After plunging about 10% in two days, both WTI and Brent oil rebounded on Wednesday, cutting their weekly losses to about 5%. The global benchmarks once again ended the week in the mid-30s, but are still down 10% year-to-date.
Last week, reduced expectations for interest rate increases in the United States were perhaps the most important influence on the price of oil. Lackluster American data and dovish comments from William Dudley, an influential member of the Fed, ignited concerns that the U.S. economy might be stalling. Investors now believe that the Federal Reserve will not raise rates anytime soon, which weakened the greenback. Because oil is priced in USD, the falling dollar boosted the price of oil, causing Wednesday’s rebound. Although bearish inventory numbers slowed the rally, the fact that oil prices did not fall back to the weekly low set on Tuesday is worth noting.
It was reported last week that hedge funds are increasing their bullish bets on oil at the greatest rate in 5 years. Net long positions increased by the largest amount since 2010, indicating that fund managers are increasingly confident that the price of oil is on the rise. The tone of the market seems to have shifted—although we are not seeing the same kind of exuberance that characterized the beginning of the decade, it seems that the overwhelming pessimism towards oil is turning into a cautious optimism.
Diesel in Canadian dollars ended trading on Friday essentially exactly where it began the week, closing just above 0.39 CAD/L. Although New York Harbor ULSD was slightly in the red last week, a small strengthening of the loonie counteracted diesel’s drop. It appears as though the market is trying to find support levels for energy prices, which would make this an opportune time to hedge a portion of your fuel consumption.
