As suggested here in this place yesterday, crude oil broke below the $60 threshold overnight and is now trading down a bearish near $1 a barrel to $59.72 for WTI with Dated Brent off more than a dollar and well below the $70 barrier to $69.65 a barrel. Refined products too are taking a beating with gasoline down 4 cent to $1.60 a gallon, while diesel, which lost 5 cents yesterday, is taking a similar loss, down 4 cents to $2.13 a gallon. With energy markets now suffering nothing short of a rout, it is interesting to note that WTI has not suffered 10 consecutive losses in nearly 35 years, going back to 1983.
The collective bad news of higher OPEC, Russian and U.S. oil output, coupled with weakening global demand and profound disappointment in the U.S. embargo on Iran being anything but, given substantial waivers to at least eight countries, is weighing down markets in what can be the most pronounced rout in the markets since December 2014. Recalling at that time, OPEC had announced it was going to flood global markets, the recent declines aren’t expected to be that drastic or profound, but it puts to rest, after 8 months of relative gains, that oil won’t be testing $100 a barrel anytime soon.
Despite fundamentals which haven’t changed radically during the sell-off, this weekend’s OPEC meeting could be a game changer as many feel that the generous waivers granted by the U.S. combined with their increased production has the makings of an unwanted glut. Look therefore to a sizeable cutback on member output that could snap markets back into their buying ways.
In the meantime, the news for motorists continues to improve with average pump prices now lowering to $2.721 a gallon which, according to GasBuddy’s Live Ticking Average put prices down 3.8 cents from last week, down 19.1 cents compared to last month but still 15.3 cents a gallon higher than last year. Even diesel, which reached $3.30 a gallon last month, on October 12, is down four cents from that high, though still 44.5 cents a gallon higher than on this same day last year.
As the bears rule the petroleum energy price complex, it is important to remember that many may return to scoop up distressed prices, including Canada’s WCS which trades at $15 a barrel and wasn’t helped by last evening’s ruling by a Montana court to put an injunction on construction of the approved Keystone XL pipeline. With deals to be had and OPEC likely to turn off the oil spigots this Sunday, look for today’s losses to moderate and something of a slight rally in prices for energy commodities next week.