This week, oil prices fell to some of the lowest levels in months. Crude oil slipped down to the low-$70s, and NYMEX gasoline hovers just above $2/gal. Diesel prices are outperforming gasoline still, but even that fuel category has traded well below $3/gal for the week. With the year coming to a close, traders are looking ahead to weak economic activity in 2023, and already beginning to price in low prices.
On Monday, the EU’s ban on Russian crude oil went into effect with more of a whimper than a bang. The price cap was set at $60/bbl, in line with where Russian oil is already trading. That means Russia can continue selling to India and China without any meaningful disruption in tankers or tanker insurance. The EU will be able to adjust the price cap bi-monthly, so we’ll see in February if they take a new approach.
This week also brought some major developments in China, where leadership is finally moving away from the zero-COVID strategy, albeit slowly. Heavy protests are creating change, with citizens now allowed to quarantine at home rather than in government facilities, along with other changes. As further restrictions are loosened, we could see China’s demand open up, improving supply chain challenges and increasing fuel demand from the world’s second-largest consuming country.
In the US, this week’s inventory report finally brought some solidly supportive numbers for fuel markets. As Supply SVP Andy Milton notes, “We finally got the large diesel build we were expecting the last few weeks.” The 6-million-barrel diesel build is the largest since January 2021. Refiners have been running near maximum capacity with over 95% utilization. It’s possible that, like this summer, markets are oscillating between over-supply and under-supply, meaning that prices could rocket higher in the next few months.
Prices in Review
Crude oil opened the week at $79.99, trading briefly above $80 on Monday before closing lower. Prices continued to sink as the week continued, falling below $75 on Tuesday and trading as low as $71 during the week. Crude opened at $71.85 on Friday, a loss of $8.14 (-10.2%).
Diesel prices also plummeted this week, with prices falling far below $3/gal during the week. Prices opened at $3.18 on Monday, but closed the day at $2.98. Prices continued trading lower, though Thursday brought a temporary increase. On Friday, diesel opened at $2.8713, a loss of 30.9 cents (-9.7%).
Gasoline fell along with the rest of the market. Opening at $2.2985, prices fell each day closer to the $2/gal mark. On Friday, the contract opened at $2.0552, a loss of 24.3 cents (-10.6%).