As daily energy sector market participants, we are often reminded how much drama, information or data needs to be vetted and digested on any given day. Unlike the set of “Oakdale, Illinois” in “As the World Turns” (1956 – 2010) where melodrama was the main theme and “the bleakness of winter, the promise of spring, the fullness of summer, and the harvest of autumn” were everyday life, the world of energy is a lot less predictable. Below you will find just some of the current headlines, event risks and technical levels that have to be digested just in one day:
Oil markets indices are up this morning following a day in which RBOB, heating oil and crude all finished lower. Yesterday’s settles had crude down $0.31 / barrel to settle at $52.41 while the refined products RBOB and heating oil also finished lower by $0.0272 / gallon and $0.0163 / gallon to close at $1.4192 / gallon and $1.8922 / gallon respectively. This morning the market has taken back those losses as bullish headlines are dominating the news. To summarize:
The oil market is mixed this morning as it continues to look for direction and weighs the same news items of the past few months. Those issues continue to be OPEC cuts, U.S. / China trade dispute, concern over a global economic slowdown and increasing U.S. crude production.
Another commodity trading year is upon us and New Year’s resolutions across the western hemisphere are cloaked with purpose and resoluteness. Many have vowed to exercise more, eat healthy and save money. Even though only about 8 percent of these New Year’s resolution ambitionists persevere with their said goals, it is nonetheless a feeling of excitement and optimism of what might be. Market participants in the energy sector are most likely seeking that same sensation of excitement for less volatility and more stable prices, more clarity in supply/demand across the globe, transparency with trade talks/tariffs, pellucidity with Iran sanctions and possibly a reverse course in actions to avoid a further global slowdown or even a recession. If, however, the first 2 trading days of 2019 for the WTI futures contract for February delivery price action is any indication of what lies ahead, we are in for more of the same rollercoaster ride of uncertainty, high volatility and event risk price movements. The first trading day of the year brought on an intraday range of $3.43 a barrel or a 7.18% intraday move. Today, as of 12:30pm EST, we have already seen a 4.51% move or a $2.14 a barrel intraday trading range.
Oil markets were up early, then flat and currently trending slightly down in trading Monday morning after comments from the United Arab Emirates energy minister suggested that the global oil market was “correcting” and he “expected everyone” to reduce oil supply under the agreement reached earlier this month in Vienna. Details of that agreement calls for OPEC and its allies to reduce output by 1.2 million barrels per day starting in January 2019. In addition to the OPEC decision, the Canadian province of Alberta mandated a production cut of 8.7% or 325,000 bpd due to limited pipeline capacity in that region. Additional price support was also coming from the latest U.S. rig count data which showed drillers reduced rigs in the week ending December 14 to 873 which was the lowest it’s been since mid-October. “This, when combined with Saudi Arabia is to cut exports to the United States to draw down inventory builds should provide a short term base despite global slowdown fears, which continue to resonate” said one analyst based in Singapore. Without major headlines today some notable things to watch this week are: