This week has focused squarely on OPEC+’s decision on whether or not to amend the 1.9 MMbpd reduction in supply cuts scheduled for January. Originally scheduled to decide early in the week, the meeting had to be postponed to allow consensus to grow.
On Thursday, the group officially decided to taper cuts in January by just 0.5 MMbpd – roughly a quarter of the scheduled cuts, but still more than markets had expected. Although traders expected OPEC to maintain current cut levels in January, the group decision gave confidence that OPEC and its allies remain committed to keeping the market in balance. WTI crude prices swelled above $45/bbl, and Brent crude came close to $50/bbl.
Mid-week, the EIA reported a small crude draw, contradicting the API’s large predicted build and providing markets a heft boost. Still, fuel inventories posted large builds, tempering mid-week gains before the OPEC announcement.
Prices in Review
Crude oil prices opened the week at $45.34, propelled by bullish vaccine news last week. Bidweek, prices fell below $44/bbl briefly before turning around. On Friday, the market opened at $45.64, mildly above Monday’s opening price. Further gains this morning make a higher closing price for the week seem likely.
Diesel has seen loftier gains this week, despite large inventory builds mid-week. Diesel demand tends to move along with the broader US economy, which is growing stronger as vaccines are approved and Congress moves towards another stimulus deal. Diesel opened the week at $1.3716, and opened Friday morning at $1.3915, a gain of 1.5% with more gains in intraday trading.
More exposed to consumer changes and lockdowns, gasoline demand has been weaker, causing prices to lag behind. Gasoline opened the week at $1.2680, and sank heavily midweek as US inventories rose 3.5 MMbbls. The product struggled to regain lost ground even as OPEC’s decision lifted the whole market, and on Friday gasoline opened at $1.2625, a small loss overall.