Another day, another contradictory outcome from the previous day.
It’s an all too familiar pattern by now. As prices for energy products have fallen dramatically over the last six weeks, it would seem that one day’s good news is immediately followed by a down day on the markets, and vice versa. Case in point, Monday markets scored a gain. Tuesday was flat followed by a drop Wednesday that was quickly replaced Thursday with strong gains. Today, early trading is pointing to modest losses, meaning the week’s session will end positively ambiguous.
The word from the G-20 meeting in Buenos Aires is that Saudi Arabia is not making headway in its attempt to achieve production cuts among major oil producers who some, like Russia are not members of OPEC. Thus far, there appears to be a risk that no cuts will occur, or at least meaningful enough to absorb the growing global glut, amidst continued worry of economically damaging trade tensions between the U.S. and China. Not surprisingly, oil which gained $1.17 a barrel yesterday to give WTI a value of $51.45 and its counterpart, Dated Brent, a smaller 80-cent hike to $59.51, are struggling with small under-$1-a-barrel losses so far.
But if drivers aren’t complaining about all this, it has much to do with the fact that pump prices are no cheaper than they were this time last year. According to GasBuddy’s Live Ticking Average, pump prices across America now chime in at $2.485 a gallon, a third of a penny below the same day in 2017, 7.1 cents lower than last week and 31.5 cents below prices just a month ago. For its part, diesel continues its gentle slide, now sitting at $3.169 a gallon, down 11.8 cents from last month but still 32.8 cents above prices his time last year.
The dilemma facing OPEC is one of disunity, distrust and frequent cheating. Only with the cooperation of Russia has the cartel been able to achieve its goals earlier this year of reducing the global glut of crude. Thus far, achieving any consensus on reducing supplies in the face of ever-increasing output from the United States appears elusive and it is at the heart of today’s sell-off. The week will likely see little movement from last week’s big losses and propel WTI back to its tenuous $50 perch. Should OPEC fail to obtain real and significant cuts at its meeting on Thursday in Vienna, look to benchmark oils trading in the mid-forties by next week. Alternatively, should there be a major agreement on significant crude production cutbacks, look for oil to gain 3-5% for the beginning of the second week of December