Crude futures were sharply lower Monday morning, adding pressure to refined products that typically see off-season weakness.

Gasoline futures and spot prices were particularly hard hit, with the largest cash market declines coming in the Midwest.

And while forecasts call for some winter weather across large parts of the country that could boost distillate demand, traders appeared to be reluctant to buy until the cold weather arrives.

Crude plunged overnight on word that Saudi Arabia was reducing its Official Sales Prices in what was regarded as an acknowledgment of lower global demand.

There is at least for now some psychological support at $70/bbl for West Texas Intermediate crude, but selling pushed the NYMEX February WTI contract as low as $70.13/bbl before it recovered some.

The February WTI contract was down by $3.41 to $70.40/bbl just ahead of midday. Brent was also under pressure with the March contract down $3.06 to about $75.70/bbl.

Some of crude's weakness was predictable. The week opened with rebalancing by large commodity funds the Bloomberg Commodity Index and the Goldman Sachs Commodity Index.

Citigroup predicted about $2 billion in WTI length may exit both funds this week. That works out to about 27,000 long positions in crude.

Bulls have largely been silent this month, though some remain vocal about oil being cheap.

Former Goldman Sachs' commodity head Jeff Currie appeared on Bloomberg television Monday morning praising the "set up" for crude in 2024. Currie said stocks are low, spare capacity is exhausted and demand is running close to record levels.

He added that market bulls fared so poorly in 2023 that many are reluctant to take a strong position either way in the new year.

Gasoline prices in some U.S. spot markets were at multi-month lows Monday morning. Gasoline and ethanol in the Great Lakes states were both priced at about $1.59/gal and ethanol Renewable Identification Number credit prices were holding at about 80cts each.

That puts the hypothetical cost of an E10 blend barely over $1.50/gal, meaning some retail stations in the region could be selling gasoline this month for as low as $1.99/gal.

NYMEX RBOB futures sold off with crude and many in the market expect the Energy Information Administration on Wednesday will estimate U.S. gasoline demand last week at about 8 million b/d.

Some refiners are reacting to the winter demand slump by looking to move up turnarounds that had been scheduled for March and April to this month and the next. Maintenance work on two large crude distillation units at Motiva's Port Arthur, Texas, refinery may begin as soon as next week.

The NYMEX February RBOB contract could flirt with a multi-year low of about $1.97/gal this week. The contract was off 7.31cts to $2.0324/gal near midday.

A seasonal low in January would break a string of years in which the annual low was reached in December.

Diesel futures were also softer even though the weather forecast for the second half of January is somewhat supportive. Heating oil demand should pick up and remove some product that would otherwise go into diesel channels.

The NYMEX February ULSD contract was off by 4.45cts to $2.564/gal just ahead of midday.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com


(END) Dow Jones Newswires

01-08-24 1246ET