A rise in equities and a slip in the dollar added strength to the market

Recap: WTI reversed 5 straight days of declines, as Russia’s central bank cautioned against plans to boost output and on forecasts calling for a decline in U.S. crude oil inventories. A rise in equities and a slip in the dollar added strength to the market. Both blends climbed steadily throughout the session, with July Brent holding below $78.00, the 10-day moving average and July WTI trading back above the 50-day moving average of $67.75. Gains were pared prior to settlement, with July Brent closing up $2.11, or 2.80%, to settle at $77.50 a barrel, and July WTI settling at $68.21 a barrel, up $1.48, or 2.22%.

June RBOB rose 1.9% to $2.184 a gallon, while June heating oil gained 2.1% to $2.232 a gallon. The June contracts expire Thursday.

Fundamental News: Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 200,000 bpd in the week ending May 25th to 35.9 million bpd. 

According to Bloomberg, US waterborne crude imports fell by 142,700 bpd to 4.17 million bpd in the week ending May 26th.  Imports into the East and Gulf Coasts fell by 78,800 bpd and 533,000 bpd, respectively.  Shipments to the West Coast increased by 469,100 bpd. 

Genscape reported that crude oil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp region increased to the highest level for the time of year since at least 2013.  Stockpiles in the ARA region increased to 65.15 million barrels in the week ending May 25th. 

A Gulf source said Saudi Arabia, other OPEC producers and non-OPEC allies aim to comply with the global output cut agreement until the end of 2018 but are ready to make gradual adjustments to offset any supply shortage.  The source said the oil producers participating in the agreement are satisfied with the result.  The deal could be extended to achieve its objectives of keeping a balanced oil market when needed and any rise in output would be in a gradual and deliberate fashion.   

While next month’s OPEC meeting is seen as key to the outlook for crude oil prices, a strong indication of what’s likely will come from Saudi Arabia’s release of its official selling prices for July loading cargoes, which in turn largely set the prices for much of the exports from the Middle East.  The official selling prices show exactly what Saudi Arabia is doing in the oil market and in some ways are a more important signal.  If Saudi Arabia is serious about raising crude output and increasing supply, a sure way of signaling this would be a sharp decline in the official selling price for July cargoes, with the cut being bigger than what would be justified by market fundamentals.  Saudi Arabia, the rest of OPEC and Russia have to ensure that crude prices remain anchored as close to $80/barrel as possible, a compromise between meeting the fiscal needs of the producers without being high enough to prompt too much demand destruction.  Saudi Arabia also has to balance the geopolitics of oil, striking a balance between their need for relatively high prices against the support of US President Donald Trump in their struggle against Iran. 

Brazil oil workers on at least 20 rigs in the Campos Basin have joined a strike.  Production has been taken over by contingency crews. 

IIR Energy reported that US oil refiners are expected to shut in 451,000 bpd of capacity in the week ending June 1st, increasing available refining capacity by 147,000 bpd from the previous week.  IIR expects offline capacity to fall to 295,000 bpd in the week ending June 8th. 

Early Market Call - as of 8:15 AM EDT

WTI - July $67.08, down $1.14

RBOB - June $2.2176, down 1.02 cents

HO - June $2.1870, up 34 points