Recap: Oil futures jumped more than 2% in reaction to the U.S. fired missiles at a Syrian government airbase in overnight trading. Trading was chaotic as May WTI peaked the session at $52.94, but by sunrise on the east coast, the market retraced itself and fell into negative territory, pressured by strength in the dollar. Just as it struggled to maintain earlier gains, oil futures struggled to the downside as well, rising back above unchanged. May WTI settled above $52.24 a barrel, up 54 cents, or 1.04%, while Brent for June delivery gained 35 cents, or 0.64%, to settle at $55.24.
The Dec17/Dec18 WTI spread we had last written about on March 27th, traded at its widest backwardation (front month premium) since February 27th, having peaked on Friday at 82 cents. This puts this spread in range of testing the post OPEC output agreement high of $1.09. A break above $1.09 allows for a run at $1.25, the highest this spread has traded since 2014.
May RBOBrose 1.66 cents, or 1%, to close at $1.7462 a gallon, its highest since August 2015. For the week, gasoline rose 2.5%. May heating oilrose 1.55 cents, or 1%, to $1.6284 a gallon, its highest close since Feb. 27. For the week, heating oil gained 3.4%.
Fundamental News: The Trump administration is developing at least one order aimed at both a new five-year offshore oil and natural gas leasing plan and reversing an Obama administration decision to bar drilling in the majority of the US Arctic waters and a large portion of its Atlantic waters.
Baker Hughes reported that the number of rigs searching for oil in the week ending April 7th increased by 10 to 672.
According to Oil Movements, OPEC’s shipments are expected to fall by 120,000 bpd to 23.9 million bpd in the four weeks ending April 22nd compared with the previous period ending March 25th.
Russia’s Prime Minister, Dmitry Medvedev, said on Friday that US cruise missile strikes on a Syrian airbase were "one step away from clashing with the Russian military."
Russia’s Energy Minister, Alexander Novak, said it was premature to say if the OPEC/non-OPEC agreement to cut production should be extended into the second half of the year. Meanwhile, Russia’s Deputy Energy Minister, Kirill Molodtsov, said the country’s daily oil production was under 1.5 million tons or 10.995 million bpd at the beginning of April.
Russia’s Deputy Prime Minister, Arkady Dvorkovich, said the country’s deal with OPEC to cut production has not delivered as much as the country expected. Russia pledged to cut output to 10.947 million bpd by the end of April, down 300,000 barrels from the record level it had in October.
Crude production data for March indicates that Russia and Kazakhstan are yet to meet their output cut obligations under the OPEC/non-OPEC agreement while Azerbaijan exceeded its promised cut last month. Assuming there is no major shift in production from February, calculations by S&P Global Platts show that the three former Soviet states met their combined obligations by about 73% for March.
Three tankers holding about 1.35 million barrels of gasoline and alkylate are drifting with no instructions for delivery around the Caribbean Isles.
IIR reported that US oil refiners are expected to shut in 940,000 bpd of capacity in the week ending April 7th, increasing available refining capacity by 79,000 bpd from the previous week. IIR expects offline capacity to fall to 763,000 bpd in the week ending April 14th and to 614,000 bpd in the following week.
EarlyMarket Call - as of 9:00 AM EDT
WTI - May $52.81, up 57 cents
RBOB - May $1.7540, up 87 points
HO - May $1.6414, up 1.28 cents
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