As is common after a series of down days, markets are rebounding this morning amid short covering as well as positive trade news. After trading as low as $50/bbl, crude oil is currently trading at $53.46, up 87 cents since last night.
Fuel prices are also getting a lift this morning. Diesel prices are trading at $1.8161, a gain of 2.8 cents. Gasoline prices are $1.7142, up 0.7 cents.
Oil prices received some support from reports that the US and Mexico are working hard to avert tariffs. Mexico has proposed sending National Guard troops to the border and making changes to their asylum policies, contingent on the US standing down on its tariff threats. Trump has been vague in his opinions on the deal, leaving room for the deal to materialize or fall through before tariffs are imposed heading into Monday. Tariffs would not only slow down trade flows between the two countries; it would also increase the cost of Mexican crude oil for US refiners, which would push fuel prices higher. If Mexico retaliates, though, it would limit fuel sales to Mexico, leading to a glut in US inventories.
In OPEC news, Saudi Energy Minister al-Falih noted that the OPEC+ group is likely to extend production quotas to the second half of 2019, noting economic conditions that could suppress demand. Russia will be an important factor in this decision – they’ve indicated their comfort with current price levels, and despite committing to work with the group, they could choose to increase their production to re-take market share.