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WTI Retreats Below $110; U.S. Gasoline Woes Take Focus


WTI and Brent are ~$4.00 worse off apiece following our earlier writing on crude, a little off their respective session lows at writing.

  • Both benchmarks currently sit at five-week lows, with the sharpest declines of the session coming after U.S. President Biden was announced to be speaking on Wednesday (1400 ET) re: gasoline prices (keeping in mind previously-flagged caution re: the significance of the development on crude prices).
  • To elaborate, BBG and RTRS source reports have pointed to expectations for Biden to call for a suspension of the federal gasoline tax, a development that has been well-documented by a slew of source reports over the past week.
  • Turning to the debate re: demand destruction, gasoline savings app GasBuddy (tracks prices at gas stations through crowdsourced data) announced that U.S. gasoline demand ending last Sunday was 5.5% firmer than the week before, while being 11.4% higher than the rolling average of the last four weeks.
  • Looking to supply-related issues, data from the EIA has shown that U.S. refining capacity has declined for another straight year, coming as the Biden administration is setting up a showdown this Thursday with U.S. oil executives over high profits and perceptions of low refining output. A note that Chevron CEO Mike Wirth had earlier this month stated that “I don’t think you are ever going to see a refinery built again in this country”, alluding to the potential trajectory of the upcoming talks.
  • The International Energy Forum (IEF) has flagged that global investment in crude production will likely come in below 2019 levels in ‘22 for a third consecutive year, with rising project costs and supply chain issues likely to prove supportive of oil prices in the face of tight global supply. The IEF’s view corroborated with broader remarks made by the CEOs of Vitol and Exxonmobil on Tuesday, with the latter predicting at least three to five years of tightness in oil markets.

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