The Oil Market Sold Off on Friday Following an Overnight Rally of More Than 4.2%

Recap:  The oil market sold off on Friday following an overnight rally of more than 4.2% after Iran played down Israeli attacks on its soil, in a sign that a further escalation of tensions in the Middle East may be averted. The market rallied $3.55 cents to a high of $86.28 in overnight trading following the news of an Israeli attack on Iran, highlighting the initial fear of further escalation. It was the latest exchange between the two countries after Iran struck Israel with drones and ballistic missiles on Saturday, April 13th in retaliation for a presumed Israeli air strike on April 1st. However, the crude market came off as the attack appeared to have caused no significant damage and Iran indicated it had no plans for retaliation, easing concerns about an escalation turning into a region-wide war. The oil market sold off to a low of $81.80 early in the morning. The market later retraced its losses and traded over the $83.00 level ahead of the close. The May WTI contract settled up 41 cents at $83.14 and the June Brent contract settled up 18 cents at $87.29. The product markets ended mixed, with the heating oil market settling up 74 points at $2.5413 and the RB market settling down 34 points at $2.7103.

Technical Analysis:  The crude market on Monday will likely trend sideways before it tests its previous low ahead of the May contract’s expiration at the close. The market is seen testing its previous low as concerns of a flare-up in the Middle East dissipates. Support is seen at its lows of $81.80, $81.56 followed by $80.55, $80.42, $80.30 and the $80.00 level. Meanwhile, resistance is seen at it high of $83.89, $84.62, $85.34, $86.28 and $87.67.

Fundamental News:  Israel launched an attack on Iranian soil on Friday, in the latest tit-for-tat exchange between the two countries. Iranian media reported explosions, but an Iranian official said those were caused by air defense systems and added that no damage was caused in the overnight attack. Israeli media cited foreign reports of an Israeli strike on Iran on Friday in the absence of official public comment, while Iranian television reports played down the attack. Israeli media cited reports from the New York Times and the Washington Post, which quoted unnamed Israeli officials as confirming Israel was behind the attack, but did not report official confirmation of their own. Meanwhile, a senior Iranian official said that Tehran did not plan a response now.

IIR Energy reported that U.S. oil refiners are expected to shut in about 1.5 million bpd of capacity in the week ending April 19th, cutting available refining capacity by 83,000 bpd.

The U.S. Environmental Protection Agency will temporarily expand sales of higher-ethanol blends of gasoline this summer in an effort to reduce potential supply disruptions amid ongoing conflicts in Ukraine and the Middle East. The decision marks the third consecutive year the administration has lengthened the period during which Americans can keep buying E15, a gasoline that uses a 15% ethanol blend. Sales are effectively blocked from June 1st to September. The waiver is effective on May 1st and will continue for 20 days. The administration intends to renew the waiver until it is no longer necessary.

The Biden administration took steps to limit both oil and gas drilling and mining in Alaska. The measures are aligned with President Joe Biden's efforts to rein in oil and gas activities on public lands and conserve 30% of U.S. lands and waters to combat climate change. The Interior Department finalized a regulation to block oil and gas development on 40% of Alaska's National Petroleum Preserve to protect habitats for polar bears, caribou and other wildlife and the way of life of indigenous communities. The rule would not affect existing oil and gas operations, including ConocoPhillips' Willow project, which the Biden administration approved last year.

Early Market Call - as of 8:10 AM EDT

WTI - May $82.68, down 46 cents

RBOB - May $2.6768, down 3.35 cents