Week in Review

It’s been a while since we wrote our regular “Week in Review” article, with so much to write about hurricanes and recovery. There’s certainly more to come on the lingering impacts of the hurricane, but for now we’re excited for things to start returning to normal. On Monday night this week, Tom Kloza from OPIS wrote, “Today was the first day in perhaps three weeks where some trading companies either expressed boredom or confidence that some normalcy had returned to markets.” From a fuel delivery perspective, this week certainly was the first time in a long time that markets bore any resemblance to “normal.” While normal operations haven’t resumed in every market, we’re much closer than we were a week or two ago.

Crude prices this week have been fluctuating on either side of $50 this week, cyclically moving up and down each day. The only day with steady gains was Wednesday, which saw support from an EIA report showing a general return to normal.  Prices traded in a very narrow band of $49.19 to $50.81, just a $1.62 range. Markets could be affected later today by OPEC if the organization makes any announcements about deepening production cuts.

Diesel had a strong week, surging past $1.80 on Wednesday following a 5.7 million-barrel (MMbbl) stock draw, far more than the 1.6 MMbbl draw expected by traders. Diesel prices have been pushed higher by three factors – increased disaster response demand following the hurricanes, agricultural demand for the fall harvest, and cooler weather increasing demand for heating oil. On that last one, I’m just taking the Weather Channel’s word – it was 90° outside Mansfield’s office yesterday, but Montana and Wyoming have already seen their first snow storm of the year!

Gasoline has been the biggest loser this week, shedding five cents throughout the week before bouncing back yesterday to regain some losses. Prices began the week at $1.6615, and have ranged from $1.6783 to $1.6205 this week. Prices are now within a penny of where they began the week, but fortunately for consumers remain a bit lower.

Market-moving news has been light this week. Markets continue to focus on hurricane recovery, though they’ve slowly moved their attention to other things. OPEC is meeting today to determine whether to deepen production cuts by 1%. Some members are in favor of the measure, while others have called it premature. We’ll see what happens.

As we noted earlier this week, gasoline basis levels (the difference between regional fuel prices delivered today and NYMEX prompt month prices) have mostly returned to normal, helping to bring prices back to pre-storm levels. Gasoline basis levels across the board rose following Hurricane Harvey, with the Gulf Coast seeing basis rise 40 cents. Some regions, notably Chicago and NY Harbor, have now dropped a bit below pre-storm basis levels. Regional diesel basis levels have also returned to normal, though they only had to fall back from 5-10 cent increases in most markets. However, the underlying NYMEX prices remain high resulting in diesel prices continuing to rise despite the decline in basis levels.