Markets appear unsure of a clear direction to take, waffling between losses and gains this week. Yesterday saw WTI crude prices dip as low as $70.78 before closing nearly a dollar higher in the afternoon. Today, after some early-morning losses, crude oil is trading 21 cents below yesterday’s closing price, at $71.57.
Fuel prices joined in the afternoon rally, leading to moderate gains for both gasoline and diesel prices. This morning, diesel prices are trading slightly lower than yesterday’s close, at $2.3214, a loss of 0.4 cents. Gasoline prices are at $1.9541, up a penny.
Search “Oil” and one of the top results this morning is the on-going tension in Saudi Arabia related to the disappearance of Saudi journalist Jamal Khashoggi at the Saudi embassy in Turkey. While any human rights abuses are abhorrent, it’s peculiar that this particular event has taken such hold of the market. Congress has considered sanctioning the Saudi regime – one of America’s closest allies among Muslim nations – and Saudi threatened to retaliate by cutting off oil. Given concerns related to Iran-sanctions, markets are afraid any further cuts to global supplies could send oil prices soaring.
On the production side, Canadian crude producers are getting squeezed like never before, with Western Canada Select (WCS) crude trading at a record $51 discount to WTI crude. With crude prices below $20/bbl, production is barely profitable, leading small producers to throw in the towel and consolidate. Without pipeline capacity to deliver crude from oil fields to refineries, the oil is stuck in Canadian stockpiles. Production is expected to rise by over a million barrels per day over the next two decades, yet the takeaway capacity has yet to materialize. If Canadian production is to help meet the world’s oil needs, more pipelines will be needed to get Canadian crude to world markets.
This article is part of Crude