Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil futures prices are rising this morning, hitting new highs above $59/b. WTI (West Texas Intermediate) crude forward prices opened today at $59.01/b today, up by $0.56 (0.96%) from yesterday’s opening price of $58.45/b. Gasoline futures prices opened with gains today, while diesel prices were up fractionally. Crude and product futures prices are holding gains this morning, based on consensus among the OPEC+ group to deepen production cuts, combined with what is expected to be a strong day for equities and an encouraging meeting of the Fed.

OPEC and other key producing countries met this weekend in Baku, Azerbaijan. The group agreed to deepen cuts, though Russia did not agree to extend its cuts into the second half of the year. Russia has been slower to comply with its pledged cuts, though Russian Energy Minister Alexander Novik said that Russia was nearing full compliance. The group has cut production by over 1.2 million barrels per day (mmbpd,) led by Saudi Arabia. Saudi Arabian Energy Minister Khalid al-Falih indicated a willingness to continue cuts through the end of 2019, though he also warned that this would not “continue indefinitely.”

The producers plan to meet again in June, where they will re-assess the market and the impacts of U.S. sanctions on Venezuela and Iran. In the autumn of 2018, prices rose when the U.S. reimposed sanctions on Iran. Other countries began to ramp up production to cope with the presumed shortfall. But the impact of the sanctions was dulled when the U.S. issued waivers to Iran’s top customers, and prices fell. Now, the Trump Administration is pushing an “energy dominance” agenda. The waivers are scheduled to expire in May, but there is speculation about this. Secretary of State Mike Pompeo stated that “We’re committed to bringing Iranian crude oil exports to zero as quickly as market conditions will permit.” This statement will allow the U.S. to interpret market conditions before trying to fully shut in Iranian exports. For example, another State Department official, Brian Hook, noted that they would take conditions in Venezuela into account.