Early Monday morning crude and products were all in negative territory but bounced back and erased almost half of the morning’s sell off

Recap: The bullish mood from Friday failed to firmly take root in the new trading week. While the crude oil market opened Sunday slightly higher the products did not and by the early hours of Monday morning the crude and the products were all in negative territory and continued to trend lower until midday when prices finally found support and bounced back on some technical short covering that would erase nearly half of the morning’s sell off. But the WTI crude oil market still finished the day down for the third time out of the last four trading sessions, today down 68 cents from Friday. The April RBOB and the heating oil contracts were off 1.03 cents and 2.19 cents per gallon respectively.

We would look for this market tomorrow to basically remain mired in its sideways trading pattern which has been demonstrated so far this month being contained for the most part between $60-$63.00.  We see more immediate resistance in the April WTI contract tomorrow at $62.33, $62.48 and $62.60.  More significant resistance would be a settle above the 50 day moving average which tonight is found at $62.74. Support we see at $60.37 followed by $60.30, $59.95 and $58.95.

Fundamental News: Norwegian employers and labor unions started four weeks of wage talks on Monday to stave off strikes that risk impacting the country’s crude output.  If initial talks break down, a state-appointed mediator will attempt to broker a deal in the final days leading up to an April 7th deadline, after which most workers are allowed to go on strike unless an agreement is signed.  While Norway’s production of oil and natural gas is unlikely to be targeted from the start since the contract for rig workers is valid until June, unions may still hit the sector by shutting down yards and other suppliers.  Onshore processing and export facilities for natural gas are also at risk of strike, while offshore oil production workers could become involved in any extended strike.   

The Iranian oil minister on Sunday said OPEC could agree in June to begin easing current oil production curbs in 2019. He said that Iran wanted OPEC to work to keep oil prices around $60 a barrel to contain U.S. shale oil production. He noted that if the price jumps to around “$70 per barrel it will motivate more production in shale oil in the United States.” He reported that Iran currently is producing 3.8 million b/d of crude oil and Iran could produce about 100,000 b/d more.

BMO Capital Markets stated that crude prices have moved into a new higher trading range, while the downside risk has declined.  Its 2018 WTI forecast was raised to $61/barrel from $52.25/barrel and its Brent forecast was increased to $65/barrel from $58/barrel. 

According to the EIA’s monthly productivity report, US crude oil production from major shale formations in April is expected to increase by 131,000 bpd on the month to a record high of 6.95 million bpd.  The expected increase, which will surpass the 105,000 bpd gain in March, is mainly driven by gains in Permian and Eagle Ford shale production

IIR reported that US oil refiners are expected to shut in 968,000 bpd of capacity in the week ending March 16th, increasing available refining capacity by 226,000 bpd from the previous week.  IIR expects offline capacity to fall to 931,000 bpd in the week ending March 23rd. 


Early Market Call – as of 8:30 AM EDT

WTI – Apr $60.86 down 50 cents

RBOB – Apr $1.8677 down 2.63 cents

HO – Apr $1.8551 down 96 points

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