Recap: Oil futures pulled back from two-year highs on Monday, pressured by the prospect of higher Iranian exports and lower Chinese demand. However, increased demand expectations for both Europe and the U.S. placed a floor under the market, as these locations commence the reopening process after COVID-19 lockdowns. While the demand side continues to drive this market, the Chinese trade data cooled things off a bit. July WTI slipped 39 cents, or 0.6%, to settle at $69.23 a barrel, while August Brent lost 40 cents, or 0.6%, to settle at $71.49 a barrel. July RBOB fell 1.84 cents, or 0.83%, to settle at $2.1931 a gallon, the largest one day dollar and percentage decline since Thursday, May 20, 2021 and the end to a four session winning streak. July heating oil shed 0.2%, to nearly $2.12 a gallon.
Technical Analysis: WTI retreated from the psychological resistance level of $70, putting a temporary stop on the uptrend of this market. July WTI held below the upper Bollinger band basis a 2 standard deviation. This spot contract continues to gravitate toward the upper band, as it establishes higher lows and higher highs. That being said, we would look for buying opportunities down toward the mean of the Bollinger bands, which is currently set at $66.20. On the bullish side of things a push through $70.00 opens up the opportunity for this market to tack on another $2, as it works its way toward $72. To the downside, a break below the mean could see this market at the lower Bollinger band, which is currently set at $62.28.
Fundamental News: OPEC's Secretary General, Mohammad Barkindo, said OPEC and its allies expect oil inventories to fall further in the coming months, suggesting efforts by the producers to support the market are succeeding. He said oil stocks in the developed world nations fell by 6.9 million barrels in April, 160 million barrels lower than the same time one year ago. He said OPEC+ compliance was 114% in April.
According to BP’s Chief Executive Officer, Bernard Looney, the company sees a strong recovery in global crude demand and expects it to last for some time, with U.S. shale production being kept in check.
Bank of America analysts said refining margins are expected to increase as oil demand recovers but added that abundant processing capacity will continue to weigh on the market, with more than 3 million bpd of planned additions during 2021-22. They stated that while they are bullish on refined product cracks from here, the upside is seen limited.
China's General Administration of Customs reported that the country’s crude oil imports in May fell 14.6% on the year to 40.97 million tons or 9.65 million bpd, the lowest level this year, as maintenance at refineries limited consumption of the resource. That compares to 9.82 million bpd in April and 11.3 million bpd in May of last year when Chinese buyers purchased cheap oil amid the spread of the coronavirus. About 1.2 million bpd of China's refining capacity was offline in May, up from 1 million bpd in April. Refined oil products exports in May fell to 5.41 million tons from 6.82 million tons in April, but increased 38.9% higher versus a year earlier.
IIR Energy reported that U.S. oil refiners are expected to shut in 286,000 bpd of capacity offline in the week ending June 11th, increasing available refining capacity by 295,000 bpd from the previous week. Offline capacity is expected to fall to 260,000 bpd in the week ending June 18th.
Early Market Call – as of 8:00 AM EDT
WTI – July $68.64, down 59 cents
RBOB – July $2.1736, down 1.92 cents
HO – July $2.0965, down 1.86 cents
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