarter of 2018. GDP growth was revised down to a 2.2% annualized rate, down significantly from the 2.6% estimated in February. Economists had predicted that the rate would be revised down to 2.4%. The revision to 2.2% was particularly significant because it cut the total 2018 rate to only 2.9%. President Trump had promised 4% growth while he was campaigning, and when elected he launched a fiscal stimulus program including $1.5 trillion in tax cuts and increased government spending. Now that the impacts of the stimulus are essentially over, economists are concerned about a continued slowdown in growth and a potential recession.

President Trump tweeted last night for OPEC to pump more oil. “Very important that OPEC increases the flow of Oil. World Markets are fragile, the price of Oil getting too high. Thank you!”