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.
Come this time next week, 2018 will be in the rear-view mirror and we will be looking ahead to what 2019 has to offer us. Before we officially close that book, let us look back at the roller coaster of a year that the oil markets has endured. A bit of a reminder that no one can really predict what is to come.
Let’s call today the Turkey Turn up rather than the dead cat bounce. Oil complex up slightly today after taking a huge turn down yesterday with WTI settling at $53.43/barrel, its lowest level since October 2017. Oil prices fell amid concerns about rising global supply and growing fear of a global synchronized economic slowdown.
Oil prices seem to be looking for a solid footing this morning as news continues to point towards an upcoming supply cut. Oil prices have lost almost a fifth of their value in the last 30 days due to oversupply concerns, signs of decreasing demand growth and the potential global economic impact of a growing trade war between the United States and China. Another wild card is the unknown political impact of the Saudi Arabian murder case of Washington Post journalist Jamal Khashoggi.
Reuters reported Monday that Saudi Energy Minister Khalid al-Falih said OPEC and its allies will need to cut around 1 million barrels per day from October’s production levels beginning next year to overcome the crude oil oversupply situation. This comes a week after the U.S. granted waivers to its allies to purchase Iranian oil which helped perpetuate the incredible sell off we’ve seen in oil prices over the past few months, with WTI down about 20% from its October high, last trading at $61.09/barrel.