Oil & Energy Investor by Dr. Kent Moors

OPEC Sticks to Its Guns – And Higher Oil Prices Persist

by | published March 14th, 2019

Despite the best efforts of a miserable monthly U.S. employment number, some disquieting economic data from Europe and China, and a presidential bully pulpit, crude oil prices continue to rise.

I discussed the paltry 20,000 job gain in the last Oil & Energy Investor (“One Employment Report Does Not a Trend Make,” March 12, 2019). Also in that column, I noted the decision by the European Central Bank to cut its growth estimates for the continent, while Beijing posted declines in both exports and imports in February.

Of course, the Chinese picture was more than offset by a surge in oil imports – February had the third highest monthly figure on record.

As for the presidential pressure (usually found in early morning tweets), Trump has attempted in every way to browbeat OPEC into expanding production, thereby increasing the volume in the market and (in theory at least) reducing price for refined products.

And yet all this hitting at the same time has failed to stop an oil rise.

U.S. crude oil benchmark, West Texas Intermediate (WTI), closed yesterday at $58.26 a barrel, up 2.4% for the session and an expanding 9.7% for the month.

Similarly, London benchmark, Brent, posted a price of $67.63, better by 1.4% and 8.5%, respectively.

I have some ideas about this trend

One Employment Report Does Not a Trend Make

by | published March 12th, 2019

The current oil market is providing us with the latest example of why figures need to be read carefully – especially when it comes to using a single number as a crystal ball with which to provide a prophecy on where oil prices are heading.

On Friday, the U.S. economy posted a dismal rise of only 20,000 new jobs in February, some 160,000 below estimates. Shortly after, West Texas Intermediate (WTI) – the oil benchmark set daily in New York – sank 3%.

Crude oil prices recovered as the day progressed. Nonetheless, at close of trade (2:30 PM for oil), WTI was still down 1.2% for the day. Yesterday, it rebounded and is continuing to move up as I write this on Tuesday morning.

Friday’s figure left market observers scratching their heads.

Those watchers I have talked to over the past several days consider it an outlier, following what has been a better than average employment picture over the past several reports. Yet as it stands, it’s certainly the worst monthly performance in recent memory.

Of course, as happens often, that figure is likely to be revised over the next two months.

But the dismal report still had a major (although, it seems, fleeting) impact on oil traders. And that occasions a simple question:

Does the monthly employment report really tell us anything about where an accurate oil price should be pegged?