Crude Oil

Prices: The front-month futures price for Brent crude oil settled at $61.68 per barrel (b) on January 10, 2019, a decrease of 1 cent/b from December 3, 2018. The front-month futures price for West Texas Intermediate (WTI) crude oil for delivery at Cushing, Oklahoma, decreased by 36 cents/b during the same period, settling at $52.59/b on January 10 (Figure 1).

After stabilizing briefly following the Organization of the Petroleum Exporting Countries’ (OPEC) agreement in early December to voluntarily reduce oil production starting in January 2019, crude oil prices rapidly declined in the final weeks of 2018. Historical crude oil futures price volatility reached its highest levels since the first quarter of 2016. Similar to that quarter, recent weakness in global economic indicators could indicate a slowdown in economic growth and oil demand. China’s manufacturing Purchasing Managers’ Index for December fell to 49.7, where any reading below 50 indicates a contraction in manufacturing activity. Recent trade data show, however, that OPEC crude oil exports declined about 10% from November to December, suggesting OPEC members began reducing oil production ahead of the scheduled reductions in 2019. These supply reductions may have contributed to the oil price increase at the beginning of January, returning to levels just before the December 7 OPEC meeting.