Markets reversed their recent gains yesterday, with oil products posting some major losses. Crude oil dropped nearly a dollar yesterday (-1.5%) as markets turn from OPEC to market fundamentals. Crude oil is currently trending fairly flat at $57.42, with early morning losses reversing to just a small losses of 5 cents.
Refined products suffered even more than crude did. Diesel and gasoline both shed 4.4 cents (-2.3% and -2.6%, respectively). As we mentioned yesterday, recent losses in fuel prices have lowered crack spreads, reducing refiners’ incentives to produce crude oil. Diesel prices today are currently trading roughly flat at $1.9005, half a cent (.3%) below yesterday’s closing price. Gasoline prices have received moderate support this morning, and have picked up 1.8 cents (1.1%) to trade at $1.7108.
News to move the market has been light this week, likely contributing to the falling prices yesterday. Without significant news to keep prices elevated, the pressure on markets is to move lower. The IEA, EIA, and OPEC will all report their monthly projections next week, which give markets some news to coalesce around. Until then, we’ll have to wait for major news.
OPEC’s oil minister Khalid al-Falih gave a rather vanilla statement yesterday, stating that OPEC expects to stay the course in the second half of 2018 but will review market conditions in June to determine whether continued action is necessary. Markets have been aware of the possibility of a reduction of volume limitations in 2018, so the statement was not news, but did at least reveal that the general expectation currently is that the deal will last through all of 2018. Falih noted that OPEC has significant production capabilities available in case cuts go too far and create a major supply outage, allaying fears of price shocks in late 2018.