MARKET SNAPSHOT

By Dr. Nancy Yamaguchi

March 20, 2020: Oil prices hit 18-year lows this week, threatening to fall below the $20/b level. COVID-19 was declared a pandemic last week. Cases have been confirmed in all fifty of the United States. Confirmed cases stand at 246,276, with a death toll of 10,038. Last week brought a crude oil price crash of over $15/b, and the downward price trend is continuing this week. On Wednesday, WTI crude closed at $20.37/b, the lowest price since January 2012. WTI crude futures prices opened at $24.73/b this morning, down by $6.04/b (19.6%) for the week. WTI rallied last night but handed back gains this morning. The week is headed for another finish in the red for the fourth week running.

Global stock markets continued to slide, though today is showing some stabilization. The Dow Jones Industrial Average dipped below 20,000 on Thursday before clawing its way back above the 20,000 mark today. Essentially all gains made over the past three years in the stock market have been erased. Today, futures point to a modest recovery, with investors hopeful that massive scale government intervention will mitigate the impacts of looming recession.

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, March 13, at $30.77/b. Prices recovered to open at $33.75/b on Monday, dropped again midweek to 18-year lows perilously close to $20/b, then regained some territory to open at $24.73/b today. The Friday-to-Friday week brought a drop of $6.04, following last week’s shocking drop of $15.32/b (33.2%). Our weekly price review covers hourly forward prices from Friday, March 13th through Friday, March 20th. 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 $0.8975/gallon on Friday, March 13, and prices continued to fall to open at $0.685/gallon on Friday, March 20. This was a drop of 21.25 cents (23.7%). Last week brought a collapse of 62.14 cents (40.9%). Gasoline futures prices ranged this week from a high of $0.9182/gallon on Monday to a low of $0.6205/gallon on Wednesday, a huge range of 29.77 cents. U.S. average retail prices for gasoline dropped by 12.7 cents/gallon during the week ended March 16th. Futures prices for gasoline currently are languishing, with a brief upturn overnight now reversing. The week will finish deep in the red. Trades are occurring mainly in the range of $0.66-$0.70/gallon. The latest price is $0.6785/gallon.

DIESEL PRICES

Diesel opened on the NYMEX at $1.138/gallon on Friday, March 13, and opened on Friday, March 20, at $1.0414/gallon, a significant drop of 9.66 cents (8.5%). This builds upon last week’s price collapse of 35.37 cents (23.7%). U.S. average retail prices for diesel fell by 8.1 cents/gallon during the week ended March 16th. Retail prices for diesel have fallen for ten consecutive weeks. Diesel futures prices ranged this week from a high of $1.1777/gallon on Monday to a low of $0.9343/gallon on Wednesday, a large range of 24.34 cents. Prices are falling again currently after an overnight rally. The week is heading for a finish deep in the red. Contracts have been trading mainly in the $1.02-$1.08/gallon range. The latest price is $1.042/gallon.

WEST TEXAS INTERMEDIATE PRICES

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, March 13, at $30.77/b. Prices recovered to open at $33.75/b on Monday, dropped again midweek to 18-year lows perilously close to $20/b, then regained some territory to open at $24.73/b today. The Friday-to-Friday week brough a drop of $6.04, following last week’s shocking drop of $15.32/b (33.2%). Today, prices are heading back down after an overnight rally. The week is heading for a finish in the red. WTI futures prices currently are trading mainly in the range of $24.00-$25.00/b. The latest price is $24.17/b.

PRICE MOVERS THIS WEEK : BRIEFING

Oil prices hit 18-year lows this week, threatening to fall below the $20/b level. COVID-19 was declared a pandemic last week. This week brought a widening array of efforts to contain it. Cases have been confirmed in all fifty of the United States. Many of the states have been tackling the virus in their own population centers, issuing shelter-in-place orders, canceling events, closing schools and businesses, and limiting travel. California’s governor launched the most restrictive and ambitious state measure this week, ordered all residents (estimated at over 40 million) to stay at home. Last week brought a crude oil price crash of over $15/b, and the downward price trend is continuing this week. On Wednesday, WTI crude closed at $20.37/b, the lowest price since January 2012. Crude prices currently are falling again after an overnight rally.

Global stock markets continued to slide. The Dow Jones Industrial Average fell below 20,000 on Thursday before clawing its way back above the 20,000 mark today. The effect of the crisis has been, essentially, to wipe out all gains made by the stock markets over the past three years.

The coronavirus known as SARS-CoV-2 and COVID-19 is a global pandemic. According to Johns Hopkins University, the virus is now infecting people at a faster rate, outside of China, where new cases have finally flattened. Confirmed cases worldwide stand at 246,276, with a death toll of 10,038. There are 86,036 recoveries. Testing kits are more widely available and being used, and citizens are hoping that mandatory social distancing tactics will “flatten the curve” of the spread. Central banks and government agencies are struggling to protect economies, cutting interest rates, deferring taxes, and preparing for high unemployment.

In an effort to support the domestic petroleum industry, the U.S. Department of Energy has been directed to purchase 77 million barrels of sweet and sour crude oil from domestic producers to place in the national Strategic Petroleum Reserve. Today, futures point to a modest recovery, with investors hopeful that massive scale government intervention will mitigate the impacts of looming recession. WTI crude futures prices opened at $24.73/b this morning, down by $6.04/b (19.6%) for the week. WTI prices currently are in the $25.00-$27.00/b range. The week is headed for another finish in the red for the fourth week running.

In other supply and demand factors: The American Petroleum Institute (API) reported a surprise crude stock draw of 0.421 mmbbls. The API also reported major drawdowns of 7.8 mmbbls of gasoline and 3.6 mmbbls of diesel. The API’s net inventory draw was 11.821 mmbbls. Market analysts had predicted a crude stock build of 3.6 mmbbls countered by gasoline and diesel draws.

U.S. Energy Information Administration (EIA) official statistics showed instead a crude stock build, more than countered by significant product draws. The addition to crude stocks was 1.954 mmbbls, overcome by a drawdown of 6.18 mmbbls from gasoline stockpiles and a drawdown from distillate stockpiles of 2.94 mmbbls. The EIA net result was an inventory draw of 7.166 mmbbls.

The EIA also reported that U.S. crude production during the week ended March 13th bounced back to its record-high level of 13.1 mmbpd. According to this weekly data series, U.S. crude production averaged 13.025 mmbpd in February 2020, the highest total ever. If low prices continue, however, the growth in U.S. output is expected to flatten, and production could begin to fall. Current data on fuel demand is not yet available, but it would be logical to expect a surge in fuel use in the period leading up to shelter-in-place orders as travelers return home, people and businesses stock up on supplies, essential services ready themselves, and emergency services ramp up to render aid. Following this, transport fuel demand should fall noticeably.