Analysis by Dr. Nancy Yamaguchi

 

West Texas Intermediate (WTI) crude oil prices opened today above the $48 per barrel (/b) mark for the first time since June 2, over seven weeks ago. Prices yesterday topped $47/b, bolstered by Saudi Arabia’s pledge to cut crude exports next month. The price rally continued when the DTN industry survey indicated a drawdown of crude oil stocks, and received yet another wave of support when the American Petroleum Institute (API) reportedly noted an even larger crude stock drawdown.

 

Prices began to climb after the meeting of the Joint Ministerial Monitoring Committee of OPEC and the key non-OPEC producers in St. Petersburg, Russia. Saudi Arabian Energy Minister Khalid al-Falih announced that the Kingdom would cap crude oil exports at 6.6 million barrels per day (MMbpd) in August. Saudi Arabian crude exports are routinely above 7 MMbpd, and they averaged 7.46 MMbpd last year.

 

DTN then published its survey, showing that industry experts anticipated a crude stock drawdown of 2.7 million barrels (MMbbls) during the third week of July. The survey also expects a gasoline stock draw of 1.2 MMbbls and a diesel stock draw of 2.5 MMbbls.

 

API later reported a massive drawdown in crude stockpiles amounting to 10.2 MMbbls. If true, this would be by far the largest stockpile drawdown of the year. However, on the product side, the API data also showed an addition to gasoline inventories of 1.9 MMbbls, and a smaller-than-expected draw of just 0.11 MMbbls of distillate.

 

With such massive volumes at stake, the market will be awaiting the official data today from the Energy Information Administration (EIA) with more than the usual curiosity. Analysts noted that the crude oil closing price of $47.89/b broke through technical resistance. Prices could continue to rise if inventories fall dramatically. At the moment, prices are trailing off pending the EIA data.

 

WTI crude opened at $48.51/b this morning, up by a hefty $2.05, or 4.41%, from yesterday’s opening value. Prices are $48.39/b currently, down by 12 cents from today’s opening price.

 

Diesel opened this morning at $1.5776/gallon, a major increase of 5.89 cents, or 3.88%, from yesterday’s opening. Diesel prices are $1.5728/gallon currently, down by 0.48 cents from today’s opening price.

 

Gasoline opened today at $1.5995/gallon, a jump of 3.98 cents, or 2.55%, from yesterday’s opening. Gasoline prices are $1.5928/gallon currently, down by 0.67 cents from today’s opening.