Earlier today, OPEC+ agreed to increase daily production cuts to 1.7M barrels of oil. The increase from 1.2M to 1.7M was a surprise to the markets, but the devil is in the details. When you look at the past six months and the reported quotas from members of OPEC, the daily average was actually close to 1.7M barrels per day. Due to Saudi Arabia and others cutting more than promised, the deal, although higher in posted cuts, is actually not much of a change from current market conditions. In addition, waivers were granted for condensates which lessens the blow on the market. Saudi Arabia announced they will continue to cut an additional 400k barrels/day off their runs which could make the cut closer to 2.1M barrels/day. But time will tell. Saudi Arabia received their evaluation for Aramco and is looking to go public with a 5% stake in their 1.7 trillion dollar evaluated state owned company. OPEC+ is planning on meeting again on March 5th, 2020 to reevaluate the market conditions. Crude prices jumped higher on the announcement but not as high as expected. Then the US Jobs report was released as well as rumors of a China/US trade deal. All the combined news today pushed WTI crude prices to $59/barrel. However, WTI is still struggling to regain the highs reached earlier in the year. Even though the news today was very bullish crude, the continued high prices will allow the US shale producers to hold their record production levels keeping overall crude supplies in balance. At this time, I don’t see crude prices making any runs higher to end the year unless an epic US/China trade deal is reached.
Retail gasoline and diesel prices relaxed a bit to start the week, but clawed back much of the cost by the week’s end. I don’t expect to see much price movement at the pump over the coming week.
Propane supply is starting to improve since the CN Railroad ended their strike last week. Propane prices have held firm even though crude prices have risen. There is still an abundance of propane available in the country and production is healthy. Plus, warmer than average weather continues to show up in our area keeping propane prices from rising any further. Next week we will experience a two-day cold snap, but that looks to be about it for cold weather in the coming weeks.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
I hope everyone has a safe and enjoyable Thanksgiving! Good news yesterday, as the Teamsters and CN agreed to a tentative deal and workers returned to work last night. We are not out of the woods yet, but now we have a target and some light at the end of the tunnel. We expect supply to be tight for the next few weeks as rail shipments get caught up. But with allocations resetting in December we feel that the potential for a December disaster is starting to subside.
Crude prices rallied this week with hopes of a China/US trade deal. In addition, OPEC+ is talking it up that supply cuts will continue. I believe that the rally is a little premature. I’m not too concerned with crude prices breaking out much higher.
Retail prices of gasoline and diesel will continue to rise as costs increased this week. We believe that once again this might subside after Thanksgiving.
As always, if you you have any questions, comments, or concerns, please feel free to give us a call.