The IMF downward revision of global growth for the year ahead was enough to cause a modest sell-off of energy assets as the futures markets once again responded in tandem with the equities markets that fell on the news. WTI oil dropped $1.23 a barrel to $52.57, while Dated Brent shed a similar amount to end the trading session at $61.5. The pessimism wasn’t confined to oil as refined products too took a step back with gasoline falling over 5 cents a gallon and diesel holding off the sellers with a smaller 2-cent-a-gallon loss.
The dour news seems now to be falling to the wayside this morning with slight gains in crude prices while products are struggling to follow. The overhang of a less optimistic outlook for the global economy, including weak Chinese data, are contributing to a challenging environment that’s likely to keep a check on more positive bids for crude futures.
The challenges facing U.S. shale producers in acquiring capital for down-the-road production is very real and may help explain what now appears to be an 8% drop in rig activity. The effects of less production could serve only to tighten crude markets, despite the conventional bearish wisdom pervading the markets. With the EIA confirming shale growth of 63,000 barrels a day in output, the restrained growth represents the slowest output in nine months. Debt levels of many shale producers is a red flag that could stymie the exponential growth in shale production seen for 2019
Still, for drivers, pump prices remain affordable even though the week ahead may begin in earnest to see prices lift several cents, reflecting the recent rise in crude prices. According to GasBuddy’s Live Ticking Average, the cost to fill up has risen two cents since Monday and at $2.279 a gallon, is now 3 cents higher than last week. Compared to last month gas prices are still 3.8 cents cheaper than last month and 27.9 cents below average pump prices on this same day in 2018. For diesel, a half-cent increase from yesterday to $2.924 a gallon is still 11.3 cents below prices last month, and 2.4 cents a gallon less than on January 23, 2018.
Markets are expected to struggle today and will need clarity from tomorrow’s EIA Weekly Petroleum Status Report to provide any further upward impetus, assuming there is a draw in crude stockpiles for the third week in a row. Short of any major economic or geopolitical upheaval, the balance of January may continue to yield only modest movements in value remaining fairly constant, within a limited range.