Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Oil prices continued to sink at today’s market opening, though prices are currently recovering. WTI (West Texas Intermediate) crude prices in today’s trading session opened at $62.99, down by $0.51 from Friday’s opening price of $63.50/b. This was the fifth day in a row that crude prices have fallen. Gasoline and diesel futures prices opened lower in this session as well, and they too are recovering. Trading is expected to be choppy today in light of the U.S. midterm elections. 

Crude and diesel prices have fallen for the past four weeks. Gasoline prices have fallen for the past five weeks. WTI futures prices opened last Monday at $67.55/b and closed on Friday at $63.14/b, a significant loss of $4.41/b, or 6.5%. Gasoline futures prices opened the week at $1.8121/gallon and dropped by 10.01 cents/gallon (5.7%) at the close of market on Friday. Gasoline prices have fallen for the last five consecutive weeks. Diesel futures prices opened at $2.304/gallon on Monday and closed at $2.1278/gallon on Friday, a sharp drop of 13.12 cents/gallon (5.7%) during the week. 

Last week we wondered whether the market had overprepared for the sanctions against Iran, first betting on tight supplies, then selling. Today is the official launch of the sanctions, but WTI crude opened below $63/b for the first time since April 10th, nearly seven months ago. The losses over the past four weeks have been substantial: WTI crude oil prices have dropped by over $11/barrel, diesel prices have fallen by over 22 cents/gallon, and gasoline prices have plummeted by approximately 38 cents/gallon.  

Initially, the U.S. adopted an aggressive stance on the sanctions, giving six months for companies and governments to phase out energy-related trade with Iran. There were to be no exceptions. In August, U.S. President Trump threatened “severe consequences” for those who continued to trade with Iran. Yet last week, U.S. Secretary of State Mike Pompeo announced that eight countries would receive temporary waivers. The Trump Administration has been concerned about high oil prices in advance of the U.S. midterm elections. Production has risen in the U.S., Russia, Saudi Arabia, and other OPEC countries including Libya, Iraq, Angola, and Nigeria. Libya and Nigeria, however, are often the sites of unplanned outages, so markets cannot rely upon a continued, steady, increase in output.