Recap: Oil prices added to their gains on Tuesday, as more states in the U.S. eased COVID19 restrictions, and as the European Union plans to allow foreign visitors who have been vaccinated to travel to its countries. Gasoline futures jumped more than 2.8%, reaching its highest level in almost three years after a unit at the Phillips 66 Bayway refinery in Linden, NJ was shut due to a leak. Gasoline demand in the U.S. has been on the rise as more motorists take to the roads. Oil futures received a post settlement boost after the API reported a 7.7 million barrel draw in U.S. crude oil inventories, with June WTI rising above $66 a barrel. This spot contract settled at $65.29, up $1.20 or 1.8%. Brent for June delivery added $1.32, or 1.9%, to settle at $68.88 a barrel. June RBOB settled at $2.1512 a gallon, up 0.0412 cents, while June heating oil settled at $1.9988 gallon, up 0.0469 cents.
Technical Analysis: The inverse relationship between the U.S. dollar and WTI fell apart after U.S. Treasury Secretary Janet Yellen suggested that U.S. interest rates may need to rise to prevent the economy from overheating as more of U.S. President Joe Biden’s economic investment programs come on line. This move would make the dollar more attractive as interest rates rise thereby increasing the price of dollar denominated commodities. Tuesday’s move in WTI also suggests buyers are focused on the successful roll-out of vaccine programs in the U.S. and in other developed countries and not on the surge in COVID-19 cases and deaths in India and Brazil. With this in mind, we would look for this market to continue to work higher, with buyers waiting down below to buy on dips. Support is set at $65 and below that at $63.28, the 10-day moving average. Resistance is up at the $67.98 level.
Fundamental News: Kpler in a research note warned that India’s oil imports may decline by more than 1 million b/d in coming weeks as the impact from COVID shut downs cycle through the economy. They also warned that India’s demand loss may result in a cut in global consumption for 2021 of 200,000 bpd.
Reuters reported the 130,500 b/d cat cracker at the 300,000 b/d Bayway Phillips refinery was shut down late Monday night due to a leak. It is uncertain how long the unit will be down.
The 26,000 b/d VDU at the Trainer refinery was reportedly shut down on Monday afternoon. The refinery also had second VDU that went off line Tuesday morning.
The U.S. Commerce Department reported that U.S. factory orders in March rose by 1.1%, slightly less than market expectations of a 1.3% increase. The Commerce Department also revised the February reading from a previous estimate of a 0.8% decline to only a 0.5% decline.
Early Market Call – as of 8:45 AM EDT
WTI – June $66.51, up 82 cents
RBOB – June $2.1790, up 2.78 cents
HO – June $2.0198, 2.10 cents
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