Price changes for Thursday, January 9th, 2020

Hi to all,



Here’s what I have for this week’s price changes:



*Heating and stove oils show a drop of 7/10ths of a cent a litre..

*Diesel fuel shows a drop of 1.1 cents a litre, and...

*Gasoline shows a drop of a half penny.



Market highlights



US targets Iranian General Soleimani

The US successfully took out an important Iranian general who the US says was the chief planner of “terrorist attacks” in the Middle East and the man who planned an executed an attack that took the life of an American working in Iraq.

     The attack has been answered with considerable anger in Iran, who has promised retaliation for the attack.



U.S inventories

The latest Energy Information Administration data is out and the news wasn’t good as oil stocks recorded a large drain on overall crude inventories.

     Crude stocks dropped 11.5 million barrels.

     Gasoline inventories gained 3.2 million barrels, while distillate inventories increased 8.8 million barrels on refiner capacity reported at 94.5 percent.

     US domestic production was reported at 12.9 million barrels a day.





Iran attacks

Retaliating for an air strike that took out Iranian General Soleimani, the news is not good as prices have (as of 9PM) been well up with WTI trading up four percent and refined commodities, gasoline up 2.5 cents a litre, and heating oil and Diesel up three cents a litre.



However, when it comes to price settings for refined commodities, with prices already on their way up, consumers can EXPECT to see a marked increase in prices as a result, and a sharp increase if Iran tags any outlying oil infrastructure following tonight’s attacks, similar to what happened initially when Saudi oil infrastructure was taken out. That attack took out a rough 5.5 million barrels of production a day.

     Iran was producing close to 3.8 million barrels a day pre-sanction.

     Iraq was putting out 4.8 million barrels a day as of August, the last data I have.



Any US response or Iranian escalation may put this output at risk, particularly if oil infrastructure is targeted.



So, if oil spikes?



Depending on oil infrastructure and the US-Iranian response really, as any disruption to world oil production will have an immediate effect. We can see the Saudi disruption from a few months back as production was knocked out for a few days may evoke the same response as then. However, a long term disruption will probably increase consumer prices more sharply and for an extended timeframe before full production is met again.



However, all is slightly different from the last Gulf War.



US domestic production was at a low of 5.5 million barrels a day, well before the dawn of shale resources where today, the US is producing 12.9 million barrels a day and room for considerable growth. Again, depends on how fast they can bring production online. Markets may simply wait it out after a spike to see if it evokes further moves by Iran and the US.



That’s it for this week!



Regards,



George Murphy

Twitter @GeorgeMurphyOil