Recap: Oil futures were mixed on Tuesday, with Brent gaining support as some governments announced the easing of coronavirus related restrictions and WTI falling as U.S. stockpile rise toward record highs amid tightening storage and waning demand. June WTI gave up early gains sparked by reports of a bomb explosion on an oil tanker in Syria. Traders are cautioned, as we have to wait and see if the explosion was a one-time thing, or if it will lead to a string of incident. Against that backdrop, June WTI briefly traded as high of $13.69 a barrel before turning lower again to settle down by 44 cents, or 3.4%, at $12.34 a barrel. It had been trading as low as $10.07 before news of the tanker explosion. June Brent climbed by 47 cents, or nearly 2.4%, to $20.46 a barrel, after a 6.8% drop to $19.99 on ICE Futures Europe on Monday. May RBOB rose 2.9% to 66.72 cents a gallon and May heating oil added 3.3% to 63.08 cents a gallon.
Technical Analysis: June WTI came down to test support set at $10, but bounced off of it. With the overall bearish fundamentals, we are still looking for a break below this level, with the possibility of trading in negative territory. Support below $10 is set at $6.50. The first line of resistance is set at $14.54 and above that at $17.65, the 10 day moving average.
Fundamental News: Refinitiv Oil Research stated that transatlantic diesel and gasoil arriving into Europe this week is expected to fall by about 25% on the week to 150,000 tons. April arrivals from the US were expected to close lower than the previous month at just under 400,000 tons, May arrivals to date are tracking at just 77,000 tons.
Texas energy regulators next week will vote on a controversial proposal to reduce the state’s oil production after delaying it on concerns of legal challenges. The vote follows a motion submitted by Texas Railroad Commissioner, Ryan Sitton, who had already been vocal about the need for curtailments to address low oil prices. His motion calls for curtailments of 20% of the state’s output and if agreed, cuts would remain place until the Railroad Commission of Texas determines that global demand has surpassed 85 million bpd of oil.
According to a notice published by the North Dakota Industrial Commission, North Dakota regulators plan on May 20th to consider whether oil production at low prices represents a waste of resources. The decision on whether oil production at certain prices is economic waste could allow regulators and operators to take actions to help stabilize prices, including mandating production cuts or allowing operators to shut wells without losing valuable leases.
According to Petrologistics, OPEC’s crude oil supply in April is at its highest level since December 2018, as producers produce at will before a new supply cut agreement takes effect in May. It reported that oil production increased more than 2 million bpd. April’s increase is being driven by “record supply from Saudi Arabia, the UAE and Kuwait, despite the country cutting its production in advance of the May 1st curtailment.
Russian Energy Minister, Alexander Novak, said oil markets would start balancing out once an output deal took effect, but no significant rise in prices was likely in the near future due to high levels of global storage. Separately, the head of production and transportation department at the Energy Ministry, Alexander Gladkov, said the price of oil is expected to average $30/barrel this year.
Abu Dhabi National Oil Co informed its customers of a cut in its crude oil nominations for June in line with a decision by OPEC+ this month to cut oil supplies. Nominations for both Murban and Upper Zakum crude grades will be cut by 20% each, while Das and Umm Lulu grades will be cut by 5% each.
Early Market Call – as of 8:25 AM EDT
WTI – June $14.50, up $2.15
RBOB – May $.6980, up 3.08 cents
HO – May $.6650, up 3.42 cents
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