Analysis by Dr. Nancy Yamaguchi
Oil prices sank sharply this morning. The five-week price rally that had moved crude prices into the $40-$41/b vicinity during March 21-23 came to an end last week. Although the price retreat came in fits and starts at first, the supply and demand fundamentals exerted a more undeniably bearish sentiment this week. US inventories have climbed, and OPEC output has risen as Iran works to restore its production levels. Iranian output is approximately 3.1-3.2 mmbpd, and its stated production target is 4 mmbpd. Although restoring this level of output will not be a simple task, Iran’s goal to place another 0.8-0.9 mmbpd onto an oversupplied market may overwhelm the goals of other producers to cap production.
Crude prices fell to $36.90/b this morning, a drop of $1.78/b, or 4.6%. Refined product prices fell also. Heating oil prices fell 4.0% (4.68 cents/gal) to $1.1348/gal. Gasoline prices fell 0.9%, (1.34 cents/gal,) to $1.4089 cents/gal.