Written on: January 7, 2019

Energy Prices Climb in Early Trading

Monday, January 7, 2019

Crude oil and refined products were posting gains of over 2% across the board on Monday, amid continued weakness in the US dollar index, but despite downward revisions to Goldman Sachs’ 2019 crude price forecasts and a Libyan plan to increase its crude output. Trade negotiations between the US and China are set to resume today and tomorrow in China.

In a research note dated January 6th, Goldman Sachs downwardly revised its 2019 crude oil price forecasts, from $70/bbl to $62.50/bbl for Brent crude, and from $64.50/bbl to $55.50/bbl for WTI crude. The bank also said that the oil market “is still pricing in a sharp slowdown in global growth despite our economists’ forecast for resilient growth and robust late-2018 oil demand data”. The bank, however, expects crude prices to rise this year should there be a lack of a “large-scale economic slowdown” and evidence of compliance with the OPEC+ output cut agreement.

NOC Chairman Mustafa Sanalla said on Sunday that Libya is planning on doubling its oil production, to 2.1mb/d by 2021, given improved security and stability in the oil-rich country. Libya is currently producing about 953kb/d of oil, which is lower than its pre-civil war production rate of 1.6mb/d, due to recent attacks by armed protesters demanding salary payments and looting.

Global stocks are trading mixed this morning (European equities were lower, Asian stocks were up, and US stock market index futures were mixed). The Nikkei Composite PMI for Japan fell to 52.0 last month, from 52.4 in November. In Germany, manufacturers’ orders dropped by more than expected in November, but growth in retail sales was much stronger than expected. Market participants looked ahead to economic data releases for the US, including November factory orders and the December ISM Non-Manufacturing Index, for further direction.

Crude complex futures traded mostly higher on Friday, amid strong gains in US stock market indexes following encouraging economic data releases, a weaker US dollar, and a drop of 8 in the US oil rig count, but despite inventory data reported by the EIA. WTI rose 87 cents for a $47.96 a barrel settlement, Brent climbed up $1.11 and settled at $57.06 a barrel, heating oil closed 2.72 cents stronger at $1.7692 per gallon, gasoline edged down 17 points to settle at $1.3478 per gallon and natural gas futures traded 9.9 cents higher to settle at $3.044 per MMBTU.