Crude Glut Weighs on Prices
US crude oil prices are coming under pressure again as concerns build about a supply overload. According to the Department of Energy's weekly storage report, US crude oil inventories are at the highest level since the Great Depression and continue to climb as US drillers pump near a breakneck pace.
One of the major issues facing the US oil market is that crude oil exports are essentially prohibited, preventing sales to foreign markets. As a result, US storage facilities are almost full, and the only way to clear the current glut would be for refineries to increase demand or drillers to slow down production.
Although refinery demand could pick up, the US also has above-average gasoline inventories, which may discourage refiners from boosting capacity. Meanwhile, US oil producers are cutting back on new projects, but wells that they've already drilled continue dumping crude onto the market, which could lead to oversupply for months to come.
As of midday Friday, April crude oil was worth $49.80 per barrel.
Mario Draghi Drops the Euro
The euro currency slid to an eleven-year low on Friday as interest rates in Europe collapsed to record low levels. Mario Draghi, president of the European Central Bank, reiterated the bank's plan to stimulate Europe's floundering economy with a massive bond buying program much like our own Federal Reserve Bank instituted during the past few years.
Draghi's goal is to improve economic growth and ramp up inflation which, in turn, should help European exports and employment. That stimulus could help one of our largest customers get back on their feet but it could also push the US dollar higher. A higher dollar can hurt our US export market since grains and other commodities produced here become more expensive to the rest of the world.
As of midday Friday, the euro currency was worth less than $1.09.
Soy Market Sours
After climbing for all of February, the soybean market started March with a rough patch, falling each of the first five trading days. By midday Friday, beans had lost nearly 60 cents per bushel, most of what they'd gained in February.
Prices are dropping as the market tries to digest a large South American soybean crop that is being harvested right now. Meanwhile, China, the US's largest customer for soybeans, is shifting its purchases towards cheaper South American beans, which is undercutting US prices, which stood at $9.73 per bushel on Friday.