WTI and Brent Reach 2 Month Highs
Just 2 days after prices were reaching their lows for November and threatening a technical breakdown, WTI and Brent both reached 2 month highs and are on the cusp of a technical breakout to the upside. As has been the case, whether the market is up or down, US/China trade talks and the November OPEC meeting are getting credit for the move, even though nothing has actually changed in either case.
Refined products have had similar moves to oil, rallying around 10 cents in two days, but unlike crude they’ve not yet broken through the top end of their November trading range.
This is often the start of the winter doldrums for refiners, and with crack spreads already falling sharply over the past months for many US plants, it seems that hope for the new IMO rules would prop up spreads have not yet materialized. As has been the case for most of the past year, there still seem to be more questions than answers on the new marine diesel specs, so don’t be surprised to see more volatility in crack spreads over the next few months.
One noteworthy difference from last year is the relative lack of volatility in both energy and equity markets compared to 2018. It may not seem like it’s low volatility after a back and forth week like we’ve just experienced, but looking at the volatility chart below, the daily movements in both asset classes are a fraction of what they were this time last year at the mid-point of the great Q4 sell-off that didn’t end until reaching a crescendo on Christmas eve. For comparison purposes, WTI dropped from $65 to $49 last November, making this week’s move seem a bit insignificant.