WTI Feb crude oil futures began the day lower and fell as low as $44.51/barrel
by 9:30am ET. However, by 10:15am ET, WTI crude had rallied as much as $2.34/barrel,
or +5.3%, to $46.85/barrel.
This volatility comes after oil prices collapsed in the fourth quarter of 2018. Between October 3 and December 24 of 2018, WTI oil dropped 44.3% to as low as $42.53/barrel, down from $76.41/barrel.
The collapse came from a number of drivers, including
- the continued rise of U.S. shale oil production;
- slowing economic growth;
- a rising dollar index;
- weaker demand;
- concerns about OPEC+ actual production cuts (concerns that any participants will back down from agreed curtailment);
- and, of course, President Trump's frequent pounding on the table for lower gas prices, which had an overall effect on the oil market, pressuring other producers.
On the flipside, key bullish drivers in the oil market have included
- OPEC+ production cuts;
- Iran sanctions;
- Venezuela (production down sharply);
- Libya (production down, chaos);
- and Saudi Arabia coming out with a rare, bullish call on oil prices, which was reflected in its 2019 budget. In short, Saudi Arabia is forecasting that 2019 oil revenue will rise 9% to $177 bln in 2019, hitting a five-year high (however, this will still mark a sixth-straight budget deficit).
Also note that with U.S. oil prices having plunged in the fourth quarter,
U.S. shale oil producers now have to debate who will start to reduce
production, especially if prices go even lower. There is a rather wide range of
break-even levels among U.S. shale oil producers. However, the $50/barrel area
(for WTI crude oil) is a good area to focus on. Many in the industry have noted
in the past that WTI oil needs to be above $50/barrel for the industry to
Going forward, all of these drivers will be influencing oil prices, which will contribute to another volatile year in the oil market.
As of now, Feb WTI crude oil futures are +1.75 (+4%) at $47.16/barrel.