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Crude oil prices today remain subdued, continuing to recede for the second day following their sustained upward streak. WTI (West Texas Intermediate) crude forward prices opened at $50.78/b today, down by $0.95 (1.84%) from yesterday’s opening price of $51.73/b. Last week, crude oil reclaimed highs of $52-$53/b, but prices began to subside on Friday. Gasoline and diesel forward prices also opened with losses today. Crude and product prices are trading up and down today, awaiting guidance. Markets are mixed, with the U.S. government shutdown muddying the market outlook.
The U.S. federal government is in day 25 of shutdown, and U.S. President Donald Trump says he will not sign any measures for stopgap funding unless they include funds for his border wall. Historically, a short shutdown can have implications that are relatively minor. But a long shutdown gets exponentially worse, causing social, economic and environmental problems that grow increasingly severe. Delta Airlines, for example, reports that the shutdown will cost it $25 million this month, and that spotty security allowed a passenger to get through security with a gun. National parks are overflowing with garbage and human waste, and vandals have even killed some iconic Joshua trees in the Joshua Tree National Park.
The overall picture is of a U.S. so badly led that global markets are looking elsewhere for positive signals today. China, for example, is responding quickly to a major slowdown in its imports and exports. The Chinese government pledged to keep monetary policy flexible and to improve access to financing for businesses. Economic advisors believe that Chinese tax cuts will stimulate GDP growth. Chinese company shares rose on the announcement, and also on hopes that the Chinese leadership will work harder to resolve trade disputes with the U.S. later this month. Markets also await news from the American Petroleum Institute on U.S. oil stockpiles, which are expected to show a drawdown from crude inventories and a build in product inventories.
Oil prices remain strong today, though the upward momentum has slowed. WTI (West Texas Intermediate) crude forward prices opened at $48.30/b today, an increase of $1.40 (2.99%) from Friday’s opening price of $46.90/b. Gasoline and diesel forward prices also opened higher today. All are working to hold their gains this morning. Market optimism is strong today, with renewed talks between the U.S. and China on the trade war. The first day of negotiation looks promising, with the surprise appearance of Chinese Vice Premier Liu He heading what was expected to be a lower-ranking delegation.
Global stock markets are shaken today by news that Apple cut its forecast of revenues, citing poor demand in China. This is seen as evidence that the U.S.-China trade war and slowing growth in China’s economy is having a larger-than-expected impact on Apple’s corporate profits. It is the first time in 15 years that Apple has cut its quarterly revenue forecast. Apple stock is a member of all three major Wall Street indices. This news is expected to diminish the recent recovery in equities and increase safe-haven investments. It may also stall today’s rally in oil prices. As of the time of this writing, the Dow Jones Industrial Average has just opened down by 320 points.
Pricing across the global energy markets will face headwinds in 2019, with a weaker and more uncertain macroeconomic framework deflating price formation in general, according to two special reports just issued by S&P Global Platts Analytics. Such headwinds will require the industry and portfolio managers to take a big-picture approach.
Particularly blustery head winds are in store for markets where prices finished 2018 at elevated levels, and well above costs, such as North American natural gas and global coal. However, if the supply side can adjust to the reality of slowing demand growth, energy prices can find support. For natural gas liquids (NGLs), the ongoing logistical constraints at the US Gulf Coast are likely to manifest on continued price volatility, particularly for ethane and liquid petroleum gas (LPG), over the next year despite strong global demand.
Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here.
Among the 22 key take-away themes:
Information gathered with help from Fuel Market Reports and S&P Global Platts Analytics
Gates L. Scott
Gates L. Scott is a Senior Land Executive with World Fuel Services developing new markets and delivery fuel management solutions through the Front Range of Colorado and beyond. A former Certified Flight Instructor and commercial helicopter pilot and aviation enthusiast, he loves anything that flies!
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