WTI crude closed yesterday near 10 week highs but prices finished off the day’s highs due to profit taking and concerns about demand recovery. It has been a strong month for crude with the June contract expiring in the black – a far cry from the negative prices seen in May. This month experienced the benefit of the OPEC+ supply cuts and the shut-ins of US production. As prices continue rising, there is some concern that US production may come back online and disturb the tenuous market balance that has lifted prices this past month.
Concern about US relations with China, and China’s recovery from the pandemic, are putting downward pressure on markets this morning. The market is giving back some of the gains earned throughout the week in early trading this morning.
Prices in Review
WTI Crude opened the week at $29.53. It followed a generally upward track throughout the week to close the week higher. Crude opened Friday at $33.95, a gain of $4.42 (15.0%).
Diesel opened the week at $0.9205. It had a choppy week of ups and downs to close the week higher. Diesel opened Friday at $0.9873, a gain of 6.7 cents (7.3%).
Gasoline opened the week at $0.9700. It had a slight bump up to start the week and then was mostly flat to close out the week higher. Gasoline opened Friday at $1.0450, a gain of 7.5 cents (7.7%).
The crude market is on track to post its third weekly gain, bringing crude prices to their highest level in over a month. With rig counts falling to all-time lows, markets anticipate declining US oil production, which combined with OPEC+ cuts should help bring supply and demand back into balance. Many analysts believe oil markets are beginning a long, painful return to normal levels. A critical threshold to watch will be when prices break above $30, a level most shale producers need to operate existing wells profitably.
Saudi Arabia and other OPEC countries are instituting deeper supply cuts beyond their OPEC+ commitments. Saudi Arabia committed to making an additional cut of 1 MMbpd. UAE and Kuwait are also making cuts to help support the Saudi Kingdom in its efforts to balance the market.
To close out the week, the IEA forecast an upward revision to demand projections for later in the year. The bullish forecast lifted prices and helped the week finish on a high note.
Prices in Review
WTI Crude opened the week at $24.49. It trended steadily upward throughout the week. Crude opened Friday at $27.64, a gain of $3.15 (12.9%).
Diesel opened the week at $0.9016. Another week of sizable inventory builds pushed prices lower as the week continued, but by Thursday the market succumbed to the overall rising tide in oil markets. Diesel opened Friday at $0.9030, a fractional gain, and is experiencing some gains in early trading this morning.
Gasoline opened the week at $0.9600. Like diesel, It began the week on a downward trajectory until bullish demand news helped it to recover losses to close out the week. Gasoline opened Friday at $0.9275, a loss of 3.3 cents (3.4%).