Thursday marked the largest drop in the oil market since May 8th based on OPEC’s most recent rhetoric. After the United States had withdrew from the Iranian Nuclear Deal everyone has seen prices go up at the pumps and the volatility in the market is as prevalent as ever. So what has finally stalled this rallying market? The answer is OPEC, primarily Russia and the Saudi’s, have begun putting it out there that they are considering increasing production to compensate for Iranian and Venezuelan crude potentially leaving the mainstream market. The current stance the U.S. is taking though seems to point at applying severe sanctions on both oil producers within the not so distant future.
What’s in the fuel you are pumping into your car, truck or machinery? Is there a difference in fuel quality from one station/supplier over another? This little write up may be able to shed some light on these questions. What is the “Top Tier” additive standard and how did it come about? If we go back to 1995 you can find that the EPA defined a level of performance additive requirements within fuels to consumers. According to the Top Tier website they report that since 1995, “most gasoline marketers have actually reduced the concentration level of detergent additive in their gasoline by up to 50%.” This ultimately means that the lack of additives/detergents within your fuel could really be harming your vehicles with issues like engine deposits, low lubricity levels and filter plugging. Since these standards were implemented some of the largest vehicle manufacturers have begun to take notice and adopt a new standard for the fuel being consumed by their engines. The Top Tier movement is coming to fruition and it is beginning to make very large strides, not only within the Tier 2 gasoline engines, but also within the newer Tier 4 diesel engines.
Oil prices took a dip today, but that has not been the case for most of January thus far. Even with this decline today in pricing, we are still seeing the strongest beginning to a year for oil prices in five years. There has been some key factors that have helped boost oil prices at the end of last week to levels not seen since quarter four of 2014. To start, one contributor was the weakness of the dollar. By the end of last week the dollar index had dropped down 1.6% to 88.89, which again is a level we have not seen in three years. It did not help that the U.S. Treasury Secretary, Steven Mnuchin, had showed support for a weaker greenback. The glaring quote that occurred was when Mnuchin said “obviously, a weaker dollar is good for us as it relates to trade and opportunities.” This is said to mark the first time a top economic official has spoken in favor of a weaker dollar. To begin this week there has been an uptick for the U.S. dollar after the president spoke at the World Economic Forum in Davos regarding the new resurgence of the U.S. economy.
There are many in the Oil and Gas industry that couldn’t be more optimistic with how things are currently going to start out in 2018. In just six months, the US has seen a rise in Brent of 41 percent and a rise in WTI of 36 percent, both have risen above $60 a barrel respectively. Reuters reports, “Brent crude futures LCOc1 were at $67.78 a barrel, 16 cents above their last close. Brent hit $68.27 last week, the highest since May 2015.” Along with this news the US rig count decreased by five rigs last week, to a total of 742, which could be a contributing factor to price gains as well. Along with these figures the US is projected to potentially start rising closer to the amount the Saudi’s produce per day in 2018. The current US production is rapidly approaching over the 10 million per day mark and only expected to increase over 2018. The Saudi’s and Russia, number one and two in the world, account for roughly 21 million barrels per day.