Oil prices are trading strongly in negative territory this morning after steep losses yesterday following the EIA’s inventory report. Oil gave up over $2/bbl yesterday amid bearish sentiment – with equities down early this morning, markets are continuing to fret over weakening demand prospects. WTI Crude is currently trading at $68.64, a loss of $1.11 since yesterday’s close.
Fuel prices are following crude lower, despite seasonal inventory draws. Diesel prices are currently $2.2897, down 2.1 cents from yesterday’s close. Gasoline prices are $1.8853, a loss of 3.3 cents.
Markets are highly focused on fundamental supply and demand trends this week, leading to lower prices. Between June and October crude stocks have risen by over 55 million barrels, compared to last year when WTI stocks fell 55 million barrels over the same time period. Even with significant geopolitical risk in the market, it’s hard for oil prices to rise too high when stocks are rising at that rate.
The EIA released their weekly inventory data, which revealed a large crude stock build, a reversal from the API’s prediction. Overall, the results were slightly more bearish than markets had expected, but directionally in line with seasonal trends. With refineries offline for seasonal maintenance, suppliers are left to rely on existing fuel stocks, while new crude production flows to storage waiting for refineries to come back online. Refinery utilization remained flat at 88.8%, down from this year’s high of 98.1% in August.
Cushing inventories (Cushing is the delivery point for WTI crude contracts) were up for the fifth week in a row. While inventories in this crucial storage area are still below five-year average for this time of the year, the steady pick-up in Cushing stocks is helping calm oil markets.
Cushing is the most significant crude oil storage hub in the country, with dozens of pipelines coming in and out of the area to support domestic transportation as well as imports/exports. As the map below shows, virtually all major crude pipelines in the US run through Cushing before continuing north or south.
Midterm Elections – What’s At Stake?
With midterm elections just a few short weeks away, it’s helpful for consumers to understand what’s at stake in the election. S&P Platts published a helpful infographic explaining the key races and ballot initiatives to consider.
The Senate controls nomination approvals, such as judge appointments and leaders of major agencies. A Republican Senate will likely support Trump’s conservative nominations, preserving conservative interpretations of energy policies. This could result in lower regulations on oil and gas production, leading to higher output and lower costs.
On the flip side, a Democratic House could significantly slow down Trump’s legislative agenda. Policies related to carbon emissions, coal and nuclear power, pollution, etc. could get bogged down in partisan fights between the two Congressional camps and the President.
At the state level, there are several important battles worth watching. Ballot initiatives in Florida and Colorado would ban drilling in specific parts of their states. Missouri and California are voting on fuel tax increases, which would have a direct impact on local consumers. Washington State is considering a carbon fee of $15/mt to curb GHG emissions, while Arizona is voting on whether to require 50% of power to come from renewables in 2030.