FUELSNews 360° – Executive Summary

The final quarter of the decade saw oil prices move higher, yet markets failed to move significantly away from the $50-$60 range in which oil has traded throughout 2019.

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Q4 Market Recap

The lack of price volatility came despite the best efforts of geopolitical actors. Q4 brought a continuation of the international drama which has populated headlines, ranging from trade wars and recession forecasts to missile strikes in the Middle East.

Although OPEC’s supply cut agreement has successfully kept a floor under the market, economic concerns have weighed heavily. At the forefront of these concerns has been the US-China trade war, which cast a shadow over market participants. Although a Phase One truce in December inspired optimism, the broader array of economic indicators continue to suggest a recession may come within the next two years. For more economic analysis, turn to the Economy and Demand section on page 12.

Weak demand has oil inventories well above historical levels, with US crude inventories 100 million barrels higher today than in 2011-2014. Despite OPEC’s best efforts, rising American production has overwhelmed global supply chains. How long can US producers maintain such rapid expansion? FUELSNews tackles this question on page 18.

Future Market Forecast

With a view ahead to 2020, supply and demand fundamentals will be pivotal. On the supply front, OPEC’s enduring supply agreement suggests the organization will continue doing whatever is required to moderate global supply. Decelerating production growth in the US should also prevent runaway global supply growth.

With the supply side of the equation losing its luster, the key factor determining oil prices in 2020 will be the economy and its effect on oil demand. A prolonged recession could tank oil demand, sending prices back to the historic lows seen in 2015 and 2016. Conversely, a quick slowdown followed by robust recovery would yield healthy demand growth, potentially leaving global supply chains undersupplied.

With the US-China trade war cited as the most likely catalyst for a recession, continued negotiations progress will be necessary to avert a broader market meltdown.

Regional Fuel Overview

Around the US, some regions experienced significant price volatility unrelated to the global market. In the Northeast, the PES refinery shutdown in Philadelphia caused local refinery utilization to fall to unprecedented lows, with the resulting supply shortage rippling throughout the South-east and Chicago areas. Mansfield Supply Director Dan Luther shares the latest on page 22.

On the opposite coast, California consumers faced earthquakes, wildfires, and refinery outages, leading to
hefty price swings throughout the quarter. To the north, Oregon and Washington consumers struggled with a pipeline shutdown, cutting off local supplies. On page 27, Supply Director Sara Bonario highlights the extreme conditions experienced by the West Coast in Q4.

Turning to the inner-areas of the country, the Midwest saw diesel prices come under heavy pressure due to a delayed harvest season and pipeline leaks that curtailed refinery production. Dan Luther explains the situation on page 25.

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