Analysis by Dr. Nancy Yamaguchi

 

The downward trend in oil prices yesterday has been slowed largely because of a potentially large drawdown in crude inventories, plus a possible drawdown in gasoline inventories as well. The American Petroleum Institute (API) reportedly published data for the week showing a major drawdown of 8.67 million barrels (MMbbls) from crude oil stockpiles, versus the Schneider Electric industry survey expectation of 2.5 MMbbls.

 

The API data also showed a gasoline inventory draw of 1.73 MMbbls, versus the industry expectation that stocks would remain unchanged. The API anticipates a diesel stock build of 0.124 MMbbls, versus the industry survey expectation of a 0.3-MMbbl drawdown. The official Energy Information Administration (EIA) data will be released later today. Prices are leveling off as the market awaits the news.

 

Many analysts and investors have reduced their forecasts of oil prices for 2017 and 2018, believing now that West Texas Intermediate (WTI) crude will have a difficult time reaching and exceeding $50 per barrel (/b). Gasoline prices rose in May, but will likely ease once again if WTI prices continue to slide. The EIA noted that gasoline prices leading up to Memorial Day were higher than they were last year, but they were the second lowest since 2009. The EIA cites low crude prices, high inventories and low demand as the key reasons for low gasoline prices.

 

WTI crude prices are approximately $48.25/b – $48.50/b this morning. Yesterday, prices continued to weaken, falling as low as $47.73 before recovering modestly to close at $48.32/b. WTI opened at $48.63/b today, a drop of $1.02, or 2.05%, below yesterday’s opening price. Current prices are $48.26/b, down by 6 cents below yesterday’s closing price.

 

Diesel opened at $1.5234/gallon this morning. This was a decline of 2.89 cents (1.86%) below yesterday’s opening price. Current prices are $1.5140/gallon, down by 0.39 cents from yesterday’s closing price.

 

Gasoline opened at $1.6051/gallon today, a significant drop of 3.49 cents, or 2.13%, from yesterday’s opening. Prices are $1.6022/gallon currently, up 0.57 cents from yesterday’s close.