It’s been a fairly calm week for oil markets, as the complex simply chipped away at pre-holiday losses with some steady increases. Quiet trading over the holidays has slowly given way to more activity as traders get over their eggnog- and champagne-induced hangovers.
After weeks of focusing on high production and weakening demand, this week’s news has struck a markedly different tone. China and the US are resuming trade talks, after Trump issued a détente for the first few months of 2019. With economic prospects for 2019 currently looking gloomy, markets are anxious for the stimulus that normalized trade relations would provide.
Just as demand prospects got a lift, supply expectations fell. Saudi Arabia cut its December production by roughly 500 kbpd as they had promised, giving credibility to the OPEC+ deal to cut output by 1.2 MMbpd. If OPEC+ does not stick closely to their deal, then stocks could begin rising once again towards their 2016 highs, the last time prices were in the $45-$55 range. If the deal sticks, though, markets should be balanced and prices could inch back towards $60 or so this year.
It’s worth pointing out that markets are once again on a streak. In October-November, WTI crude experienced a 12-day streak of losses. Now, prices seem to be moving the other way. Prices have risen in four straight sessions (beginning Dec 27), and appear set to add a fifth day today. While we probably won’t see another record streak, it does show there’s momentum on the upside.
Prices in Review
As noted above, crude prices have risen steadily throughout the week, though Wednesday brought a particularly large post-holiday gain with the release of Saudi Arabia’s production data. Oil opened the week at $45.22, rising to $47 in intraday trading on Wednesday but closing lower. This morning crude opened at $46.90 – below yesterday’s close, though morning gains make it quite likely the week will end in the black. Overall, the product gained $1.68 (3.7%) for the week.
Diesel prices have seen a similar gain throughout the week. Starting the week at $1.6722, prices jumped above $1.70 on Wednesday, and have continued climbing since then. This morning diesel opened at $1.7300, a gain of 5.8 cents (3.5%) for the week.
Gasoline opened the week at $1.3285, but fell below $1.30 on Tuesday before rallying in the afternoon along with crude. Since then, the trend has been higher. This morning gasoline opened at $1.3364, a very small weekly gain of 0.8 cents.