Fuels Market Watch 24

FUEL MARKETS TODAY – Market Overview

Crude oil prices are stabilizing this morning, holding to gains made midweek. WTI (West Texas Intermediate) crude prices in today’s trading session opened at $72.18/b, up by $0.17 from yesterday’s opening. This week, Monday and Tuesday brought a price surge of around $2/b, and Wednesday brought some downward correction. Prices stabilized and began to recover Thursday. Gasoline and diesel prices opened with gains today, generally outperforming crude. Although the strong upward movement in prices is flattening, the oil complex appears to be headed for a week solidly in the black.

Prices this week strengthened after OPEC and non-OPEC producers seemed to disregard pressure from U.S. President Donald Trump to reduce prices. It is possible that the stridency of President Trump’s remarks made it difficult for the producers to reveal their plans too fully and to make promises about the future. Since then, reports have surfaced that the group did in fact discuss raising production by approximately 500,000 bpd. This would help alleviate the lost output from impending sanctions against Iran, and also would replace supplies lost because of high rates of compliance exceeding 100%. This has tended to moderate the upward price momentum, against a backdrop where some traders are issuing warnings about supply shocks and oil prices potentially climbing above $100/b.

Saudi Arabia already was at work expanding the crude output capacity of its Khurais and Manifa oilfields, which will add 550,000 bpd to its spare capacity by the fourth quarter. Moreover, OPEC holds its annual meeting at the end of November, and the OPEC and non-OPEC producers plan to discuss the production cut agreement in early December. This will allow the group to weigh the impacts of the Iranian sanctions.

Although spare production capacity may be growing tighter, the producers are concerned about possible weakness in demand because of global equity and currency issues. Italian assets are tumbling today. Emerging markets still are struggling with higher oil prices and weak currencies.