Oil Prices Rally After U.S. President Tweets His High Hopes
Oil prices rallied 25 percent in less than 40 minutes Thursday, after the U.S. president tweeted his hope that Saudi Arabia and Russia might come to an agreement on an output cut.
Despite the fact that the Saudi’s have subsequently made it clear that they will only cut if other producing nations join in the effort (including the U.S.) and the fact that a 15 million barrel output cut would only cover half of the drop in global oil demand, petroleum prices around the world are trading sharply higher for a second day.
Prices are also aided by the Department of Energy announcement Thursday, announcing that it is opening up the SPR for lease to struggling U.S. producers that are quickly running out of storage space. There’s a total capacity available of roughly 77 million barrels, which would accommodate roughly six days’ worth of total U.S. output, or six weeks of the record-setting inventory build we just witnessed.
The record rally following the worst month on record for oil prices has temporarily halted talk of negative oil prices; although, they did already happen on a very limited basis, with Wyoming sour trading below zero earlier this week. The more important part of that article is not that the values went negative, it’s that the negative values are a sign of a functioning market whereas some other markets are beginning to halt trading altogether.
The March payroll report just released showed a drop of 701,000 jobs in the U.S. last month, with unemployment rates jumping by nearly one percent for the headline rate, and 1.7 percent for the U6 unemployment rate. While those figures are a huge negative divergence change from the prior decade, they are also just the tip of the iceberg as most of the virus-impact was felt in just the last two weeks of the month.
Two weeks ago, the all-time official record for weekly jobless claims in the U.S. was around 700,000. Last week’s report smashed that record, with 3.3 Americans filing for unemployment benefits,. That figure was doubled again yesterday, with 6.6 million new filings reported in the past seven days, wiping out the previous four years’ worth of gains.
While the short term price action may be driven by the headlines, longer term prices may well be decided by how quickly we can get those people back to work.
Click here to download a PDF of today's TACenergy Market Talk.
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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.