OPEC cut its 2020 demand forecast by 6.9 million barrels per day

Recap: After trading higher early in the session, oil futures turned lower after OPEC cut its 2020 demand forecast by 6.9 million barrels per day. That reflects a contraction in demand of 12 million barrels a day in the current quarter, with April bearing the brunt with a 20 million barrel a day fall. This is in response to the COVID-19 pandemic, which has taken a huge bite out of global demand. Brent futures were up modestly for the session, while WTI finished flat to hold ground at their lowest in over 18 years. WTI for May delivery settled at $19.87 a barrel, unchanged from Wednesday, which marked the lowest settlement for a front-month contract since Feb. 7, 2002. June Brent rose 13 cents, or 0.5%, to settle at $27.82 a barrel. May RBOB fell by 2.1% to 70.51 cents a gallon and May heating oil added 3.6% to 94.63 cents a gallon.

Technical Analysis: Oil prices failed to hold onto early gains, as technical traders continue to grapple with the overpowering bearish fundamentals, which one cannot ignore. Our stance is the same, and that is for trading to remain volatile, while continuing to trade in a sideways pattern. With the May WTI contract soon to expire, we will turn our focus to the June contract. There is considerable support down at the $20 level and should the June contract get down there, we would expect to see a bounce. To the upside, $27 provides significant resistance. Breaks above this level should prompt a push toward $30. 

Fundamental News: US Energy Secretary, Dan Brouillette, said the deal reached by OPEC and its non-OPEC allies to cut production has worked to “stem the tide, stem the damage that was being down to the market,” since the onset of the coronavirus pandemic and the Saudi Arabia-Russia oil price war. The secretary credited Trump with acting "aggressively" to pressure the Saudis and Russians to change course, adding that he can act even more aggressively if the situation calls for it.

In its monthly report, OPEC cut its 2020 forecast for world oil demand by 6.9 million bpd or 6.9% due to the coronavirus impact on the economy. It expects oil demand to fall by 12 million bpd in second quarter and added that downward risks remain for its oil demand forecast. OPEC reported that its oil output in March increased by 821,000 bpd to 28.61 million bpd. Saudi Arabia told OPEC it cut its oil production in March by 51,000 bpd to 9.733 million bpd. OPEC estimated that in 2020 non-OPEC oil supply is forecast to fall by 1.5 million bpd.

Interfax news agency reported that Russian oil output has been steady in April so far.  OPEC and other leading oil producers led by Russia agreed over the weekend to reduce their production by a combined 9.7 million barrels per day in May-June to combat falling demand due to the spread of the coronavirus.

ConocoPhillips said it would cut gross production by 225,000 bpd, suspend its share repurchase program and further cut its capital spending to weather a fall in oil prices.

The Governors of Louisiana, Texas, Oklahoma, Utah and Wyoming said refiners in their states need hardship waivers to the Renewable Fuel Standard to weather the financial turmoil. 

The EPA stated that the US generated 1.14 billion ethanol (D6) blending credits in March compared with 1.16 billion in February. The US also generated 371 million biodiesel (D4) blending credits in March compared with 315 million in February.

Chief US District Judge, Brian Morris, on Wednesday ruled against the U.S. Army Corps of Engineers' use of a permit that allows new energy pipelines to cross water bodies, in the latest setback to TC Energy Corp's plans to build the Keystone XL oil pipeline. 

Early Market Call - as of 8:30 AM EDT

WTI - May $25.21   -0.32

RBOB - May $0.7063 +0.0003

HO - May $0.9632 +0.0139