Written on: October 18, 2019

Energy Price Report

Friday, October 18, 2019

Crude futures looked set for a third consecutive session higher, with Brent up by 0.4% and WTI crude futures having gained 1.0% as of this writing in the overnight session on Friday, as the US dollar continued to sell off and amid data showing Chinese refining growth outstripped domestic supply growth last month. The gains came despite flat to lower trade in global equities following mixed but mostly discouraging economic data out of Japan and China. Market participants looked ahead to the weekly US rig count report from Baker Hughes for further direction.

Chinese crude oil refining activity hit a record-high last month, with runs up 9.4% from last year at 13.75mb/d. The increase in refining activity far outpaced a 2.9% yearly increase in Chinese crude oil production, which averaged 3.81mb/d.

The US dollar had depreciated by 0.06% against a basket of currencies as of this writing, its fourth consecutive session lower in a continuation of a sharp sell-off from multi-year highs reach on October 1. The dollar index, at yesterday’s lows and this morning, was trading at levels not seen since August 26. While this was supportive for oil prices, trade in Asian and European stocks and futures for the major US stock market indexes was not so supportive this morning. Consumer price inflation in Japan was weaker than expected last month, as the Consumer Price Index rose 0.2% year-on-year, whereas consensus called for a 0.3% increase. Year-on-year retail sales growth of 7.8% in China matched expectations, as did fixed asset investment growth of 5.4%, and industrial production growth of 5.8% beat expectations at 5.0%. The headline release for China, however, was a miss – GDP growth came in at 6.0% (year-on-year) for the third quarter, short of expectations at 6.1% and slowing from 6.2% in the previous quarter. Growth last quarter was the slowest since the first quarter of 1992. The Shanghai composite fell 1.3% last night, while the Nikkei 225 edged up 0.18%. European bourses were mixed as of this writing, as were US stock market index futures.

Petroleum futures saw flat-to-higher trade on Thursday, as WTI crude futures climbed 57 cents higher to settle at $53.93 a barrel amid a sharp continued sell-off in the US dollar and strength in US equities, despite bearish crude oil inventory data from the Energy Information Administration. Data from the EIA were supportive for heating oil and gasoline, and yet crack spreads narrowed with gasoline slipping 23 points lower to $1.6225 per gallon and heating oil closing just 55 points higher at $1.9481 per gallon. Brent crude futures settled 49 cents stronger at $59.91 a barrel. Natural gas futures added 1.5 cents to settle at $2.318 per MMBTU.