Yesterday brought another unpredictable sell-off, sending prices cratering to $46/bbl (a 7.3% loss) – within striking distance of the $45/bbl threshold that was a long-term floor even when prices were trading in the $45-$55 range. This morning crude is trading decisively higher, up 76 cents (1.6%) to $47.00.
Fuel price losses were not as severe as crude’s, but the products still took a hefty hit. Diesel sank to $1.75 yesterday (down 4.0%), while gasoline closed the day at $1.35 (losing 4.3%). This morning, diesel prices are garnering some support from the API’s data, trading up 2.6 cents (+1.5%) to $1.7802. Gasoline prices are also in the black, trading at $1.3691 after picking up 1.9 cents (1.4%).
The API reported its weekly inventory data late yesterday, showing a surprise crude build countered by a surprise drop in distillate stocks. Lately the API’s data has been a poor predictor of the EIA’s more authoritative data (released later this morning), so markets are taking the report with a grain of salt.
Looking internationally, Saudi Arabia is betting their budget on oil prices reaching $80/bbl this year – a far cry from current levels. Do they know something we don’t? The country plans to cut its output to 10.2 MMbpd in 2019 – almost a million barrels below its current production levels but still higher than its quota in 2018. According to Bloomberg, though, Brent crude is expected to average $73/bbl next year, not quite enough to keep the Saudi budget whole.