Oil prices are soaring this morning in response to a massive draw from oil inventories. After trading roughly flat since Monday, prices are marching once again towards higher ground. WTI crude is currently trading at $59.48, up $1.65 per barrel (+2.9%).
Fuel prices are also seeing meteoric gains. Diesel prices are trading within striking distance of $2/gal, up 4.6 cents (2.4%) to trade at $1.9693. Seeing even higher gains, gasoline prices are trading at $1.9565, a gain of 7.9 cents (4.2%) over yesterday’s closing price.
The EIA’s report highlighted a historic drop in crude inventories, with national crude stocks falling almost 13 million barrels. Behind the draw was a hike in exports and declining imports, which together swung net intake by over a million barrels per day (+350 kbpd exports, -800 kbpd imports). Fuel stocks also so moderate draws, contrary to the API’s expectations. Like crude, diesel exports and imports together contributed roughly 300 kbpd to the draw. For gasoline, inventories fell in the Lower Atlantic, and markets expect further drops in the coming weeks as the PES refinery remains offline.
Traders are closely monitoring the Northeast fuel supplies for signs of disruption following the PES refinery outage. The Colonial Pipeline, which ships fuel from the Gulf Coast up to the Northeast, has indicated there’s available capacity to ship more fuel northward to help fill the gap, which is good news for the Northeast but comes at the cost of taking product away from the Southeast. Many expect portions of the PES refinery to remain shut in for over a year, possibly never returning to operations. The refinery had gone through some financial struggles over the past six months, leading some to wonder if the massive fire will push the company over the edge of bankruptcy.
The region is expected to have enough supplies and backup supply optionality to avoid any short-term price spikes. Diesel inventories are well above 5-year average levels, while gasoline prices are closer towards the average. Heading into a holiday weekend when many will be traveling, though, supplies may temporarily have trouble keeping up with increased demand.