Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil futures prices have remained firmly above $60/b since Friday’s close through this morning’s trading, and prices are cracking the $61/b barrier. These are the highest prices since early November. WTI (West Texas Intermediate) crude forward prices opened at $60.24/b today, up by $0.71 (1.19%) from Friday’s opening price of $59.53/b. Gasoline futures prices also opened with gains today, while diesel forward prices opened with small losses. Crude prices currently are strengthening, with markets optimistic about a bounce-back in China’s manufacturing data in March, combined with progress in U.S.-China trade talks. A potential cautionary note may be added by this morning’s news that U.S. retail sales unexpectedly fell in February.

Crude oil and diesel forward prices finished last week in the black, while gasoline prices were in the red. WTI crude opened on Monday at $58.98/b and closed on Friday at $60.14/b, up by $1.16 (2.0%.) WTI forward prices had not closed above $60/b since November 9^th. Diesel forward prices opened on Monday at $1.9591/gallon and closed on Friday at $1.9659/gallon, up by 1.23 cents (0.6%.) Gasoline forward prices opened on Monday at $1.9259/gallon and closed on Friday at $1.8825/gallon, down by 4.34 cents (2.3%.) Note that contracts switched to the next forward month.

Data for the first quarter of 2019 is now available. Q1 2019 brought hefty increases in oil prices. WTI crude prices opened on January 2^nd, 2019, at $45.80/b and closed the quarter on March 29^th at $60.14/b, an increase of $14.34/b (31.3%.) Gasoline forward prices began the first quarter at $1.3136/gallon, rising to $1.8825/gallon by the end of March, an increase of $0.5689/gallon (43.3%.) Diesel forward prices opened the quarter at $1.6895/gallon and closed the quarter on Friday at $1.9714/gallon, an increase of $0.2819 (16.7%.)

Adding to perceptions of tightening supply, Baker Hughes reported on Friday that the active rig count dropped by 10 again (8 oil rigs and 2 natural gas rigs.) Despite strong prices, the U.S. rig count has been trailing down. During the first quarter of 2019, the oil rig count fell from 877 during the first week of January to 816 during the last week of March, a drop of 61 rigs. The natural gas rig count fell from 198 at the start of Q1 to 190 at the end, a drop of 8 rigs. According to the Energy Information Administration (EIA,) domestic crude production declined slightly in January, falling from 11,961 thousand barrels per day in December 2018 to 11,871 thousand barrels per day in January 2019. During the twelve months between January 2018 and January 2019, oil production has climbed in 11 of the 12 months, adding a total of 1876 thousand barrels per day to U.S. output.