The start of the New Year looked promising for end users but not so swell for shale producers. From the beginning of November 2015 to mid-January 2016, diesel prices went from $1.5000 on the NYMEX, to a low around $.8650. That’s an estimated $.6350 plummet in that two and a half month stretch. With the constant reports of global oversupply of crude surrounding the market, it wouldn’t have been a surprise if prices fell below $.8650 after the continual drop off. To the dismay of consumers, OPEC held a meeting to discuss the possibility of a crude freeze. At first, this meeting was a threat to prices and most OPEC and non-OPEC users were all aboard with Saudi Arabia and Russia for a crude freeze. There was a dark horse behind the scenes in Iran that frustrated the highest producing nations (Saudi Arabia and Russia).
Two weeks before the infamous meeting, the market showed signs of hope, dropping down to $1.0600 and leaving the door open for it to reach January levels. After the meeting on the 17th was a bust, it was almost a shoe-in for the bears to roam wild. Then came a strike in Kuwait and a weaker U.S. dollar, leading to a non-stop surge heading into the 2nd quarter.
What will May, June, and July hold? The Saudis reported that they will push oil output higher, near record highs, to meet the summer demand for power. Could this be a positive sign? Apparently not, because it is unlikely this will flood the market, sources say. The global economy is struggling mightily, with the U.S. economy at the forefront of the sluggish activity. If history repeats itself, many have cautioned that the economy could make a turnaround in the months after quarter 1, but it remains weak in the beginning of the 2nd quarter.
- U.S. gasoline consumption could very well reach a record year in 2016.
- As of 12:30 PM EST, diesel is down $.0170, gas is down $.0100, and crude is down 22cts.
- Petromatrix says Saudi Arabia’s Aramco will nearly finish its expansion of Shaybah oilfield by the end of May from .75 mill bpd to 1.0 mill bpd.
- WTI and Brent futures have gained nearly $10/bbl this month, largely due to near-term supply concerns based off of production outages in Kuwait, Iraq, Nigeria and the North Sea.