Recap: Recession fears pressured oil prices on Thursday, pushing them to their lowest level in four years, as the coronavirus pandemic slowed economic growth and oil demand while Saudi Arabia and Russia kept up their battle for market share. After gaining more than 5% in overnight trading, April WTI turned to the downside, pressured by lower equities. This spot contract fell to a low of $26.63 a barrel, before settling at $26.95, down 41.75, or 6.1%. This was the lowest level for a spot month contract since February of 2016. May Brent lost $1.32, or 4.4% to settle at $28.73, the lowest level since January 2016. Global oil supplies are projected to range between 4 to 10 million barrels per day from February to May 2020, according to IHS Markit. April RBOB rose 3.1% to 71.14 cents a gallon, after a more than 23% plunge a day earlier. April heating oil shed 1% to $1.0357 a gallon.
Technical Analysis: Based upon a 60 minute chart, and after falling out of the sideways trading pattern set by the high of $33.86 and low of $30.05, April WTI has slipped into a downward channel, with a near term bottom below $24.00. With the downtrend established we would look for a test at the bottom of this channel. To the upside a trade above $27.83 should lead toward another run at the $30 level.
Fundamental News: Saudi Arabia plans to increase its crude oil exports to more than 10 million bpd from May while burning less crude for power generation. Saudi Arabia will utilize the gas produced by the Fadhill gas plant to compensate for about 250,000 bpd of domestic oil consumption. This will enable the country to increase its crude exports during the coming months to exceed 10 million bpd.
Morgan Stanley lowered its second quarter Brent price forecast from $35/barrel to $30/barrel. It also lowered its third quarter and fourth quarter forecasts for Brent crude to $35/barrel. It lowered its second quarter WTI price forecast to $27.50/barrel from a previous forecast of $30/barrel. Its third quarter and fourth quarter WTI price forecast was cut to $32.50/barrel. The price of Brent for 2021 was cut to $42.50/barrel from $50/barrel and the price of WTI was cut to $40/barrel from a previous forecast of $45/barrel.
Societe Generale said it expects peak oil demand destruction to occur in the second quarter with 5 million bpd of oil demand destroyed in those three months. It expects OPEC+ output to increase by 3 million bpd starting now and for this to be sustained at least in 2020.
Glencore has chartered the 3 million barrel of crude carrier Europe to store oil at sea for at least 6 months. Glencore booked the vessel at a rate of $37,000 a day for the first six months. Sources stated last week that Royal Dutch Shell had provisionally booked at least three supertankers to store crude oil at sea for at least three months.
S&P Global Platts trade flow software cFlow reported that a total of 890,000 metric tons of US Gulf Coast middle distillate shipments is currently scheduled to arrive in Europe in March, with 570,000 metric tons bound for Northwest Europe and 320,000 metric tons set to arrive in the Mediterranean. In February, about 580,000 metric tons of middle distillates loaded on the USGC landed in Europe.
Early Market Call – as of 8:50 AM EDT
WTI – Apr $23.76 down $2.27 per barrel
RBOB – Apr $$0.6814 down 3.00 cents per gallon
HO – Apr $$1.0133 down 2.27 cents per gallon
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