Analysis by Dr. Nancy Yamaguchi

 

Crude oil traded in a relatively narrow range this week, opening higher on two days and lower on three. West Texas Intermediate (WTI) crude prices were comfortably above $45 per barrel (/b) all week, and by Wednesday, prices broke through the $47/b barrier for the first time since July 3. Today’s prices are ebbing, with signs of pre-weekend profit taking. Crude prices are slightly below where they began the week. They may end in the red, while product prices may hold to some of their gains.

 

WTI crude opened at $46.91/b this morning, down 18 cents from yesterday’s opening value. Prices are $46.58/b currently, down by 33 cents so far today. Crude prices are modestly down for the week, while product prices are up. As of the time of this writing, WTI is down by 10 cents/b for the week, diesel is up by 1.21 cents/gallon and gasoline is up by 2.27 cents/gallon.

 

WTI crude prices opened the week at $46.68/b. WTI opened this session at $46.91/b, an increase of 23 cents, or 0.5%, from Monday’s opening. During the week, prices ranged from a low of $45.81/b on Tuesday to a high of $47.55/b on Thursday, a narrow range of $1.74. Prices are $46.58/b currently, down by 33 cents so far today.

 

Diesel prices opened Monday at $1.5186/gallon. Diesel opened this morning at $1.5436/gallon, up by 2.5 cents, or 1.6% for the week. Prices ranged from a low of $1.4923/gallon on Tuesday to a high of $1.578/gallon on Thursday, a price range of 8.57 cents. Diesel prices are $1.5307/gallon currently, down by 1.21 cents from today’s opening price.

 

Gasoline prices opened Monday at $1.5625/gallon. Gasoline opened today at $1.6065/gallon, an increase of 4.4 cents, or 2.8%, for the week. Prices ranged from a low of $1.5499/gallon on Tuesday to a high of $1.6341/gallon on Thursday, a range of 8.42 cents. Gasoline prices are $1.605/gallon currently, down by 2.13 cents from today’s opening.

 

A mid-week price rally began on Wednesday when the Energy Information Administration (EIA) released data for the week ended July 14. The EIA reported across-the-board inventory drawdowns for crude (4.727 million barrels [MMbbls]), gasoline (4.445 MMbbls) and diesel (2.137 MMbbls). For these three commodities combined, it was the second-largest inventory draw this year, totaling 11.3 MMbbls. This went far beyond industry expectations. The American Petroleum Institute (API) data had reportedly showed a small crude stock build of 1.63 MMbbls, countered by major drawdowns of gasoline stocks (5.45 MMbbls) and diesel stocks (2.89 MMbbls).

 

Apparent demand for refined products rose strongly during the week, jumping by 1,220 thousand barrels per day (kbpd). However, among the product mix, gasoline demand dropped significantly by 194 kbpd. In contrast, distillate demand increased by 476 kbpd.

 

On the supply side, U.S. crude production continued to expand. The EIA reported that crude production rose by 32 kbpd for the week, rising to 9,429 kbpd. This was the highest level of crude production since the week ended July 31, 2015, nearly two years ago. The market will watch today for the Baker Hughes active rig count data.

 

OPEC crude supply is expanding as well. Despite Shell having declared force majeure on Nigerian Bonny Light crude exports, August crude exports are scheduled to exceed 2 million barrels per day (MMbpd). According to OPEC, Libyan production reached 852 kbpd in June—more than twice the 390 kbpd it averaged in 2016.

 

Oil prices have received support from a weaker U.S. Dollar, and some analysts have been of the opinion that without this, prices would not have been able to hit the $47/b level this week. The U.S. Dollar index has been generally trending down since April, and it dropped by a significant 0.8% this week. This week’s downturn was attributed to political uncertainties, including the inability of the Republican-led Senate to repeal Obamacare and develop an acceptable replacement, and to the expansion of Special Counsel Robert Mueller’s probe into possible ties between the Trump campaign and Russia.