Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil and refined product futures prices continue to sink today. Prices fell on Friday, then opened yesterday in a holding pattern, awaiting guidance from the direction of equity markets. As equities markets continued to spiral down, oil prices slid down in tandem. WTI (West Texas Intermediate) crude forward prices opened at $49.16/b today, a significant drop of $2.09 (4.08%) from yesterday’s opening price of $51.25/b. Today was the first day since March 2017 that WTI has opened below $50/b, and it was the lowest opening price since July 28, 2016. Gasoline and diesel forward prices also fell this morning, with gasoline opening approximately 2.8% lower and diesel opening 2.1% lower. Prices have hit multi-year lows, with WTI dropping as low as $47.84/b. The downward trend appears to be slowing this morning, but there are no signs of a serious price rally.

The Dow Jones Industrial Average dropped by 2.11% yesterday, plummeting by 507.53 points. This finish was the lowest in fourteen months, shaking the already-shaken faith of investors. As of the time of this writing, some key Asian and European markets are opening with losses. There are hopes that U.S. markets will stabilize today.

Several financial houses including Morgan Stanley Smith Barney are expecting a recession to settle in by late 2019 or early 2020. Morgan Stanley warned that there is now a 15% chance of recession in 2019 and a 30% risk in 2020. They forecast that core inflation will rise from 2.0% currently to 2.5% by the end of 2020. The Federal Reserve Bank is starting its two-day meeting today, and interest rates are expected to be raised by 25 basis points. This will raise the federal funds target rate from 2.0% to 2.25%. The Fed has attracted a great deal of criticism from the White House, as it continues on its course of phasing out the accommodative monetary policies that were launched to pull the country out of the Great Recession. Given the current economic slowdown, the Fed may adopt a more dovish approach in 2019.