Markets plummeted yesterday, with huge across-the-board losses yesterday. A combination of rising U.S. production, a strong dollar, and large oil inventory builds sent prices lower by about 2.5% yesterday. Today, crude oil is trading down 18 cents, at $61.61. For context, that’s more than $2/bbl below where they opened yesterday morning.
Refined products also plunged yesterday, with diesel prices shedding 2.7% yesterday while gasoline lost 2.1%. Today, fuel prices are mixed. Diesel prices are down yet another penny (-0.5%), trading at $1.9221. On the other hand, gasoline prices are now in positive territory, with prices at $1.7671, a change of 0.1 cents.
The EIA’s inventory data was released yesterday, revealing across-the-board inventory builds that surprised the market. Markets expected crude inventories to rise, but the large gains in gasoline and diesel stocks caught the market off-guard, leading to yesterday’s sell-off.
The EIA’s inventory report should not have been a huge shock to the market – inventories typically rise in the first few months of the year. But after January’s net draw, markets felt nothing could stand in the way of market rebalancing and higher prices. Now that normal seasonality has set back in, markets are losing enthusiasm. This week demonstrates the return of volatility in the market – after huge gains over the past month, markets are switching direction. Just as quickly, they could turn and start marching higher again.