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MARKET SUMMARY
Oil prices fell sharply last week in the United States and worldwide, with most of the decline occurring in a two-day slide in response to bearish supply and demand data. Influences that had lifted prices in recent weeks, particularly tropical weather systems and production restraint, appear now to have had less lasting impact than earlier thought. Most market assessments last week centered on traders' "disappointment" with U.S. inventories, the global supply/demand balance, and results of the meeting of Saudi Arabian, Venezuelan, and Mexican oil ministers in Cancun.
Crude oil - global market weakness was at the root of the week's price decline, although in the U.S., crude oil prices actually fell less than those for products. Prices began to slide on Monday, as markets were unimpressed with the extension of current output reductions agreed to in Cancun. After Tuesday's optimism about expected stockdraws, prices fell solidly over the next two days, first due to mixed messages from the weekly API and EIA data reports, then from IEA and EIA reports citing world production growth despite OPEC restraint, in the face of soft demand. Nigerian force majeure on exports due to civil unrest, and Mexican port closures due to weather, were only mildly supportive.
Gasoline -prices fell even more sharply than crude on Wednesday and Thursday, despite continued problems at two major Gulf Coast refineries still struggling to recover from Hurricane Georges. A post-summer easing of demand has allowed production to nearly keep pace, minimizing stockdraws.
Distillate - followed crude oil markets, pulling prices down to their lowest levels since early September. Stocks fell only slightly in the week ending October 2, and remain 13 million barrels over year- ago levels.
CHRONOLOGY OF RECENT MARKET EVENTS
10/9 - mixed - crude oil and NYMEX gasoline prices rose modestly, while other product prices posted a slight decline. After a two-day slide in which WTI crude prices fell over $1 per barrel, markets were relatively quiet ahead of the weekend.10/8 - falling - prices fell marketwide for a second day, in a virtual repeat of Wednesday's drop, this time in response to reports from both IEA and EIA citing a growing world oil supply surplus. Despite a drop in OPEC output, world production grew in September, while demand continues to soften due to regional economic weakness.
10/7 - falling - all prices dropped sharply, led by gasoline, as traders reacted to "disappointing" weekly supply data. Gasoline and distillate stockdraws were smaller than had been expected, while EIA showed a crude oil stockbuild, as opposed to the draw reported by API. The reported shut-in of over 400 thousand barrels per day of Nigerian production due to civil unrest was mildly supportive.
10/6 - rising - crude oil and product prices rose moderately across the board, boosted by general expectations of stock draws in the weekly API and EIA supply reports. However, traders lacked consensus on the specific impacts of Hurricane Georges on Gulf Coast production and refining.
10/5 - mixed - most prices ended lower, reflecting overall disappointment with the results of last week's meeting of oil ministers in Cancun. Only spot gasoline was higher, supported by tight prompt supplies resulting from continued problems at two flood-damaged Gulf Coast refineries.
10/2 - rising - prices rose market-wide, partially rebounding from Thursday's sharp selloff. Shortcovering was largely credited to the meeting in Cancun of oil ministers from Saudi Arabia, Venezuela, and Mexico. Gasoline was particularly strong, with two refineries still shut down due to storm damage.
10/1 - falling - spot and futures prices dropped solidly across the board, in a broad-based selloff characterized as a correction to recent bullishness. Spot WTI crude oil had reached a 5-month high through Wednesday after climbing since mid-August, and was seen as overvalued.
9/30 - rising - all prices rose, led by products, despite larger-than-expected stockbuilds in crude oil and distillates in the weekly API and EIA supply reports. The October NYMEX product futures contracts expired uneventfully, while recovery from Hurricane Georges continued.
9/29 - mixed - most prices moved moderately higher in the wake of Hurricane Georges, led by crude oil, as operators in the Gulf Coast area worked to restart production and refining facilities. Two significant refineries remained closed due to flooding.
9/28 - mixed - crude oil and distillate prices partially recovered from early losses, but finished lower, despite Hurricane Georges' landfall near Biloxi, Mississippi, temporarily shutting in most offshore oil and gas facilities in the Gulf of Mexico. Gasoline closed slightly higher, due to refinery shutdowns caused by the storm.
File last modified: 10/15/1998
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