Today’s Market Trend

WTI crude prices are just above $53/b this morning. WTI opened at $53.15/b today, a drop of $0.59 from Friday’s opening price. Current prices are $53.13/b, $0.04 below Friday’s close. Product prices are mixed, with gasoline showing price weakness.

Last week’s supply and demand fundamentals should have lent a bearish note to the market. This included across-the-board stock builds, a drop in demand, and a rise in U.S. crude production. Nonetheless, Thursday brought a strong price rally. Hedge funds have increased their net-long position on WTI to the highest in many years. The rally ended on Friday, and the price gains were reversed. This was in part a response to yet another addition to the U.S. active rig count. On Friday, Baker Hughes reported that the rig count had risen by 18. Last Friday, the rig count had jumped by 35. For the first three weeks of January, U.S. crude production has risen by an average of 15 kbpd.

The market is giving credence to the OPEC production cuts. OPEC has been reporting compliance levels of upwards to 70%-80%. This week, wire service surveys are scheduled for release to provide an independent assessment of compliance in January. OPEC’s own data release for January supply will not be released for two more weeks, so the market is keen to see preliminary data.

Distillate opened at $1.6189/gallon in today’s session, down 2.91 cents from Friday’s opening. Current prices are $1.62/gallon, a slight increase of 0.11 cents from Friday’s close.

RBOB opened at $1.5222/gallon today, down 1.08 cents from Friday’s opening. Current prices are $1.5223/gallon, down 0.48 cents from Friday’s close. EIA weekly supply estimates are showing an inexplicably large drop in gasoline demand for the first three weeks of January. According to the EIA, demand of 8470 kbpd for the week ended January 6^th fell to 8039 kbpd for the week ended January 20^th. It remains to be seen if EIA supply data for the week ended January 27^th moderates this drop.