Today’s Market Trend

Analysis by Dr. Nancy Yamaguchi

WTI crude prices are easing back down into the $53.50/b neighborhood this morning. Yesterday’s price rally was stronger and more sustained than expected, with WTI rising above $54/b. WTI opened at $53.74/b today, a jump of $0.78 from yesterday’s opening price. Current prices are $53.51/b, $0.27 below yesterday’s close. Product prices have been mixed, with distillate prices rising strongly and gasoline prices languishing.

It may be that the market is giving more weight to the OPEC production cuts, since other supply and demand fundamentals have not improved. This week, EIA data showed significant builds of crude oil and gasoline, plus a minor distillate stock build. Apparent demand for products including gasoline, jet fuel and propane has fallen so far this month, offset partly by growth in apparent diesel use. U.S. crude production also is on the rise. The market is also betting on a strong U.S. economy, with the Dow Jones Industrial Average topping 20,000 this week for the first time.

Distillate opened at $1.6197/gallon in today’s session, essentially unchanged from yesterday. Current prices are $1.6225/gallon, a decline of 1.84 cents from yesterday’s close.

RBOB opened at $1.533/gallon today, a small increase of 0.15 cents from yesterday’s opening. Current prices are $1.535/gallon today, down 0.77 cents from yesterday’s close. EIA weekly supply estimates are showing an inexplicably large drop in gasoline demand for the first three weeks of January. According to the EIA, demand of 8470 kbpd for the week ended January 6^th fell to 8039 kbpd for the week ended January 20^th. Wells Fargo economists trace the drop to wet weather, finding no economic rationale for the decline.