Oil prices are taking a breather today after Wednesday’s strong rally due in large part to the gasoline inventory draw and low production levels in Venezuela.
WTI is trading lower this morning by $0.53 to $64.08/barrel after Wednesday’s rally which have prices trading at new highs for 2019. Gasoline was the primary cause for yesterday’s rally as it surged by 7 cents per gallon to $2.0692 after the Department of Energy reported an inventory draw of 7.7 million barrels. There has been a litany of refinery issues this spring, particularly in California, where retail 87 octane gas prices have eclipsed $4.00/gallon in some markets. The Los Angeles CARBOB market has contracts trading $0.62 over the May futures market while New York Harbor trades about $0.06 under. May futures have risen over 18 cents since the beginning of April, so profit taking today does make sense. RBOB currently trades lower by $0.0320 to $2.0372/gallon.
Another reason for yesterday’s rally was OPEC’s monthly report that indicated Venezuela’s oil production was 960,000 barrels per day which the International Energy Agency (IEA) later lowered to 870,000 barrels per day. Using the IEA’s data, Venezuela’s production has dropped 270,000 barrels from February and production is lower year-on-year by 600,000 barrels per day. The drop in production has been caused by U.S. sanctions imposed because of the political in turmoil in Venezuela that still persists and has subsequently resulted in electricity outages.
We’re below technical resistance on WTI of $64.38 so we will look to where we settle the next few days to see if the 2019 rally continues or if today’s breather is a sign of what’s to come. May ULSD futures currently trade lower by $0.0098 to $2.0778/gallon.