Analysis by Dr. Nancy Yamaguchi

 

Market prices have been volatile all week, as OPEC and non-OPEC members met in the days leading up to yesterday’s formal session in Vienna, and various announcements were made along the way. The announcements were generally confident and constructive. However, as noted earlier, this suggested that anything other than stellar results from the final agreement would disappoint the market. This appeared to be the case yesterday.

 

In many ways, yesterday’s formal session was expected to merely formalize the nine-month extension that had already been announced as a consensus position. Many traders hoped for even more dramatic results, such as deeper and more immediate cuts. Yet OPEC did exactly what it had hinted it would do. The end result was that the buying turned to selling. The price gains seen this week during the leadup to the meeting vanished.

 

Oversupply concerns remain as before: the fact that OPEC members Libya and Nigeria remain exempt from cuts and have announced their determination to expand production, the possibility that some of the participating OPEC-non-OPEC members will gradually reduce compliance with the agreed cuts, and the trend of rising crude production from other crude producers, chiefly the United States.

 

West Texas Intermediate (WTI) crude prices have dropped sharply to under $48.50 per barrel (/b) this morning. WTI opened at $48.75/b today, a major drop of $2.50, or 4.88%, below yesterday’s opening price. Current prices are $48.42/b, a continued decline of 48 cents below yesterday’s closing price. Crude and product prices plunged following the OPEC meeting yesterday, despite OPEC agreeing to make the nine-month extension to the production cut agreement. This morning, crude prices are bouncing along a rocky floor of $48.20/b – $49.10/b.

 

Diesel opened at $1.5471/gallon this morning. This was a drop of 6.05 cents (3.76%) below yesterday’s opening price. Current prices are $1.5341/gallon, a decrease of 1.68 cents from yesterday’s closing price.

 

Gasoline opened at $1.6105/gallon today, a significant drop of 4.43 cents, or 2.68%, from yesterday’s opening. Prices are $1.6020/gallon currently, down 0.73 cents from yesterday’s close.