Recap: The oil market rallied higher on Friday and settled in positive territory, while it posted a weekly decline for a second consecutive week after U.S. economic data and uncertainty over further interest rate increases weighed on the demand outlook. The market retraced some of Thursday’s losses overnight, trading back to $75.50 before it gave up its gains once again and retraced little more than 50% of its move from a low of $64.58 to a high of $83.38 as it sold off to a low of $73.93. However, the market bounced off its low and rallied $2.15 to a high of $76.91 ahead of the close. The market was supported by EIA data showing that U.S. oil production fell in February to 12.5 million bpd, while demand increased to nearly 20 million bpd. The June WTI contract settled up $2.02 or 2.7% at $76.78, with a weekly decline of 1.4%, while the June Brent contract settled up $1.17 at $79.54. WTI crude gained $1.11 or 1.47% on the month, the largest gain since October 2022. The product markets also ended the session in positive territory, with the heating oil market settling up 2.45 cents at $2.3787 and the RB market settling up 4.52 cents at $2.5780.
Technical Analysis: The oil market is seen continuing on its downward trend as it continued to post a lower low over the last few sessions after backfilling a gap from early April. The market is seen finding resistance at $76.92, $77.93 followed by $79.07, $79.18 and $79.81. Support is seen at $76.21, $75.50, and $74.50 followed by its low of $73.93, $71.90 and $71.76. More distant support is seen at $69.27 and $67.02.
Fundamental News: The U.S. EPA on June 1st will issue an emergency waiver on volatility limits for E15 during the summer driving season, marking the second consecutive year the Biden administration has moved to lift restrictions on the ethanol blend. The waiver, announced by the agency on Friday, will remain in effect for 20 days, meaning the administration will need to renew the relief measure a number of times this summer. The move will temporarily exempt the 15% ethanol fuel blend from volatility requirements that effectively block sales from June 1st to September 15th throughout much of the United States.
The EIA reported that U.S. crude oil field production in February fell by 53,000 bpd to 12.483 million bpd, the lowest level since December 2022. It reported that U.S. crude and petroleum products demand increased to 19.997 million bpd, the highest level since November 2022. U.S. product supplied of finished motor gasoline in February increased by 1.4% or 117,000 bpd to 8.715 million bpd, the highest level since November 2022 and U.S. distillate demand in February fell by 3.8% or 159,000 bpd to 4.018 million bpd. The EIA reported that U.S. crude oil exports increased to 3.998 million bpd in February, up from 3.514 million bpd in January and total refined oil product exports fell to 2.685 million bpd in February, down from 2.919 million bpd in January. U.S. gasoline exports fell to 785,000 bpd in February from 884,000 bpd in January and distillate fuel exports fell to 913,000 bpd in February from 940,000 bpd in January.
Baker Hughes reported that U.S. energy firms this week added oil and natural gas rigs for a second consecutive week for the first time since March. The oil and gas rig count increased by two to 755 in the week ending April 28th. The number of oil rigs was unchanged this week at 591 while gas rigs increased by two to 161 this week.
IIR Energy reported that U.S. oil refiners are expected to shut in about 1.1 million bpd of capacity in the week ending April 28th, increasing available refining capacity by 149,000 bpd. Offline capacity is expected to fall to 580,000 bpd in the week ending May 5th and further to 495,000 in the week ending May 12th.
Early Market Call – as of 8:20 AM EDT
WTI – June $75.30, down 1.47
RBOB – June $2.4891, down 4.1 cents
HO – June $2.3449, down 3.22 cents
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