Yesterday, WTI crude closed higher on better than expected manufacturing data coming from Asia, Europe, and the US. The data would seem to indicate that the worst of the impact from the pandemic is behind us. Crude is continuing to trend higher this morning as it rallies from earlier lows.
Isaias made landfall as a category one hurricane in North Carolina last night but has been downgraded to a tropical storm as it heads north. Tropical storm warnings stretch from North Carolina to Maine. Storm surge, rain, flooding, and tornadoes are expected up and down the mid-Atlantic coast. The storm is expected to decrease diesel and gasoline demand in those areas this week, and the path of the storm may take it right over the refining center of the NE region, which may affect production.
As part of the Phase One Trade Deal, China agreed to purchase $25.3 billion in US energy products in 2020. Through the first half of the year, China has only purchased $1.3 billion compared to a year-to-date target of $12.6 billion. That is a little over 5% of the total 2020 agreed to purchase amount in 6 months. Even if China drastically increases energy imports, it seems unlikely that China can meet its obligations by the end of the year.
If China does not comply with the Phase One Trade Deal, then Trump is put in a difficult position. Does he risk a renewed trade war with China? Such an action would undoubtedly put downward pressure on equities markets, which would be unpopular at any time, but even more so considering the election this year. The pandemic fallout is already playing havoc with the economy and a trade dispute with China would just be throwing gasoline on the fire.
In early trading today, crude prices are up. Crude is currently trading at $41.37, a gain of 36 cents.
Fuel prices are mixed this morning. Diesel is trading at $1.2477, a gain of 0.7 cents. Gasoline is trading at $1.2003, a decline of 1.3 cents.