It’s been a whipsaw week for oil prices, due in large part to changes in the US dollar. In the middle of the week, the US dollar fell to its lowest level since April 2018, just before global economic concerns caused a flight to the dollar and spurred a two-year rally. With the US at the forefront of the COVID-19 crisis and Congress gridlocked on further stimulus actions, markets fear economic losses in the US will hurt market returns, leading them to send their investments to other countries using other currencies. For oil, which has an inverse relationship with the dollar, the dollar devaluation supported prices midweek; today’s USD rally is now pushing oil prices lower.
OPEC has taken to public shaming of its members to push compliance. OPEC’s technical committee met this week and identified 2.3 MMbpd of excess production (“cheating”) in May through July. Reuters graphically demonstrated which countries are the biggest perpetrators, with Iraq, Nigeria, and Russia among the worst offenders. Several countries have implied they would make up for cuts in August and September, so further review will be needed to see whether those countries have made amends.
The petroleum complex is moving lower this morning on a strengthening dollar and COVID-19 concerns. WTI crude is currently trading at $42.26, down 56 cents (-1.3%).
Fuel prices are taking a hit as well this morning. Diesel is trading at $1.2171, down nearly 3 cents (-2.4%) from Thursday’s closing price. Diesel is disproportionately lower today because jet fuel demand forecasts continue dropping, meaning refiners will likely reroute jet fuel into the diesel output streams. Gasoline is still clinging to some of their gains this week as demand continues normalizing. Gasoline is trading at $1.2821, down 1.4 cents (-1.1%).