Yesterday saw a wide trading range for the oil complex – products fell in the early morning, soared higher mid-morning, and settled with some mild gains by the end of the afternoon. Crude is currently trading at $46.45 this morning, roughly flat after gaining over $1.00/bbl yesterday.
Fuel prices saw similar volatility yesterday, with both diesel and gasoline prices sporting 10-cent ranges from low to high yesterday. Despite the large range, diesel ended with 2 cent gains, while gasoline was virtually unmoved. Today, diesel prices are trading at $1.7142, up 1.4 cents from yesterday’s close. Gasoline prices are $1.3344, up 0.9 cents.
Yesterday’s rally was stimulated by a report showing Saudi Arabia’s output fell by 400-500 kbpd in December – exactly what they promised in November. Although the supply cut was expected, it does prove that Saudi Arabia is serious about their commitment to balancing markets.
Adding to supply concerns were reports from Libya of further damage to El-Sharara oil field, which normally produces 315 kbpd but has been under force majeure since mid-December. Officials noted an additional output loss due to looting and operational equipment losses. Altogether, OPEC output fell by some 400-500 kbpd in December (depending on which survey you’re looking at), with the cuts partially offset by production increases in Iraq, Nigeria, and Kuwait.