Market Report & Analysis for 12/20/2018 Morning Edition
Morning Market Overview
New York Mercantile Exchange oil futures nearest to delivery and the Brent contract on the Intercontinental Exchange deepened their selloff Tuesday, with West Texas Intermediate and Brent plunging more than $3 bbl on a market view global oil inventory will expand in 2019 as demand flags under the weight of a slowing world economy while supply grows despite a production agreement set to cut 1.2 million bpd for the first six months of 2019.
The world economy has already slowed, with recent data from China and the eurozone detailing a further decline in key economic sectors in November including industrial and manufacturing while the malaise is spreading to retail.
The slowdown is linked primarily to the U.S.-China trade dispute, while odds for a “hard Brexit” in March when the United Kingdom is set to leave the European Union adding to trade woes. The market fears contagion from a sluggish world economy should the U.S.-China trade dispute escalate that is seen pulling the U.S. economy into the downdraft. A stronger U.S. dollar, which reached a nearly 18-month high on Friday, has also exerted pressure on emerging economies with debt pegged in the greenback.
Tightening monetary policy in the eurozone and the United States have prompted analysts to dial back economic growth expectations even before the latest round of selling.
NYMEX January WTI futures settled down $3.64 at $46.24 bbl, the lowest settlement on the spot continuation chart since late August 2017, with the February contract settling down $3.60 at $46.60 bbl. January WTI futures expire at Wednesday’s close. Speculators have unwound length in WTI futures for 11 consecutive weeks through Dec. 11, the most current data from the Commodity Futures Trading Commission shows, with their net-long position the lowest in two years.
ICE February Brent futures lost $3.35 with a $56.26 bbl settlement, a 14-month spot low. NYMEX January ULSD futures dropped back 7.28cts to a $1.7539 gallon settlement that was the lowest spot month settlement in more than 14 months. NYMEX January RBOB futures erased 5.99cts in value with a $1.3505 gallon better than two-year low settlement on the spot continuous chart.
