Oil Prices Up for the Week
The West Texas Intermediate (WTI) and Brent crude oil benchmarks finished the day and the week in positive territory.
December WTI edged upward Friday, gaining nine cents to settle at $57.24 per barrel. Compared to the Nov. 1, 2019, settlement price, WTI is up nearly 1.9 percent.
Also finishing the day higher was the January Brent contract, which settled at $62.51 per barrel – a 22-cent gain. For the week, Brent is up 1.3 percent.
Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business, noted the WTI and Brent grades “have been somewhat range-bound” for the past week.
“Trading between about $55.75 and just under $58, WTI has moved in-sync with the, once again, daily shift in perception regarding a trade deal with China,” he said.
Seng explained that higher oil prices Monday, Tuesday and Thursday of this week stemmed largely from what the market viewed as progress in U.S.-China trade negotiations – with talk of some level of tariff repeals on the horizon. He added that Wednesday’s lower settlement price resulted primarily a very bearish crude inventory report from the U.S. Energy Information Administration (EIA).
Friday’s market action “is nearly flat to yesterday as a report on Chinese oil imports and a drone attack by Iran are sending mixed signals,” continued Seng. He added the U.S. Dollar’s rise throughout the week helped to cap any rally on crude.
Seng also noted that China reported its oil imports last month were 11.5 percent higher compared to the same period in 2018 and, year-to-date, are up 10.5 percent higher year-on-year.
“This indicates that the trade war between the U.S. and China has had no impact on their oil purchases,” he said.
Returning to the topic of the most recent EIA Weekly Petroleum Status Report, Seng noted that it showed:
- A 7.9 million-barrel increase in U.S. commercial crude inventories – unexpectedly high given forecasts calling for relatively modest increases of 1.4 million barrels (by Wall Street Journal analysts) and 2.7 million barrels (by S&P Global Platts survey respondents); Tuesday’s oil stocks report from the American Petroleum Institute revealed a 4.3 million-barrel build
- Total crude in storage at 447 million barrels – three percent above the five-year average for this time of year
- A 1.7 million-barrel increase in the volume of crude stored at the Cushing, Okla., hub to 48 million barrels, or approximately 63 percent of capacity there
- An unexpected 1.7-percent drop in refinery utilization to 15.8 million barrels per day (bpd), or 86 percent
- A year-on-year 17.4-percent drop in oil imports
- Steady week-on-week U.S. oil production at 12.6 million bpd – a full 1 million bpd higher than the year-ago level.
Seng also observed that the WTI/Brent spread is holding near the $5.20 level and that the latest U.S. rig count is as low as it was in April 2017.
“Technically, the December WTI NYMEX futures contracts were trading right above the five-, 10- and 20-day moving averages until yesterday, retreating today to within the five- and 10-day moving average areas,” said Seng. “Prices remain above the 20-day moving average. The contract has moved into a slightly overbought position relative to the overbought/oversold conditions according to momentum indicators. Today’s volume is solid at over 500,000 contracts.”
Reformulated gasoline (RBOB) fell slightly on Friday, with December RBOB losing just two-tenths of one cent to end the day at $1.63 per gallon. RBOB is down 1.8 percent week-on-week.
“Gasoline prices were on a rollercoaster this week, starting off moving higher, crashing lower Wednesday and rebounding today,” said Seng. “U.S. inventories of total gasoline fell to 217 million barrels, moving toward the center of the five-year average for this time of year. Average U.S. retail prices were 15 cents per gallon lower than last year at $2.60 per gallon while NYMEX futures prices are about five cents per gallon less than a year ago at $1.66 per gallon.”
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