Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Oil prices remain strong today, continuing a fifth consecutive day of price recovery. WTI (West Texas Intermediate) crude forward prices opened at $48.73/b today, an increase of $0.43 (0.89%) from yesterday’s opening price of $48.30/b. Gasoline forward prices fell today, while diesel forward prices were unchanged. All are working to cling to recovered gains this morning.

The past five days have brought a price recovery in the oil complex. Last week, crude, gasoline and diesel all finished in the black, breaking a three-week downward slump. The price recovery has been steady, clawing back some of the losses seen in December. The recovery has been relatively modest, and a modest recovery appears sustainable for four key reasons:

1. The OPEC-NOPEC production cut agreement is being taken seriously. Saudi Arabia once again is shouldering the main responsibility. The Saudis have provided this leadership before, and they can do it again. The Kingdom announced that it plans to cut crude exports by 0.8 million barrels per day (mmbpd,) targeting 7.1 mmbpd relative to November exports of 7.9 mmbpd.

2. There is hope for progress on the U.S.-China trade war. Both sides expressed satisfaction with yesterday’s meeting. As yet, nothing truly has been accomplished, but the mood of the day is optimism.

3. Equity markets are steadier. Investors appeared reassured when Federal Reserve Chairman Jerome Powell indicated that the Fed could adopt a more dovish stance on interest rate hikes in 2019. U.S. President Trump continues to criticize the Fed for raising interest rates in 2018, even longing for a reduction in 2019. Trump blamed the Fed for December’s stock market crash, and he instructed staff to explore whether he could fire the Fed Chair. The Fed is independent of the President, however, and Mr. Powell has indicated that he will not resign.

4. Industry experts predict that U.S. oil inventories will show a drawdown this week, following last week’s massive addition.