Counter to expectations yesterday morning, markets extended their losing streak yesterday, setting an all-time NYMEX WTI crude record of eleven straight days of losses. Overnight losses brought by equity weakness seem to be setting crude up for yet another day of losses today, bringing the streak to twelve. WTI crude prices are trading at $58.58 currently, down $1.35 since yesterday’s close.
Fuel prices are also trading lower. Gasoline prices are at their lowest prices since September 2017, trading at $1.5986 after a 3.8 cent loss this morning. Diesel is still historically high with levels reaching just 4-month lows. Diesel prices this morning are trading at $2.1244, a loss of 3.1 cents.
Markets are abuzz discussing the soon-to-be 12-day losing streak, which has virtually erased the oil price gains made in 2018 and brought WTI crude below $60/bbl. In early 2018, oil prices spent a short amount of time locked in the $55-$60 range; the question now is whether that range will re-emerge or if crude will get a lift higher. Markets are cyclical, so what goes down must come back up – the question is how far down it’ll go, and when it will go back up.
Yesterday’s sell-off appeared less based on fundamentals, and more on technical relationships with the US Dollar and equities. The dollar showed large gains yesterday, causing oil prices (inversely related to the US Dollar since a strong dollar makes it more expensive for other countries to buy oil) to revert lower. Markets have been using the S&P 500 as a proxy for oil demand, but stock markets also move inversely with a stronger dollar – doubling the apparent bearish “signal” but really just another domino falling as the dollar rises.
Fundamentally, markets have largely ignored Saudi Arabia’s commitment to cut production in December by 500 kbpd. Overall, Saudi Arabia is forecasting OPEC’s output will need to be 1 million barrels per day lower in 2019 to keep markets in balance, though Russia believes no cut is needed. Trump’s tweet yesterday criticizing OPEC for cutting output could play into the organization’s decision, though their desire to appear independent could also lead them to make cuts for sheer defiance.