by Dr. Nancy Yamaguchi
Crude prices were under constant pressure this week, threatening to break through some technical supports that many analysts believe herald a coming crash. Prices on Tuesday were dipping down toward $47/b. This week brought the lowest prices seen since just before the OPEC meeting in November. Currently, the downward movement has reversed, and WTI crude is nearly back at the $49/b level. With the current momentum, the oil complex appears to be ending the week in the black.
WTI crude prices opened the week at $48.45/b, a major drop of $4.74 from prices a week prior on March 6th. WTI opened this session at $48.79/b, an increase of $0.34, or 0.7%, from Monday’s opening. During the week, prices ranged from a high of $49.62/b on Thursday to a low of $47.09 on Tuesday, a range of $2.53. Current prices are $48.95/b, up $0.20 from yesterday’s close.
Diesel prices opened Monday at $1.5116/gallon. Diesel opened this morning at $1.5046/gallon, a small decline of 0.5%, or 0.7 cents, for the week. Prices ranged from a high of $1.5299/gallon on Thursday to a low of $1.4784/gallon on Tuesday, a price range of 5.15 cents. Prices currently are $1.5104/gallon, a gain of 0.6 cents above Thursday’s close.
Gasoline prices opened Monday at $1.5946/gallon. Today’s opening price of $1.5919/gallon was a small decline of 0.2%, or 0.27 cents, for the week. Prices ranged from a low of $1.5623/gallon on Tuesday to a high of $1.6108/gallon on Wednesday, a range of 4.85 cents. Prices are $1.601/gallon currently, up 0.68 cents from Thursday’s close.
Prices this week were weakening until the API released its report on oil stocks, showing across-the-board draws. The official data from the EIA then corroborated this. EIA reported the year’s first crude drawdown this year, a small draw of 0.237 mmbbls. Although the draw was small, it was unexpected. This year had brought a steady increase in crude stockpiles, and last week’s non-SPR stockpile reached a gargantuan 528.4 mmbbls. Even though this week’s draw only brought the stockpile down to 528.2 mmbbls, the movement in the right direction reinforced prices. Product prices also received a boost when the EIA reported stock draws of 3.055 mmbbls of gasoline and 4.229 mmbbls of diesel.
The price rally was significant, but it could not bring prices back to $50/b. For the week, prices were largely below $49/b, even falling below $48/b for a time on Monday and Tuesday, and dipping nearly as low as $47/b.
The Federal Open Market Committee met this week, and Fed Chair Janet Yellen announced the FOMC’s decision to raise interest rates by 0.25%. The FOMC has noted that it considers two additional rate increases appropriate for the upcoming year, if economic conditions progress as foreseen. Despite the rate increase, market observers felt the message was more dovish than hawkish, and the U.S. Dollar weakened against other major currencies. This has helped support oil prices.
This morning, prices began to trend upward once again, following a report from Bloomberg on their interview with Saudi Arabian Energy Minister Khalid Al-Falih. The Minister stated that OPEC was considering extending the production cuts beyond the original six-month plan if global inventories remained above their five-year averages. Earlier this week, OPEC released its production data for the month of February. OPEC reported another decline in output that builds upon the cuts already achieved in January. In total, OPEC reported that its output declined from 32,099 kbpd in January to 31,959 kbpd in February, a drop of 140 kbpd.