Oil futures rose for the fourth straight session

Market Insights
Heating Oil
June 24, 2021

Recap: Oil futures rose for the fourth straight session, with Brent tackling the $76 a barrel level for the first time since late 2018, after government data showed U.S. crude oil inventories falling 7.6 million barrels (excluding SPR oil). WTI topped $74 a barrel, for the first time since October 2018. The drop in inventories was the fifth weekly decline in a row. On the first full session as a front-month contract, West Texas Intermediate
crude for August delivery rose 23 cents, or 0.3%, to settle at $73.08 a barrel. August Brent crude added 38 cents, or 0.5%, at $75.19 a barrel. September Brent, the most actively traded contract, climbed 42 cents, or 0.6%, at $74.50 a barrel. Petroleum products also rose, with July RBOB tacking on 1.9%, to settle at $2.27 a gallon and July heating oil adding 0.4%, to close at $2.16 a gallon.

Technical Analysis: Bulls remain in control of the oil markets, as supply of crude oil continues to tighten after the coronavirus pandemic. Global demand is set to rise further in the second half of the year, though OPEC+ also faces the prospect of rising Iranian supply if talks with the world powers lead to a revival of Tehran’s 2015 nuclear deal. Movement in the U.S. dollar has also contributed to the rise in oil prices, making crude oil less expensive for buyers holding other currencies. The chain of U.S. crude oil declines is a reflection of the strength of the U.S economy, while at the same time, indicates a lack of production. This is indicative of a supply squeeze, further supporting this market. We are still looking for this market to test the $75 level, with a successful break opening up the opportunity of running up toward $78.33. The $70 remains a key level of support, with additional support set below that at $67.50.

Fundamental News: ABN Amro said its year-end estimate for Brent oil was increased from $60/barrel to $65/barrel.  Its 2021 Brent annual average view is at $66/barrel, up from a previous forecast of $62/barrel.

Goldman Sachs sees the oil market getting “very tight” over the coming months.  Goldman Sachs’ global head of commodities research, Jeff Currie, said the oil market faces significant upside risk over the next few months amid increasing driving season demand and limited short-term supply growth potential.  He said the market is really tight between now and Labor Day and reaffirmed the bank’s $80/barrel third quarter average price forecast. 

JBC Energy said European refiners will increase its crude throughput in June and July, increasing the region’s imports. It said crude oil imports into Europe will increase into July, with the recovery in jet fuel demand supporting middle distillate margins.  JBC also stated that it expected demand for jet/kero to increase in June to more than 6 million bpd for the first time since the onset of the pandemic.  It is expected to increase to 6.7 million bpd by August, still well below pre-pandemic levels. 

Iran said that the U.S. had agreed to remove all sanctions on Iran's oil and shipping, and take some senior figures off a blacklist, at talks to revive Tehran's 2015 nuclear deal with global powers which are now on a pause.  The remarks, by outgoing President Hassan Rouhani's chief of staff, were consistent with previous assertions by officials in Rouhani's camp that Washington is prepared to make major concessions at the talks, under way since April in Vienna.  Separately, Iran’s Presidential chief of staff, Mahmoud Vaezi, said Iran’s Supreme National Security Council will decide whether to extend its monitoring deal with the International Atomic Energy Agency after its expiry on June 24th. 

Germany’s Foreign Minister, Heiko Maas, said Iran and world powers have been making progress in talks to revive their 2015 nuclear accord but still have to overcome major hurdles. 

Early Market Call - as of 8:05 AM EDT

WTI - July $72.73, down 35 cents

RBOB - July $2.2492, down 1.77 cents

HO - July $2.1377, down 2.17 cents

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