A sell-off Thursday dropped WTI crude to its lowest level in a month, closing the day at $48.97. After spending the first three weeks of the month above $50, WTI finished below that mark every day this week. Refined products also took a hit yesterday, with HO finishing down almost three cents at $1.5072 and RBOB down four cents at $1.55. This morning, WTI was up slightly as traders took advantage of buying opportunities. Also providing support were analyst expectations that the OPEC/non-OPEC production cuts will be extended to the end of 2017, along with comments from Russia that April numbers will show it is meeting its target production cut of 300k bbl/day. As of this writing, however, WTI and the refined products are down, with WTI at $48.91 as of 12:30 p.m. ET.
The market is up slightly today, propelled by escalating tensions between the U.S. and Iran, as well as bigger than expected production cuts by Kazakhstan. As of 11:00 a.m. ET, WTI crude is up about half a penny and heating oil and RBOB are up about a penny and a half. It’s been a while since “geopolitical tensions” has been mentioned as a market influence.
As mentioned in this space yesterday, one of the oil market’s primary concerns these days is the battle of OPEC cuts vs. U.S. shale production. Today, the cuts are winning. The market is up on data showing that OPEC has decreased production by just over 1 million bbls/day, which is 88% of its stated production cut objective. Impressive so far, given that the historical compliance rate is around 60%.
Trading is light on the last trading day before Christmas weekend. Keep in mind the market settlement will be at 1:30 p.m. EST versus the normal 2:30 EST and will reopen Monday at 6:00 p.m. ET. So, effectively markets will be closed on Monday in observance of Christmas.
Regular readers of the Fuel Matters blog have probably just about had it with OPEC by now. A quick check shows over sixty OPEC references in this blog during the last two weeks alone. Understandable, certainly, given the recent surge in oil prices that showed just how relevant the cartel remains. But, really, we could use a break. Lots of interesting things going on here in the U.S., so let’s dig into that: