Oil Futures Experience Significant Losses

Crude oil and refined product futures contracts are experiencing strong losses as we head into Friday afternoon, erasing gains from the previous day and setting prices up for weekly losses.

Crude Contracts Plunge

At around 11 a.m. ET, crude contracts were down by more than $1 per barrel, while gasoline and diesel futures were plummeting by more than 4 cents per gallon.

Refined Product Prices Rally, Then Fall

Refined product prices rallied on Thursday following a report from the Energy Information Administration showing declines in distillate and gasoline inventories. This came amidst a notable decrease in U.S. refinery operations. However, U.S. crude oil inventories have seen builds due to this decrease in refinery operations.

Market Pressures Persist

Despite ongoing tensions in the Middle East raising supply concerns, the combination of U.S. Fed hesitancy to cut interest rates and increased oil inventories is continuing to pressure prices.

Price Movements

• The April contract for U.S. benchmark West Texas Intermediate crude dropped $1.30 per barrel to $77.31.
• May prices also fell, with a decrease of $1.16 per barrel to $76.77.
• European benchmark Brent crude for April was down $1.26 per barrel to $82.43, while May prices slipped $1.16 per barrel to $81.54.

Both WTI and Brent contracts have fallen more than $1 per barrel compared to last week's levels.

Diesel and Gasoline Futures Prices Experience Decline

Diesel futures prices took a significant hit during the week, continuing their decline on Friday. The March USLD contract fell 4.82cts to $2.7038/gal, while April prices dropped 4.65cts to $2.6568/gal. Overall, both contracts have decreased by more than 10cts/gal since the previous Friday.

Diesel Prices Face Challenges

Diesel prices are currently grappling with challenges due to a milder than expected winter, which has dampened demand. Furthermore, the forecast predicts unseasonably warm temperatures across much of the country starting next week.

In comparison, RBOB contracts experienced lighter losses for the week. On Friday, the March contract decreased by 4.17cts to $2.2930/gal, marking a drop of over 2cts/gal from the previous week. Meanwhile, the April contract, representing a pricier summer blend of fuel, was down 4.04cts to $2.5295/gal.

Potential Shifts in Gasoline Demand

Although gasoline demand has been lackluster in the early months of 2024, many anticipate a surge in demand as Spring approaches. There are concerns within the industry regarding potential imbalances in supply as U.S. refinery downtime coincides with the transition from winter to summer fuel specifications.