Recap: The oil market continued on its downward trend on Thursday following Wednesday’s sell off on the inventory report showing builds across the board and the OPEC+ decision to leave its output policy unchanged, suggesting major oil producers are not in a rush to push prices higher. Also, while the Commerce Department reported that new orders for U.S. manufactured goods increased in December, orders for industrial equipment and other machinery fell, highlighting a slowing economy. A rebound in the dollar index, which sold off to a nine-month low earlier in the session, also weighed on the oil market. The oil market traded mostly sideways in overnight trading, posting a high of $77.24 and holding support at its previous low of $76.05. However, the market breached its support and sold off to a low of $74.97 by mid-morning on the economic report. The market later bounced off its low and retraced some of its earlier losses. The March WTI contract settled down 53 cents at $75.88, while the April Brent contract settled down 67 cents at $82.17. The product markets also ended the session in negative territory, with the heating oil market settling down 5.44 cents at $2.8967 and the RB market settling down 15 ticks at $2.4523.
Technical Analysis: The oil market on Friday will likely retrace some of its recent losses ahead of the weekend. The market is seen finding support at its low of $74.97, $73.80, basis a trendline followed by $73.52 and $72.74. Meanwhile, resistance is seen at its high of $77.24, $77.84, its 38% retracement off a low of $74.97 to a high of $82.48, $77.90, basis a trendline, $78.72, its 50% retracement level, $79.61, its 62% retracement level, and $79.73.
Fundamental News: Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week Tuesday, January 31st increased by 2,004,658 barrels on the week and by 1,139,986 barrels from Friday, January 27th to 42,017,195 barrels.
According to company outlooks and analysts' estimates, U.S. oil refiners are cutting their operating runs this quarter after sky-high utilization rates last year and aim to operate at between 85% and 89% of capacity. Lower rates will cut supplies of gasoline, diesel and jet fuel, helping keep profit margins high during one of the weakest demand periods of the year. The largest U.S. refiner by capacity, Marathon Petroleum Corp said it plans to operate at 88% in the first three months, down from 94% last quarter. Second-largest refiner, Valero Energy Corp is targeting between 85% and 88%, down from 97% last quarter. Analysts said maintenance work will be heaviest at refineries along the U.S. Gulf Coast, with major overhauls in coming weeks at plants operated by Marathon, Valero, Exxon Mobil Corp and Phillips 66.
Insights Global reported that gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp terminal in the week ending February 2nd increased by 6.04% on the week and by 42.52% on the year to 2.316 million tons, as importers increased their Russian purchases ahead of a February 5th European Union ban on Russian oil product imports. Gasoline stocks fell by 0.85% on the week but increased by 10.46% on the year to 1.405 million tons, while fuel oil stocks fell by 0.90% on the week and by 9.2% on the year to 1.106 million tons.
The International Monetary Fund said global central banks need to make clear to financial markets the probable need for interest rates to remain higher for longer in order to bring inflation sustainably back down to target and avoid a rebound in price pressures. The IMF said "Loosening prematurely could risk a sharp resurgence in inflation once activity rebounds, leaving countries susceptible to further shocks which could de-anchor inflation expectations." The disconnect was on show on Wednesday when the U.S. Federal Reserve raised its policy rate and Fed Chair Jerome Powell reiterated that the central bank does not plan to cut rates this year as it needs to see goods disinflation followed by marked progress in the services sector, which is forecast to take longer. Investors ignored him, piling further into bets the Fed will cut rates this year while stocks rallied.
Early Market Call - as of 8:30 AM EDT
WTI - March $76.20, up 32 cents
RBOB - March $2.4490, down 33 points
HO - March $2.8921, down 42 points
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