EIA: Uptick in Global Supply Disruptions

Crude close the day Tuesday with some very modest gains on the crude oil side, while fuel prices declined. This morning, oil is getting yet another boost above $57/bbl, but recent history has shown this to be treacherous territory. The API’s report of a surprise crude build may contribute to a more bullish leaning this go-round, if the EIA confirms it later today. Currently crude oil is trading at $57.73, up 86 cents (1.5%) from Tuesday’s close.

Fuel prices are also trading higher, getting support from rising crude prices. Diesel is currently trading at $1.9895, up a meager 0.4 cents from yesterday’s close. Gasoline is seeing much larger gains, trading at $1.8339 after rising 1.8 cents (1.0%).

The API released their weekly data last night, showing a surprise crude oil build that is supporting oil prices this morning. Markets had expected a 2.7 MMbbl build, but received a 2.6 MMbbl draw. Last week the API and EIA data were roughly in line for crude, so markets are assigning the API’s data a bit more credibility this week. We’ll see whether the EIA confirms the numbers. Gasoline also saw a draw nearly double the expected level, while diesel stocks posted a small surprise build.

The EIA released their monthly Short-Term Energy Outlook yesterday, which highlighted the fact that global fuel inventories in February fell to their lowest level since June 2017, largely due to OPEC production cuts. Still, the agency expects fuel inventories to rise 0.2 MMbpd in 2019 and accelerate to 0.4 MMbpd builds in 2020.

The STEO also reports on unexpected outages in global production, and the data reveals a strong up-tick in surprise outages in Q1. Unplanned outages reached the highest level since May 2016, when Canadian oil sand disruptions and Libya/Nigeria instability caused over 3.5 MMbpd of production to fall offline. Compare the outages to this time last year – nearly 1 million barrels of daily supply have been removed from the market temporarily. The cause ranges from corruption, to instability, to technical failures, to sanctions. On this last note, we expect to see the Venezuela output rise to a much higher number once March data is released.

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The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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