Oil prices are giving up some of their gains this morning, bringing prices from a high of $54/bbl to below $53. It’s normal after a rapid price increase to see prices revert lower as traders cash in their profits; since Christmas Eve’s close, crude prices have risen $10/bbl, or 24%. This morning, crude is trading at $52.73, down $1.07.
Fuel prices are also down from profit-taking, though now well clear of the holiday lows. Diesel prices are trading at $1.8964, down 2.0 cents. Gasoline prices are $1.4181, losing 3.5 since Friday’s close.
The recent slowdown in prices is also a product of weakening economic activity in China. Yesterday China reported its lowest annual economic growth forecast in almost 30 years, down to just 6.6% in 2018. The IMF in turn cut its 2018 global growth forecast from 3.7% to 3.5%. While China has been absorbing record high levels of petroleum, many expect their demand to slow down as their economic growth wanes.
Last week the US rig count levels fell by the largest amount since 2016, in part a response to the pullback in prices. The Permian Basin in West Texas remains the most prolific production area, but pipeline constraints are expected to limit output from this area until the end of 2019. Still, US production is expected to grow significantly this year, helping to mitigate global supply issues.