Energy Price Report for May 20th

Monday, May 20, 2019

Energy futures are trading flat to higher in the on Monday, following comments from Saudi Arabia indicating OPEC producers favor rolling output cuts into the second half of the year. Economic data released over the weekend were supportive, but European stock markets and US stock market index futures were in the red. Asian markets were mixed. Market participants had a quiet day before then on the economic calendar and would have to look elsewhere for direction.

Reuters reports that Saudi Arabian Energy Minister Khalid al-Falih said on Sunday that in the second half of the year, our preference is to maintain production management to keep inventories on their way declining gradually, softly but certainly declining towards normal levels.” Two Reuters sources said Saudi Arabia and Russia were discussing two main scenarios for next month’s OPEC meeting, involving a relaxation – but not an elimination – of the output curbs. The Saudi Energy Mister said it is “critical that we don’t make any hasty decisions – given the conflicting data, the complexity involved, and the evolving situation.” Iranian and Venezuelan production is likely to see a decline, amid US sanctions.

In related news, Reuters reports that the Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK) concluded that the attack on four oil tankers last Sunday, including two Saudi Arabian Vessels, was likely to have been organized by Iran’s Revolutionary Guards and carried out by Houthi rebels. It should be noted that previous drone strikes by Houthi rebels were with surface drones, whereas the attacks near Fujairah last weekend used sub-surface drones.

In economic news, the Japanese economy expanded 0.5% on a quarterly basis in the first three months of the year, beating expectations for a 0.1% contraction and up from a downwardly-revised 0.4% growth rate for the final months of 2018. Asian shares saw mixed trade, with the Nikkei up but Shanghai down, whereas European stocks and US stock market index futures were falling.

Crude futures fell on Friday, amid some weakness in US equities and modest strength in the dollar, despite another decline in the US oil rig count. Brent crude slipped 41 cents lower to settle at $72.21 a barrel, WTI crude shed 11 cents to close at $62.76 a barrel, gasoline lost 1.45 cents for a settlement at $2.0473 per gallon and heating oil closed at $2.0955, down 2.77 cents, natural gas futures, like crude futures, settled not far south of the unchanged mark, off by 80 points at $2.631 per MMBTU.

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