Energy Market Updates

Prices have been trending upward this week, largely based on OPEC following through on production cuts. Namely, we saw a drop in output of around 800K bpd in January by its member nations. This would seem to indicate that the so called "OPEC+ deal" to cut output and thus global oversupply is actually being followed, and it appears it is starting to have the desired effect - stabilizing prices higher than we have seen over the past year or so.

As we head towards the end of 2018, it looks like oil prices will finish the year out down about 20%. We saw wildly fluctuating energy markets throughout the year, but the fundamental factors of supply and global economic growth concerns kept the downward pressure on pricing over the long term. 

OPEC, as well as the so called "OPEC+" partners have reached a tentative agreement on production cuts, causing the oil market to spike Friday. The cuts reportedly amount to 800,000 bpd on OPEC's part, and an additional 400,000 bpd (combined) from allied nations, including Russia. No specific cuts by country were committed to, or at least they were not confirmed in statements. 

Oil was down today as the market weighed out OPEC speculation on one hand, and a drop in US Crude inventories on the other.

Today saw oil prices have the biggest one day rally of 2017 thus far, with WTI Crude surging up 3.3% ($1.55) to settle out at $47.89/bbl. Likewise, refined products surged, with ULSD jumping over 5 cents (+.0516) to 1.5685, and gasoline jumped +.0394 to settle at 1.5962.

The oil markets were down sharply this morning on increasing cynicism that, essentially, global supply will not be driven down sufficiently by either OPEC or "non-cartel" producer production caps, or the summer driving season in the U.S. being upon us (despite the weather here in Boston, technically yes, its summer driving season). 

Crude closed out today at over $50 ($50.44 to be exact) which is the highest close we've seen since June. ULSD closed up .0135 to $1.5958 and RBOB ended up .0050 at $1.4978.

On Wednesday, OPEC countries made a surprise agreement to cap production at 32.5-33 million BPD at their meeting in Algiers (if you’re keeping score at home, current production is about 33.24mmb.. insert yawn here, in other words). This marked the first deal since 2008, largely on account of Saudi-Iranian tensions – more on that later. Oil spiked on the news before backing off slightly over the remainder of the week.

August has been all over the place. Crude futures this month were up 23% in less than 3 weeks as of the 28^th. We've bounced from an August 10^th low of $41.71 to an August 19^th a high of $48.52 -  and today we’re in the middle at $46.35.

After a strong start to the month of July post Brexit, markets settled down again today after closing out August's futures yesterday.