Recap: The oil market posted an inside trading day as the market remained cautious amid the lingering uncertainties around global trade negotiations. The market traded to its high of $63.68 in overnight trading as the market remained supported by a de-escalation in the trade war between the U.S. and China, the softer inflation data and new sanction on Iranian oil. However, the market gave up its gains in early morning trading and posted a low of $62.75 in anticipation of the EIA’s oil inventory report showing builds in crude stocks for the week ending May 9th after the API late Tuesday afternoon reported a crude stock build of over 4 million barrels on the week. The market was also pressured by OPEC maintaining its forecast for global oil demand growth as it prepares to accelerate its output hikes for a second month in June and lowered its supply growth estimates from countries outside of OPEC+. The market later bounced off its low and traded in a sideways trading range during the remainder of the day. The June WTI contract settled down 52 cents at $63.15 and the July Brent contract settled down 54 cents at $66.09. Meanwhile, the product markets ended the session higher amid the draws in product stocks, with the heating oil market settling up 3.48 cents at $2.2061 and the RB market settling up 40 points at $2.17.
Technical Analysis: The crude market will continue to trend sideways as the market weighs the recent supportive economic data, further sanctions imposed on Iranian oil and the de-escalation of the trade war with China against the crude inventory builds reported in the latest weekly inventory reports and the expected increase in OPEC+ output for the second month in June. The crude market is seen finding resistance at its high of $63.68, $63.90-$63.92, $64.87, $65.29 and $66.41. Meanwhile, support is seen at $62.75, $61.65, $61.02, $59.89, $57.87 and $57.74.
Fundamental News: The U.S. Treasury Department said the U.S. issued new Iran-related sanctions on Wednesday. The sanctions target individuals and entities in China and Iran.
French Foreign Minister, Jean-Noel Barrot, said the European Union approved a 17th sanctions package on Russia, adding that the bloc would now turn to working on further, tougher sanctions in coordination with the United States.
OPEC cut its forecast for growth in oil supply from the United States and other producers outside the OPEC+ group this year and said it expected lower capital spending following a decline in oil prices. In its monthly report, OPEC said supply from non-OPEC+ countries will increase by about 800,000 bpd in 2025, down from last month’s forecast of 900,000 bpd. A slowdown in supply growth outside OPEC+ would make it easier for OPEC+ to balance the market. While the United States is still expected to drive supply growth, OPEC expects U.S. total oil output to increase by about 300,000 bpd this year, down from a previous forecast of 400,000 bpd. It left its forecasts for global oil demand growth unchanged in 2025 and 2026 at 1.3 million bpd and 1.28 million bpd, respectively.
Platts reported that despite the increases in quotas in April by OPEC+, overall production by the group stayed flat at 41.01 million b/d. Platts survey found that serial overproducers Iraq and Kazakhstan both cut output in April by 20,000 b/d and 30,000 b/d, respectively.
IIR Energy said U.S. oil refiners are expected to shut in about 714,000 bpd of capacity in the week ending May 16th, increasing available refining capacity by 560,000 bpd. Offline capacity is expected to fall to 227,000 bpd in the week ending May 23rd.
The EPA reported that U.S. generated 592 million biodiesel blending credits in April, up from 573 million in March. It also reported that the U.S. generated 1.16 billion ethanol blending credits in April, down from 1.21 billion in March.
Early Market Call – as of 8:35 AM EDT
WTI – Jun $61.25, down $1.64
RBOB – Jun $2.1138, down 3.80 cents
HO – Jun $2.1559, down 3.52 cents
