Analysis by Dr. Nancy Yamaguchi
Oil prices appear to be headed for another week in the red—the fourth in a row. Crude prices remain below $45 per barrel (/b), their lowest levels since November 2016.
This week’s price slump is shaped like a milder version of last week’s price collapse, which resulted mainly due to the release of the Energy Information Administration’s (EIA’s) weekly supply data. Last week’s news of across-the-board additions to stockpiles and weak apparent demand started a sell-off.
This week, the EIA reported a crude stock draw of 1.661 million barrels (MMbbls), but this was counterbalanced by another stock build of 2.096 MMbbls of gasoline and 0.328 MMbbls of diesel. The weekly supply data also noted a drop of 48 thousand barrels per day (kbpd) in apparent demand for gasoline, falling from 9,317 kbpd during the week ended June 2 to 9,269 kbpd during the week ended June 9.
Last week’s supply data reported a 505-kbpd collapse in gasoline demand. Apparent demand for gasoline for the first two weeks of June averaged 9,232 kbpd versus an average of 9,596.5 kbpd during the four weeks of May—a drop of over 303 kbpd month-over-month. Gasoline demand typically continues to grow in June.
Global oversupply continues to dampen prices. U.S. crude production rose again last week, by 12 kbpd, bringing U.S. production to 9,330 kbpd. OPEC released its production figures for May 2017, which showed that Libyan output rose to 730 kbpd, up from 552 kbpd in April. Nigerian output rose to 1,680 kbpd, up from 1,506 kbpd in April. These two countries are not part of the OPEC-non-OPEC production cut agreement.
Low prices are expected to slow production gains, however, if they continue. If crude prices slide to around $40/b, it is believed that many development projects in shale plays and offshore may become uneconomical.
West Texas Intermediate (WTI) crude prices are in the $44.75/b – $45.00/b range this morning. This week brought a sharp collapse on Wednesday, a modest decline on Thursday and a gradual strengthening this morning. WTI opened at $44.25/b today, a significant drop of 44 cents, or 0.98%, below yesterday’s opening price. Current prices are $44.83/b, up by 37 cents from yesterday’s closing price.
Diesel opened at $1.4113/gallon this morning. This was a slight recovery of 0.13 cents (0.09%) above yesterday’s opening price. Current prices are $1.4327/gallon, up by 1.81 cents from yesterday’s closing price.
Gasoline opened at $1.44/gallon today, up 0.8 cents, or 0.56%, from yesterday’s opening. Prices are $1.4589/gallon currently, up by another 2.32 cents from yesterday’s close.