Oil Prices Show Tiny Gains After Volatile Week

West Texas Intermediate (WTI) and Brent crude oil capped off a volatile week Friday with very modest day-on-day gains.

January WTI futures lost 81 cents Friday, settling at $57.77 per barrel. The light crude marker traded within a range from $57.50 to $58.74. Compared to the November 15 settlement, the WTI is up by well under one percent.

Brent crude for January delivery declined 58 cents to end the day at $63.39 per barrel. It also showed a very slight gain week-on-week and is up just one-tenth of one cent.

“It was another roller-coaster ride for crude oil this week as the daily saga of U.S.-China trade relations ebbed and flowed while a bullish inventory report, a continuing decline in drilling activity and a weaker U.S. Dollar helped push prices higher on the week,” commented Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business.

Seng observed this past week’s volatility enabled a significant technical move to occur: the WTI managed to test both upper and lower price limits in just two days.

“For the umpteenth week now, the market has changed – on a daily basis – its perspective on a U.S.-China,” said Seng. “The Dow, S&P and NASDAQ all breached new highs this week only to turn lower toward week’s end partly on yesterday’s jobs report, which indicated (unemployment) claims are the highest in five months.”

Seng pointed out that data on manufacturing activity in Europe and Asia showed a lessening decline – and helped to buoy stocks in those areas. Also, he noted the U.S. Dollar – down for most of the week – rebounded Friday and added some weakness to oil prices. Additionally, citing the latest U.S. Energy Information Administration (EIA) Weekly Petroleum Status Report, he noted:

• Domestic commercial crude inventories rose by 1.4 million barrels, compared to the 1.1 million- and 1.6 million-barrel builds projected by Wall Street Journal and S&P analysts, respectively; meanwhile, the American Petroleum Institute reported a 6 million-barrel increase in oil stocks.
• Total crude oil in storage stands at 450 million barrels, three percent higher than the five-year average for this time of year.
• The volume of oil stored at the Cushing, Okla., hub dropped by 2.3 million barrels to a total of 44.2 million barrels – approximately 58 percent of capacity.
• Refinery utilization increased by 0.7 percent to 87.8 percent, or 16.4 million barrels per day (bpd).
• Oil imports were down 18 percent year-on-year.
• U.S. oil production for last week was 12.7 million bpd

Seng also pointed out the EIA increased its oil growth forecast for the rest of 2019 by 30,000 bpd and for 2020 by 119,000 bpd. He said the majority of the increase is expected to come out of the Permian Basin.

On a technical level, the January WTI NYMEX futures contract made a rare two-day move, said Seng.

“Wednesday’s prices fell to an area defined as ‘two standard deviations below the Mean’ but rebounded by settlement,” he explained. “Thursday’s price rally ran prices in the compete opposite direction, touching on ‘two standard deviations above the Mean.’ These moves encompass a $4 price range in short order.”

Oil prices are well above the five-, 10- and 20-day moving averages, Seng continued.

“The contract is now in a slightly overbought position relative to overbought/oversold conditions according to momentum indicators,” he said of the WTI. “Today’s volume is solid at over 400,000 contracts.”

Reformulated gasoline (RBOB) also settled lower Friday. December RBOB shed three cents to land at $1.67 per gallon. For the week, RBOB is up 2.1 percent.

“After starting out lower, gasoline prices rallied in concert with crude o,” said Seng. “U.S. inventories of total gasoline rose to 221 million barrels, holding near the center of the five-year average for this time of year. Average U.S. retail prices were only two cents per gallon lower than last year at $2.592 per gallon while NYMEX futures prices are about six cents per gallon above a year ago at $1.635 per gallon.”