MARKET SNAPSHOT

By Dr. Nancy Yamaguchi

February 21, 2020: Oil prices are in recovery mode this week. Investors injected some optimism into the market, accepting indicators that the coronavirus, COVID-19, was coming under control. It may be wishful thinking, however, based on data that attempts to predict the unpredictable. There is no doubt that the outbreak is hampering economic activity. Last week, the International Energy Agency (IEA) projected a drop in world oil demand this quarter, the first quarterly drop since the great recession in 2009. Price strength this week came from supply-side cuts: Venezuelan President Nicolas Maduro declared an “emergency situation in the oil industry” after the U.S. imposed sanctions on Russian-owned Rosneft Trading S.A. Libyan crude remains off the market. U.S. oil inventories did not rise as much as expected. WTI crude futures prices opened at $53.74/b this morning. WTI prices currently are in the $52.75-$53.75/b range. The week appears to be headed for a finish in the black, which would be the second week of price recovery following a six-week string of losses.

WTI futures crude prices opened on Friday, February 14, at $51.51/b, and prices rose to an open of $53.74/b today, up strongly by $2.23/b (4.3%). The low prices for WTI futures stayed steadily above $51/b this week. Gasoline and diesel prices also are in recovery. Our weekly price review covers hourly forward prices from Friday, February 14th, through Friday, February 21st. Three summary charts are followed by the Price Movers This Week briefing for a more thorough review.

DIESEL PRICES

Diesel opened on the NYMEX at $1.679/gallon on Friday, February 14, and opened on Friday, February 21, at $1.6899/gallon, up by 1.09 cents (0.6%). U.S. average retail prices for diesel fell by 2.0 cents/gallon during the week ended February 17th. Retail prices for diesel have fallen for six consecutive weeks. Diesel futures prices ranged this week from a low of $1.658/gallon on Tuesday to a high of $1.7183/gallon on Thursday, a range of 6.03 cents. Prices are falling currently, and the week’s gain may be handed back. The week may finish in the red. Contracts have been trading mainly in the $1.66-$1.69/gallon range. The latest price is $1.6671/gallon.

WEST TEXAS INTERMEDIATE PRICES

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, February 14, at $51.51/b. Prices opened at $53.74/b today, a recovery of $2.23 (4.3%). Prices appeared to hit bottom last week, and they rose steadily since then. Monday brought the week’s low point of $50.88/b. Investor optimism rose on the belief that the coronavirus outbreak may be coming under control, combined with oil supplies being taken off the market from Venezuela and Libya. U.S. oil inventories showed only a small crude build. The coronavirus is far from gone, however, and prices are currently trailing back down. The week appears to be heading for a finish in the black for the second week in a row, pulling up after six weekly declines. WTI futures prices currently are trading mainly in the range of $52.50-$53.50/b. The latest price is $52.80/b.

WEST TEXAS INTERMEDIATE PRICES

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, February 14, at $51.51/b. Prices opened at $53.74/b today, a recovery of $2.23 (4.3%). Prices appeared to hit bottom last week, and they rose steadily since then. Monday brought the week’s low point of $50.88/b. Investor optimism rose on the belief that the coronavirus outbreak may be coming under control, combined with oil supplies being taken off the market from Venezuela and Libya. U.S. oil inventories showed only a small crude build. The coronavirus is far from gone, however, and prices are currently trailing back down. The week appears to be heading for a finish in the black for the second week in a row, pulling up after six weekly declines. WTI futures prices currently are trading mainly in the range of $52.50-$53.50/b. The latest price is $52.80/b.

PRICE MOVERS THIS WEEK : BRIEFING

Oil prices began to recover and climb this week. Investors gained optimism that coronavirus COVID-19 is coming under control. Supply-side constraints also bolstered prices. Venezuelan President Nicolas Maduro declared an “emergency situation in the oil industry” after the U.S. imposed sanctions on Russian-owned Rosneft Trading S.A. Civil unrest is keeping Libyan crude off the market. U.S. crude inventories did not increase as much as expected. WTI crude futures prices opened at $53.74/b this morning. WTI prices currently are in the $52.50-$53.50/b range. The week appears to be headed for a finish in the black for the second consecutive week, climbing back from a six-week string of losses.

Experts and the public are divided on whether COVID-19 will be coming under control sooner rather than later. Any virus is unpredictable at best, and the data on COVID-19 are more difficult to interpret because China has changed how it counts cases three times. The disease has spread internationally despite Chinese efforts to contain it. The rise in confirmed cases (now 204) in South Korea has shaken confidence. There are now 76,775 confirmed cases worldwide, and the global death toll stands at 2247. Some economic activity is being re-started, but much remains constrained. Last week, the International Energy Agency (IEA) projected a drop in world oil demand this quarter, the first quarterly drop since the great recession in 2009.

The American Petroleum Institute (API) reported a larger-than-expected crude stock build of 4.16 mmbbls. The API also reported significant drawdowns of 2.67 mmbbls of gasoline and 2.63 mmbbls of diesel. The API’s net inventory draw was 1.14 mmbbls.

U.S. Energy Information Administration (EIA) official statistics showed a smaller crude stock build and smaller products draws. The addition to crude stocks was only 0.415 mmbbls, more than outweighed by a drawdown of 1.971 mmbbls from gasoline stockpiles and a drawdown from distillate stockpiles of 0.635 mmbbls. The EIA net result was an inventory draw of 2.191 mmbbls.

The EIA also reported that U.S. crude production remained its record-high 13.0 mmbpd during the week ended February 14th. According to this weekly data series, U.S. crude production averaged 12.96 mmbpd in January 2020, the highest total ever. Approximately 1.2 mmbpd was added to U.S. crude oil output in 2019. Most forecasts predict that U.S. production will continue to grow in 2020, though some forecasts warn that U.S. shale output is heading for a decline.