A volatile week for crude saw WTI and Brent crude both up around 2%. This moderate gain was not enough to erase this year’s slide; Brent is down over 10% since January 1, and WTI has lost nearly 20% of its value during that period.
- Readers of this newsletter will be familiar with Venezuela’s and Russia’s requests to hold a special meeting to discuss low energy prices. Well, this week, their wish was granted—partially. These two countries met with Saudi Arabia and Qatar, and agreed to freeze production at January levels. The market responded well to this news, until it realized that keeping production constant still represents a large oversupply. Iranian officials supported the decision, causing oil’s second rally of the week, although they did not indicate that they would join deal. While this is not exactly what Venezuela and Russia (and North American producers) would have hoped for, they will be comforted that the situation, for now, should not get worse.
- A story came out this week that underscored the difficulty that North American oil producers are currently facing: North Dakota’s top oil regulator, Lynn Helms, has noticed that an increasing number of his Uber drivers are laid-off oil and gas workers. North Dakota, the home of much of America’s shale oil production, had one of the largest increases in unemployment rate in the United States last year. If conditions do not improve, we could see a reduction in shale supply.
- Although oil prices increased slightly last week, refined products ended the week in the red. Diesel fell almost 4% to nearly 1.03 USD/gal, and gasoline fell by 8% to 0.96 USD/gal. With oil prices perhaps beginning to find a range, and producers finally talking about the global oversupply, we believe that entering into a fuel hedge today could be a nice opportunity. Have a great week!
Philippe Shebib