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Energy Prices Slipped Modestly Lower Overnight

Wednesday, Dec 11 2019
Market Talk

Energy prices slipped modestly lower overnight following a pair of bearish fundamental reports in what will be an extremely busy day for data.

We’ll see both the DOE’s weekly status report & OPEC’s monthly oil report later this morning, followed by the FOMC announcement and press conference this afternoon…all on top of the swirling rumors over the U.S./China tariff deadline looming this weekend.

The API was said to show inventory builds across the board last week of 1.4 million barrels of crude, 4.9 million barrels for gasoline and 3.2 million barrels of diesel, which helps explain the weakness in prices overnight. WTI is showing some relative strength to the other contracts however as the Cushing, OK hub was reported to have a decline of more than 3 million barrels of crude.

The EIA’s monthly energy outlook released Tuesday forecasts lower oil prices in 2020, despite the recent OPEC & Friends’ decision to extend output cuts.

A few highlights from the STEO:

EIA expects crude oil prices will be lower on average in 2020 than in 2019 because of forecast rising global oil inventories, particularly in the first half of next year.

EIA assumes that OPEC will limit production through all of 2020, amid a forecast of rising oil inventories. EIA forecasts OPEC crude oil production will average 29.3 million b/d in 2020, down by 0.5 million b/d from 2019.

RE IMO 2020: EIA expects that starting in the fourth quarter of 2019, this regulation will encourage global refiners to increase refinery runs and maximize upgrading of high-sulfur heavy fuel oil into low-sulfur distillate fuel to create compliant bunker fuels. EIA forecasts that U.S. refinery runs will rise by 3% from 2019 to a record level of 17.5 million b/d in 2020.

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