Written on: June 18, 2019

Energy Prices Sink Again

Tuesday, June 18, 2019

Crude oil and refined products are trading flat to weaker on Tuesday, amid an appreciation in the US dollar but despite continued tensions between Iran and the US as well as strength in US and European stocks.

Perhaps helping put a cap on losses this morning was news that the US will be sending 1,000 additional troops and more military resources to the Middle East for defensive purposes, amid recent tensions with Iran.

In other news, OPEC sources said that an upcoming OPEC/non-OPEC ministerial meeting might occur from July 10th – 12th in Vienna, as suggested by Iran.

European stocks traded higher this today, along with US equity index futures, amid mixed economic data releases for Europe. In Germany, the ZEW Survey reflected that analyst views were stronger than expected about the state of the German economy for this month, but much more pessimistic than predicted about the forward outlook. The merchandise trade surplus for the Eurozone narrowed from an upwardly revised E18.6bn to E15.3bn in April. The underlying Harmonized Index of Consumer Prices (HICP) for the Eurozone was left unchanged for May, showing a 0.8% annual increase in core prices. Market participants looked ahead to US housing starts for May and Canadian manufacturing sales for April for further direction. Also, the two-day Federal Open Market Committee meeting begins today, with expectations calling for no change in interest rates.

Energy futures lost ground on Monday, amid the Bank of America cutting its 2020 price forecasts for crude oil and increased Iraqi crude output, despite strength in US equities and a threat to increase enriched uranium stockpiles from Iran. In other unsupportive news, in its June Drilling Productivity Report, the EIA forecasts that production from seven shale oil plays will grow by 70kb/d in July, to a new record high of 8.52mb/d. WTI crude lost 58 cents for a $51.93 a barrel settlement, Brent crude fell $1.07 to close at $60.94, heating oil closed 2.99 cents weaker at $1.7995 per gallon and gasoline dropped 4.17 cents to settle at $1.6908. Natural gas futures edged down 10 points to $2.386 per MMBTU.