This week has been focused heavily on trade, with the US and China signing Phase One of a trade deal on Wednesday and the US Senate passing the US-Mexico-Canada Agreement (USMCA) yesterday. We’ve reported on the USMCA before when the House ratified the agreement, which was expected to be the largest hurdle for the deal. Now that the agreement has Senate approval, it goes to President Trump for signature before it is fully ratified. Canada still needs to pass the agreement, but clearing both houses of Congress is a big milestone for the long-awaited USMCA.
The USMCA replaces NAFTA to govern trade relations among the three largest countries in North America. Since NAFTA’s repeal, businesses have been wary of cross-border investments because the future of trade relations was unclear. Trump’s threatening of tariffs on Mexico back in May added to the uncertainty. With USMCA nearly signed, businesses are more confident and able to resume business as normal, opening investments and lifting both economic and oil demand.
Looking ahead to the rest of the year, the EIA is forecasting that oil prices will fall slightly in the first half of 2020 as geopolitical risk premiums are removed from the market. However, the government agency sees prices bottoming in April before steadily rising again in the second half of 2020 and throughout 2021. For consumers, the short-term downturn in prices represents an ideal opportunity to evaluate price risk, including potentially fixing some portion of their fuel spend to prevent budget overruns.
Today’s Pricing Update
Markets are mostly flat this morning, though diesel is continuing its steady decline following Wednesday’s report of a hefty inventory build. Crude oil is currently trading at $58.78, up 26 cents from Thursday’s close.
Diesel prices are down another 1.7 cents today, or 0.9%, trading at $1.8435. Gasoline prices are currently $1.6612, up 0.6 cents.