Recap: Crude oil futures rose for the second straight session, but gains were contained as the coronavirus pandemic’s heavy toll on demand offset hopes for a forthcoming $2 trillion U.S. economic stimulus package. Prices continue to reel from the unexpected price war between Saudi Arabia and Russia, which has flooded the market with supplies while the pandemic is on track to lower fuel demand by at least 10% worldwide. Early in the session both Brent and WTI were trading up over 5%. So far this year, oil prices have fallen about 50%. Meanwhile, U.S. gasoline futures soared over 30% early in the day and closed up about 8%. May WTI finished up 65 cents, or 2.8%, to settle at $24.01 a barrel, while May Brent added 12 cents, or 0.4%, settling at $27.15 a barrel. April RBOB tacked on about 7.8% to settle at 44.37 cents a gallon, that’s after dropping 32% on Monday. April heating oil rose 6.3% to $1.0803 a gallon.
Technical Analysis: Despite gaining ground, it’s tough to think that oil prices can maintain momentum to the upside, given the overwhelmingly bearish demand outlook. At this point in time, it appears that the demand factor will far outweigh any stimulus measures. While the U.S. stock market rallied in response to the $2 trillion coronavirus aid package and gold posted gains, demand worries continue to pressure oil prices. For now, we would stick to the sidelines, waiting for a break above $30.00 before entertaining higher prices. We should see selling up at the $30.00 level, which leaves us cautious. Prior to this level, there is psychological resistance up at $25.00 and $27.50. Support is seen at $23.00 and below that at $20.50.
Fundamental News: US President Trump stated that the US is going to be opening relatively soon and added that he would love to have the US open by Easter. He stated that the country is not built to shutdown and added that a country can be destroyed by a shutdown. He said Americans can socially distance themselves and head to work.
The Trump administration will appoint Victoria Coates as special energy representative to Saudi Arabia. She will be based in Saudi Arabia to ensure the Department of Energy has an added presence in the region. Coates will work in Saudi Arabia for months at least alongside State Department officials and existing energy attaché, Scott Hutchins.
Citi lowered its oil price forecasts. It sees Brent crude prices averaging $30/barrel this year and $17/barrel through the second quarter of this year.
Barclays cut its oil price forecasts for 2020, citing downward pressure on the market from the Saudi-Russian price war and demand disruption caused by the coronavirus pandemic. The bank lowered its 2020 price outlook for Brent and WTI by $12/barrel each to $31/barrel and $28/barrel, respectively.
The head of the Renewable Fuels Association trade group, Geoff Cooper, said US ethanol producers are on track to shut down 2 billion gallons of annualized output by the end of the week due to a decline in output.
Suncor Energy Inc cut its 2020 production outlook and suspended share repurchases for the year following a fall in oil prices. It revised its 2020 production outlook to a range of 740,000 bpd of oil equivalent to 780,000 bpd of oil equivalent, down from its previous forecast of 800,000 bpd of oil equivalent to 840,000 bpd of oil equivalent.
Chevron Corp said it was lowering its forecasts for spending and Permian production by 20% for the year. It expects organic capital and exploratory spending to be $16 billion for the year, while production in the Permian basin at the end of the year is expected to be about 125,000 bpd of oil equivalent.
US Senators Chuck Grassley and Joni Ernst of Iowa have asked the Trump administration not to appeal a court ruling that would cut the use of small refinery biofuel waivers, but have not heard back yet on its decision. A court in January ruled the EPA had been overusing the waivers in a decision that could end the program.
Early Market Call - as of 8:50 AM EDT
WTI - Apr $23.57, down 44 cents
RBOB - Apr $.4599, up 1.62 cents
HO - Apr $1.0799, down 4 points
View the Sprague Refined Products Market Watch Report in a downloadable pdf format by clicking below.
Click to view more online:
Heating Oil Supplier
Diesel Supplier
View market updates
View our refined products glossary
Go to SpraguePORT online
This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.