Morning Market Overview
At first look the oil and refined product markets are beginning the week with a push higher. Crude settled the final business day of the first quarter higher on Friday, with West Texas Intermediate cracking through $60 bbl at settlement for the first time since early November on Organization of the Petroleum Exporting Countries production cuts while the U.S. oil drilling rig count declined for the sixth consecutive week.
Oil futures posted the biggest quarterly gain in almost 10 years on Friday, with WTI gaining 32.4% in the last three months, supported by OPEC production cuts and U.S. sanctions on Iran and Venezuela’s oil sector. NYMEX May WTI futures settled $0.84 higher at $60.14 bbl. ICE May Brent expired at $68.39 bbl at the market close, with the June contract settling at a $0.81 discount to the May contract in the backwardated market. Brent futures rallied $14.59 or 27% in the first quarter.
NYMEX April ULSD futures expired 0.14cts higher at $1.9734 gallon, with May delivery settling at a 20 points discount. NYMEX April RBOB futures expired 1.57cts higher at $1.8956 gallon, rolling off the board with a 1.31cts premium to the May delivery contract. On Friday, Russian Energy Minister confirmed that Russia deepened production cuts in March as part of the six-month OPEC+ agreement, and is ready to discuss their extension beyond June a day after it was reported that Moscow is considering letting the accord lapse. A lack of clarity on U.S. waivers for Iranian crude sales continues to generate uncertainty on the supply side.
Meanwhile, demand worries eased on reports of progress in U.S.–China trade talks, with China reportedly offering unprecedented concessions to U.S. demands. U.S. Economic Director Larry Kudlow said on Friday that the Trump Administration is prepared to continue negotiations for weeks and even months to reach a deal that ensures China improves market access and provides intellectual properties guarantees for U.S. companies. Dow Jones Industrial Average rose more than 200 points to 25,928, gaining 0.8% on the session, while S&P 500 Index advanced 0.7%, with both indexes posting their best quarterly gains in nearly 10 years.
The stunning performance of the stock market in the first quarter follows the fourth quarter plunge. Friday afternoon, Baker Hughes reported the number of oil rigs in operation in the United States declined for the sixth consecutive week, down eight to a nearly one-year low at 813 through the week ended today. In the first quarter, the U.S. oil rig count is down 69, while up 19 year-on-year.
Monthly data released today by the Energy Information Administration confirmed weekly data that U.S. crude production averaged 11.871 million bpd in January, with output during the four weeks ended March 22 having averaged 12.075 million bpd, up 1.677 million bpd or 16.1% against year ago. The year-on-year growth rate slowed in the first quarter however, with production in January 2 million bpd or 20.3% above year ago.