MARKET SNAPSHOT
By Dr. Nancy Yamaguchi
February 14, 2020: Oil prices appear to have hit bottom this week, and slowly are creeping back. The coronavirus has a new name, COVID-19. It also had a discrepancy in how it the cases were counted: are true cases ones which test positive for the virus, or ones which show symptoms? Midweek, markets rose when China reported the lowest number of new daily cases. But which ones were counted? The director of the World Health Organization stated that the world may only be seeing the “tip of the iceberg.” The outbreak has caused the International Energy Agency (IEA) to project a drop in world oil demand this quarter, the first quarterly drop since the great recession in 2009. WTI crude futures prices opened at $51.51/b this morning. Monday through Wednesday saw prices still dipping below $50/b, but today’s lows have been above $51/b. WTI prices currently are in the $51.25-$51.75/b range. The week appears to be headed for a finish in the black, which would break a six-week string of losses.
WTI futures crude prices opened on Friday, February 7, at $51.11/b, and prices gradually pulled up to an open of $51.51/b today, up by $0.40/b. Low prices for WTI futures dipped below $50/b, but they stayed above last week’s lows. Gasoline and diesel prices also stopped sliding and are in recovery. Our weekly price review covers hourly forward prices from Friday, February 7th, through Friday, February 14th. Three summary charts are followed by the Price Movers This Week briefing for a more thorough review.
GASOLINE PRICES
Gasoline opened on the NYMEX at $1.4981/gallon on Friday, February 7, and prices recovered to open at $1.5853/gallon on Friday, February 14. This was a significant recovery of 8.72 cents (5.8%). Gasoline futures prices ranged this week from a low of $1.4975/gallon on Monday to a high of $1.6136/gallon on Thursday, a large range of 11.61 cents. U.S. average retail prices for gasoline fell by 3.6 cents/gallon during the week ended February 10th. Gasoline prices at the pump have fallen for five consecutive weeks. Futures prices for gasoline currently are showing an uptick, and the week may end in the black for the first time in six weeks. Trades are occurring mainly in the range of $1.57-$1.60/gallon. The latest price is $1.5865/gallon.
DIESEL PRICES
Diesel opened on the NYMEX at $1.6712/gallon on Friday, February 7, and opened on Friday, February 14, at $1.679/gallon, up slightly by 0.78 cents (0.5%). U.S. average retail prices for diesel fell by 4.6 cents/gallon during the week ended February 10th. Retail prices for diesel have fallen for five consecutive weeks. Diesel futures prices ranged this week from a low of $1.61 on Monday to a high of $1.6957/gallon on Thursday, a range of 8.57 cents. Prices are recovering currently. If the upward movement is sustained, the week may finish slightly in the black. Contracts have been trading mainly in the $1.67-$1.69/gallon range. The latest price is $1.6886/gallon.
WEST TEXAS INTERMEDIATE PRICES
WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, February 7, at $51.11/b. Prices opened at $51.51/b today, an increase of $0.40 (0.8%). Prices appeared to hit bottom this week and received a boost on Thursday. Monday brought the week’s low point of $49.42/b. The coronavirus outbreak remained the chief market mover. An addition to U.S. oil inventories weighed modestly on prices. Markets sought optimism by focusing on the more positive news of progress against the virus, which may or may not be warranted, and the possibility of a deeper production cut by the OPEC+ group. The week appears to be heading for a finish in the black, which would break the past six weekly declines. WTI futures prices currently are trading mainly in the range of $51.50-$52.50/b. The latest price is $52.21/b.
PRICE MOVERS THIS WEEK : BRIEFING
Oil prices appeared to hit bottom this week and began to creep back up. But uncertainty surrounds the coronavirus. The coronavirus has a new name, COVID-19. It also had a discrepancy in how it the cases were counted: are true cases ones which test positive for the virus, or ones which show symptoms? Midweek, markets rose when China reported the lowest number of new daily cases. But are all the cases being counted? The director of the World Health Organization stated that the world may only be seeing the “tip of the iceberg.” Confirmed cases have reached nearly 64,500, with the death toll reported at 1384. WTI crude futures prices opened at $51.51/b this morning. Monday through Wednesday saw prices still dipping below $50/b, but today’s lows have been above $51/b. WTI prices currently are in the $51.25-$51.75/b range. The week appears to be headed for a finish in the black, which would break a six-week string of losses.
The outbreak has caused the International Energy Agency (IEA) to project a drop in world oil demand this quarter, the first quarterly drop since the great recession in 2009. The OPEC+ group announced that it was considering a deeper production cut of up to 2.3 mmbpd to cope with the oversupply. This has bolstered prices, but an agreement has not been formally adopted. As discussed in last week’s column, the SARS outbreak caused crude prices to drop by over 20%. The WTI futures price averaged $59.86/b in December. If COVID-19 causes a similar drop, WTI prices could fall to approximately $47.30/b.
On Tuesday, the American Petroleum Institute (API) reported a stock build of 6.0 mmbbls to U.S. crude oil inventories. The API also reported a stock build of 1.1 mmbbls of gasoline and a drawdown of 2.3 mmbbls from diesel inventories. Industry experts had anticipated a crude oil stock build of 3.0 mmbbls, a gasoline build of around 0.62 mmbbls, and diesel stock draw of approximately 0.63 mmbbls. The API’s net inventory build was 4.8 mmbbls.
U.S. Energy Information Administration (EIA) official statistics showed an even larger crude stock build: an addition to crude stocks of 7.459 mmbbls, partly countered by a drawdown of 0.095 mmbbls from gasoline stockpiles and a drawdown from distillate stockpiles of 2.013 mmbbls. The EIA net result was an inventory build of 5.351 mmbbls.
The EIA also reported that U.S. crude production ticked back up to its record-high 13.0 mmbpd during the week ended February 7th. 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. The Baker Hughes active rig count was unchanged during the week ended February 7th, 2020, but it is noteworthy that the rig count is 259 below where it was during the first week of 2019.
