WTI Crude Bet
We at Mansfield like to have a bit of fun. A few weeks ago, Mansfield’s supply and marketing teams put together a fun bet on crude prices: “Will WTI crude hit $60 or $80 first?” The bet began weeks ago when crude had just surpassed $70. The team is fairly evenly split – half say $60, half say $80! It came close two weeks ago, with crude dropping to $64, but with crude pushing $75 this morning we’ve apparently come full circle. What do you think? Will crude hit $60 next, or $80?
We’ll share the results on how you voted tomorrow – as well as how the FUELSNews writing staff (Madi Burton and I) both voted. Check back tomorrow!
Today’s Market Trends
After relatively little movement this morning, prices are trending downward this morning in reaction to the weekly EIA’s oil market data. While WTI crude closed above $74/bbl on Tuesday, this morning prices are in much lower territory. WTI crude is currently trading at $73.11, $1.03 below Tuesday’s closing price and just $4.36 below international Brent crude oil prices.
Fuel prices have so far remained in the green, though market forces could pressure them to fall lower in connection with crude. Diesel and gasoline both closed Tuesday with small gains of roughly a penny. Today, diesel prices are trading at $2.1732, up 0.9 cents despite a small inventory build. Gasoline prices are $2.1220, a gain of 0.4 cents since Tuesday.
Iran Threatens to Torpedo Global Oil Trade
Yesterday Iran threatened to block oil exports from the Strait of Hormuz, a narrow passageway out of the Persian Gulf through which 20% of all global oil flows (18.5 million barrels per day in 2016). Iran has threatened the strait before, typically in response to sanctions on their oil exports. The latest threat comes as the U.S. State Department is pressuring countries to cut off trade with Iran. American officers have noted that the U.S. Navy is prepared to maintain free-flow of goods through the area, which the EIA identifies as the world’s most important chokepoint.
EIA Report Shows Inventory Builds
The EIA released their inventory data this morning, delayed due to Independence Day. The results were underwhelming for markets – crude inventories rose slightly, contradicting market expectations for a fairly large draw. Gasoline saw a modest 1.5 million barrel draw, while diesel inventories posted meager gains. Refinery utilization decreased slightly this week, from the record high 97.5% reported last week down to 97.1%.
Crude imports rose by 700 kbpd this past week, while crude exports fell 660 kbpd week over week. Last we noted that exports reached a record 3 million barrels per day – those record levels did not last long. Last week’s data reflected two factors that have changed since then:
- Weather. Bad weather in the Gulf Coast two weeks ago prevented import vessels from docking and offloading their supplies. As weather conditions improved, product that should have been delivered two weeks ago was delivered this past week. This week’s data is a great example of how physical conditions can have an impact on oil prices and market sentiment.
- Brent-WTI Spreads. Just weeks ago, American WTI crude oil was trading at a $9-$11 discount to international Brent prices. With American oil so cheap, traders were buying it up and exporting it to other countries at higher prices. Spreads have collapsed over the past week to the $4-$5 range, making exports less favorable.