White House Flip Flops on Stimulus Negotiations

WTI crude is down this morning after President Trump called for a halt to economic stimulus negotiations until after the election. This announcement came just hours after Fed Chairman Jerome Powell reiterated the need for more stimulus. This morning, Trump has changed his messaging again, saying he’s willing to sign a narrow deal that only includes $1,200 stimulus for individuals. Although little in the stimulus bill directly impacts oil and gas markets, the economic stimulus would help drive increased demand, bringing more stability in financial and commodity markets.

The API reported a small build for crude inventories and falling refined product inventories. Gasoline’s draw would be a surprise compared to the expected build, if confirmed later this morning by the EIA. But with so many macro events unfolding, markets are paying little attention to what would normally be a slightly bullish report. Looking ahead to next week, expect Hurricane Delta to disrupted inventory numbers in next week’s EIA report. The storm has forced the shutdown of half a million barrels per day of production, equating to 2 million barrels or more that will not be pumped into inventories by next week.

The EIA released its monthly Short-Term Energy Outlook today, which slightly cut its forecasted 2021 WTI crude oil price from $45 to $44.72. Their outlook reduced 2021 demand prospects by 0.3 MMbpd.  The agency also updated its Winter Fuel Outlook, which forecasts home heating oil demand to rise this year due to chilly weather and COVID-19 keeping consumers indoors. The agency’s outlook shows this winter being on par with the 10-year average for winters – much colder than last year but less chilly than Winter ’18-’19.

Political uncertainty is driving volatility for oil prices, pushing prices around the $37-$41 price range in which crude has settled for the past few months. WTI crude prices are down this morning, trading at $39.72, a loss of 95 cents.

Fuel prices are following crude markets, as the prospect of no stimulus bill also means reduced individual consumption.  Diesel is trading at $1.1603, down 2.8 cents from Tuesday’s closing price.  Gasoline is trading at $1.1988, a decrease of 3.6 cents.