Oil Prices Attempting To Rally Ahead Of Weekly Inventory Reports
Oil prices are attempting to rally ahead of the weekly inventory reports and the FOMC’s highly anticipated announcement due tomorrow. WTI rallied right back into the 200 day moving average that helped reject last week’s rally attempt, which makes a good pivot point to watch as the market continues its search for direction. If WTI can sustain a push above that level, it seems likely that we’ll see a run at $60, which should help products add another 8-10 cents. If it fails again, it seems more likely we’ll see another test of the lower end of our summer trading range.
Traders have priced in a 100% probability that the FOMC will cut its interest rate target tomorrow by at least 25 points, and a 25% chance of a 50 point cut. That certainty of a rate cut is getting some of the credit for the early rally in energy prices, although stock markets are pointed to a lower open, which contradicts that theory. Odds are that without any news from the Strait of Hormuz, interest rates are the easiest thing to explain a brief bit of buying.
A US federal appeals court rejected PDVSA’s appeal, and set the stage for Citgo’s assets to be seized and sold to pay off a previous $1.4 billion judgement against the Venezuelan oil company. Don’t expect changes any time soon however as it looks like this could get appealed again to the US Supreme court, and it’s hotly debated just who is in fact legally in charge of PDVSA these days.
The stream of oil company earnings reports continue this week, with mixed results so far and more signals that smaller drillers are continuing to struggle, which may mean less drilling activity in the US in the back half of the year. The multi-billion dollar question is when that slowdown in drilling will actually translate to less oil production, as the log of drilled but uncompleted wells (DUCs) may keep output rising for some time.
The storm system heading towards Florida was “downgraded” by the NHC in its latest advisory, with a 0% chance of development over the next 48 hours, and only a 10% chance of development over the next 5 days. No doubt the weather channel will continue showing it multiple times an hour this week, but it appears this will be a non-issue for fuel supplies in the area.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.