Brent gained $1.78/bbl last week to average $64.29/bbl, while WTI gained $1.63/bbl to average $59.25/bbl. Trade agreements were front and center last week, with significant progress made on Brexit, US-China, and USMCA. For the week ahead, we foresee more strength pushed by the US-China phase one agreement announced on Friday. We expect Brent to average $65/bbl in the week ahead.
Markets continue to await full details on the US-China phase one trade deal, but unless the details come out much worse than expected prices should hold steady. Prices are likely to trade fairly range-bound over the week after last week saw several major economic questions semi-answered. The weeks ahead could see some weakness as excitement around the trade deal wanes and also because of lower activity due to the holidays.
Crude and product stocks in the US and Europe are ending the year close to the five-year average. In the United States gasoline stocks are elevated, in part as a byproduct of strong distillate production. Refining margins in Europe and Asia have weakened considerably during the last several weeks, and crude runs are likely to fall. This could pressure spot prices in those regions, especially Europe.
Geopolitical Unrest – Neutral
Global Economy – Positive
Oil Supply – Positive
Oil Demand – Negative
How We Did