A Great Deal Of Uncertainty

There is a great deal of uncertainty these days, whether it be from trade talks, the government shutdown, or geopolitical unrest. Many times in years past, and even in the first few weeks of 2019, uncertainty such as we’re seeing now would lead to great bouts of volatility in oil & refined product prices. The past two days however, it feels like there’s so much confusion as to what might come next, that traders have just stopped guessing and fuel prices are going nowhere.

From a technical perspective this back and forth action that ultimately goes nowhere leaves indicators in neutral territory, so until we break out of the December trading range (either to the upside or down) don’t expect any consistency in daily price changes. From a seasonal perspective, there is a strong history of seeing prices rise as we approach spring – particularly for gasoline - so if I had to make a bet on which direction we will eventually break, my SWAG would be to the upside.

In its annual Energy Outlook the EIA is projecting (not predicting) that the US will become a net energy exporter in 2020, and that continued gains in energy efficiency will keep domestic demand relatively flat despite a growing economy. The report also provides estimates on how the upcoming IMO diesel spec changes will impact fuel usage and refinery operations. The entire 165 page report is an interesting read for anyone in the industry (and required reading for the employees of TACenergy) but it’s hard to imagine the government employees working without pay will see the value in federally funded projections of oil consumption in 2050 this week.

Yesterday’s EIA weekly status report was largely shrugged off at least in terms of market reaction. The most notable point from the report was that total US Gasoline inventories reached a new all-time high. What’s more important for those in the industry however is that record was set while the western half of the country is seeing below-average stockpiles, meaning the glut of gasoline East of the rockies is becoming a serious issue that could ultimately force some refiners to cut back on production.

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Click here to download the EIA Annual Energy Outlook PDF >