Analysis by Dr. Nancy Yamaguchi


West Texas Intermediate (WTI) crude oil prices have broken through another key price point, opening above $49 per barrel (/b) this morning. Prices have opened higher for the past four trading sessions. Yesterday’s highs were mainly fueled by a bullish set of weekly supply data released yesterday by the Energy Information Administration (EIA), which covers the week ended July 21.


Saudi Arabia may be joined by Kuwait and the United Arab Emirates (UAE) in its current pledge to combat oversupply by cutting exports next month. Earlier this week, Saudi Arabian Energy Minister Khalid al-Falih announced that the Kingdom would cap crude oil exports at 6.6 million barrels per day (MMbpd) in August. Saudi Arabian crude exports are routinely above 7 MMbpd, and they averaged 7.46 MMbpd last year. The strategy of cutting exports, rather than focusing solely on cutting production, is considered a logical step since countries may raise exports despite cutting production by exporting crude out of storage.


Oil prices have received support from a weaker U.S. Dollar. The U.S. Dollar index has been generally trending down since April. Over the past month, it has decreased by 2.6%. The Federal Open Market Committee (FOMC) released its July 26 statement, noting moderate economic growth, past improvements in the labor market and an expansion of household and business spending. Inflation was below the target 2%. As expected, the FOMC did not change the interest rate. The FOMC also hinted that it might start tackling its balance sheet relatively soon, which is being interpreted as perhaps in September.


The Bureau of Economic Analysis (BEA) has just released second quarter U.S. gross domestic product (GDP) figures, showing 2.6% growth in their advanced estimate. Analysts had forecast 2.7% growth. The BEA also revised their first quarter GDP figure downward to 1.2% from 1.4%.


Currency and commodity markets also are moving in response to corporate earnings reports. The market expects high Q2 earnings in the technology, financial and energy sectors. For the most part, energy sector earnings have been high despite the fact that many forecasts of earnings were based on crude oil prices of $55/b – $60/b by the end of the second quarter, versus the $44/b – $47/b prices that dominated in June. Among key energy companies, Exxon Mobil, Chevron and Baker Hughes are scheduled to report earnings today. The market will also watch for the Baker Hughes active rig count data today.


WTI crude opened at $49.17/b this morning, up 47 cents from yesterday’s opening value. Prices are $49.10/b currently, down by 7 cents from today’s opening.


Diesel opened this morning at $1.6049/gallon, up by 1.07 cents, or 0.67%, from yesterday’s opening. Diesel prices are $1.6094/gallon currently, up by 0.45 cents from today’s opening price.


Gasoline opened today at $1.6438/gallon, an increase of 2.77 cents, or 1.71%, from yesterday’s opening. Gasoline prices are $1.6505/gallon currently, up by 0.67 cents from today’s opening.