MARKET SNAPSHOT

By Dr. Nancy Yamaguchi

March 27, 2020: Oil prices avoided falling below the $20/b level this week, but warnings abound. COVID-19 continues to ravage the world. Cases have been confirmed in all fifty of the United States, and the U.S. is now the center of the pandemic with 83,836 confirmed cases, surpassing China’s 81,897 cases. Global confirmed cases have more than doubled since last week, soaring above the half-million mark. The death toll also more than doubled. Johns Hopkins reports confirmed cases today at 551,337, with the death toll more than doubling to 24,906 since last week. There is nothing compelling to support short-term crude oil prices. The International Energy Agency (IEA) estimates that 3 billion people are in lockdown, and that demand will drop by as much as 20 million barrels per day. The downward price trend is continuing this week. Last week brought a low of $20.06/b, and many market analysts believe $20/b prices and below is just a matter of time. Refiners are cutting utilization, storage tanks are rapidly filling, and the industry is bracing for a widespread idling of active rigs. WTI crude futures prices opened at $23.29/b this morning, down by $2.30/b (9.0%) for the week. The week is headed for another finish in the red for the fifth week running.

Investors are pinning hopes on the $2 trillion economic stimulus package unanimously passed in the U.S. Senate on Wednesday. The U.S. House of Representative is expected to quickly pass the bill today. The House plans to use a voice vote procedure, since many members are out of town and working at home during the outbreak. The Dow Jones Industrial Average rebounded this week after collapsing to levels not seen since November 2016. Today, however, stock markets are opening lower as investors take profits.

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, March 20, at $25.59/b. Prices fell to open at $23.29/b today. The Friday-to-Friday week brought a drop of $2.30 (9.0%). The prior two weeks brought a combined drop of $20.50. Our weekly price review covers hourly forward prices from Friday, March 20th, through Friday, March 27th. 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 $0.685/gallon on Friday, March 20, and prices continued to fall to open at $0.5713/gallon on Friday, March 27. This was a drop of 11.37 cents (16.6%). The last two weeks brought a massive collapse totaling over 83 cents per gallon. Gasoline futures prices ranged this week from a high of $0.6141/gallon on Thursday to a low of $0.376/gallon on Monday, a huge range of 23.81 cents. U.S. average retail prices for gasoline dropped by 12.8 cents/gallon during the week ended March 23rd. Futures prices for gasoline currently are continuing to fall. The week will finish deep in the red. Trades are occurring mainly in the range of $0.50-$0.55/gallon. The latest price is $0.525/gallon.

DIESEL PRICES

Diesel opened on the NYMEX at $1.0414/gallon on Friday, March 20, and opened on Friday, March 27, at $1.0782/gallon, a recovery of 3.68 cents (3.5%). This helps restore some of last week’s decline of 9.66 cents and the prior week’s massive collapse of 35.37 cents. U.S. average retail prices for diesel fell by 7.4 cents/gallon during the week ended March 23rd. Retail prices for diesel have fallen for eleven consecutive weeks. Diesel futures prices ranged this week from a low of $0.955/gallon on Monday to a high of $1.1065/gallon on Wednesday, a range of 15.15 cents. Prices are roughly flat today. Diesel futures prices may finish in the black this week, though any significant deterioration of crude prices today could pull diesel prices down as well. Contracts have been trading mainly in the $1.04-$1.08/gallon range. The latest price is $1.0562/gallon.

WEST TEXAS INTERMEDIATE PRICES

WTI (West Texas Intermediate) crude forward prices opened on the NYMEX on Friday, March 20, at $25.59/b. Prices fell to open at $22.52/b on Monday, recovered midweek to $24.49/b, then slid again to open at $23.29/b today. The Friday-to-Friday week brought a drop of $2.30 (9.0%). Today, prices are continuing down. The week is heading for a finish in the red for the fifth week running. WTI futures prices currently are trading mainly in the range of $21.00-$22.50/b. The latest price is $21.57/b.

PRICE MOVERS THIS WEEK : BRIEFING

Oil prices this week avoided collapsing below the $20/b level, but warnings abound. The COVID-19 pandemic continues to ravage the world. Cases have been confirmed in all fifty of the United States, and the U.S. is now the center of the pandemic with 86,012 confirmed cases, surpassing China’s 81,897 cases. Global confirmed cases have more than doubled since last week, soaring above the half-million mark. The death toll also more than doubled. Johns Hopkins reports confirmed cases at 551,337, with the death toll more than doubling to 24,906.

There is nothing compelling to support short-term crude oil prices. The International Energy Agency (IEA) estimates that 3 billion people are in lockdown, and that demand will drop by as much as 20 million barrels per day. The downward price trend is continuing. Last week brought a low price point of $20.06/b, and many market analysts believe $20/b prices and below is just a matter of time. WTI crude futures prices opened at $23.29/b this morning, down by $2.30/b (9.0%) for the week. The week is headed for another finish in the red for the fifth week running.

The U.S. stock market received a boost from rapid progress on the $2 trillion stimulus bill. The Dow Jones Industrial Average surged back by over 2100 points on Tuesday, recovering from the low, low point of 18,592 on Monday. Last week, the Dow Jones Industrial Average fell below 20,000, briefly clawed its way back above the 20,000 mark, then collapsed again on Monday. The effect of the crisis has been, essentially, to wipe out all gains made by the stock markets over the past three years. Investors are pinning hopes on the $2 trillion economic stimulus package unanimously passed in the U.S. Senate on Wednesday. The U.S. House of Representative is expected to quickly pass the bill today. The House plans to use a voice vote procedure, since many members are out of town and working at home during the outbreak.

Today, stock markets are opening lower, with investors looking to take profits from this week’s rally. Markets remain hopeful that the massive scale government intervention will mitigate the impacts of looming recession.

The issue of storage is becoming critical. With demand collapsing in certain markets, refineries are reducing throughput. More crude is flowing into storage. Product inventory levels will be more complicated. Jet fuel storage already is becoming problematic, given widespread flight cancellations. Gasoline and diesel inventories, which have been at high levels in the U.S., could be drawn down more in markets where refinery utilization falls. Demand, however, is being curtailed sharply, perhaps negating the impact.

The American Petroleum Institute (API) reported a surprise crude stock draw of 1.25 mmbbls. The API also reported drawdowns of 2.6 mmbbls of gasoline and 1.9 mmbbls of diesel. The API’s net inventory draw was 5.75 mmbbls. Market analysts had predicted a crude stock build of approximately 3.2 mmbbls only partly 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 1.623 mmbbls, overcome by a drawdown of 1.537 mmbbls from gasoline stockpiles and a drawdown from distillate stockpiles of 0.678 mmbbls. The EIA net result was an inventory draw of 0.592 mmbbls.

The EIA also reported that U.S. crude production during the week ended March 20th fell back only slightly from 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. The industry is now bracing for what is expected to be the biggest idling of wells in over three decades.