The Oil Market on Monday Breached the Trading Range Seen in the Last Few Days

Recap:  The oil market on Monday breached the trading range seen in the last few days and ended the session lower after its stochastics crossed to the downside on Friday. The market traded mostly sideways in overnight trading, holding its support. However, the market breached Wednesday’s low of $81.28 and extended its losses to over $1.90 as it sold off to $80.61 in early afternoon trading. The market sold off amid some strengthening of the U.S. dollar and as traders bet the Federal Reserve will raise interest rates in May by another quarter of a percentage point. The oil market settled in a sideways trading range before further selling pressure pushed the market to a low of $80.47 ahead of the close. The May WTI contract retraced some of its losses and settled down $1.69 at 80.83, while the June Brent contract settled down $1.55 at $84.76. The product markets ended the session in negative territory, with the heating oil market settling down 2.45 cents at $2.6147 and the RB market settling down 6.19 cents at $2.774.

Technical Analysis:  The market on Tuesday will look towards the release of China’s first quarter GDP data for further direction. The data is expected to be positive for the oil market, with the IEA forecasting that China will account for most of 2023 demand growth. The oil market is seen finding support at its low of $80.47, $79.37 and its gap from $79.00 to $75.72. Meanwhile, resistance is seen at $81.32, $82.00, $82.40 and its high of $82.71. Further upside is seen at $83.12, $83.44 and $83.53 followed by $85.45, $87.51, $88.68, $89.84 and $90.10.

Fundamental News:  An official said the Group of Seven coalition will keep a $60/barrel price cap on seaborne Russian oil, despite rising global crude prices and calls by some countries for a lower price cap to restrict Moscow's revenues. The G7 and Australia made the decision to maintain the cap over the past few weeks after a review of the $60 price set in December with an aim to reduce Moscow's ability to finance its war in Ukraine. The official said Russian crude has been selling at a discount of around $30 to Brent. Coalition officials concluded the price cap was working to both limit Russian revenue while maintaining energy market stability, but said they would continue coordinating to ensure effective monitoring and enforcement. The coalition will also intensify efforts to combat evasion of the price cap and sanctions imposed on Russia, including the use of deceptive practices to access insurance and other coalition services for oil traded above the cap.

The EIA reported that U.S. output from top shale-producing regions is due to increase in May to the highest on record. Oil output is set to increase to 9.33 million bpd, with output in the Permian Basin increasing to 5.69 million bpd, the highest level on record.

Exxon Mobil Corp. units in Nigeria declared force majeure on oil loadings from multiple terminals in the country following industrial action. Mobil Producing Nigeria Unlimited, Esso Exploration and Production Nigeria Ltd and Esso Exploration and Production Ltd. declared the measure from their respective terminals. ExxonMobil said it will continue to take all reasonable actions necessary to resolve the impasse as soon as possible.

IIR Energy said U.S. oil refiners are expected to shut in about 936,000 bpd of capacity in the week ending April 21st, increasing available refining capacity by 168,000 bpd. Offline capacity is expected to fall to 678,000 bpd in the week ending April 28th.

Colonial Pipeline Co is allocating space for Cycle 24 shipments on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina. The current allocation is for the pipeline segment north of Collins, Mississippi.

Early Market Call - as of 8:20 AM EDT

WTI - May $80.59, down 24 cents

RBOB - May $2.7463, down 2.77 cents