Morning Market Overview
New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange settled Thursday’s session mostly higher amid ongoing price-boosting production cuts by Organization of the Petroleum Exporting Countries, with the upside limited by this week’s renewed concerns over a slowing global economy reinforced by data released today showing the Eurozone grew at the slowest pace in five years in the fourth quarter.
NYMEX April RBOB futures settled up 1.64cts at $1.8054 gallon, with the April ULSD contract ending 0.35cts down at $2.0127. NYMEX April West Texas Intermediate futures settled up $0.44 at $56.66 bbl, and the ICE May Brent contract ended up $0.31 at $66.30 bbl.
Oil futures continue to draw support from deep production cuts by OPEC joined by 10 non-OPEC producers aiming to remove 1.2 million bpd or 219 million bbl of oil off the market during the first half of 2019, with the strategy aimed at tightening the global crude oil market. At the same time, two key OPEC members exempt from the deal—Venezuela and Iran—have seen production fall as a result of U.S. sanctions on their oil industries. Thursday morning the European Central Bank slashed its growth forecast 0.6% to 1.1% from its previous forecast in December.
The downward revision was spurred by a slowdown in Germany’s manufacturing sector—traditionally the growth engine of the region, technical recession in Italy and Britain’s looming exit from the European Union. ECB President Mario Draghi said Thursday there had been a “sizable moderation in economic expansion that will extend into the current year.” Given the worsening economic conditions, ECB announced a slew of market-friendly measures to prompt a sluggish economy, including keeping the key interest rate at zero through the end of the year and a fresh set of loans to European banks. The ECB policy decision sent the euro sharply lower against the rallying dollar Thursday afternoon, tumbling to the lowest point in 20 months at 1.11845.
In contrast, the U.S. dollar strengthened to a three-month high at 97.65 in afternoon index trading, with the stronger greenback capping the upside for West Texas Intermediate since oil overwhelmingly trades in the U.S. currency. The stronger U.S. dollar comes ahead of Friday’s payroll report from the Department of Labor, with the market anticipating 180,000 jobs were created by the U.S. economy in February. That’s in line with Wednesday’s private employment report from payroll provider ADP, and follows 304,000 job gains in January.