Oil futures erase early weakness to end with a small gain Friday

Market Insights
Heating Oil
May 23, 2022

Recap: Oil futures erase early weakness to end with a small gain Friday, though upside appeared to be limited by a sharp stock-market selloff. June WTI finished 0.9% higher for the session at $113.23 a barrel, which amounts to a 2.4% weekly gain and is the fourth straight week that prices have finished higher. Crude's gains suggest the sell-off in US stock markets isn't being replicated at all in energy commodities, at least not yet. Though worried about a global downturn that could hurt oil demand, energy investors are more concerned on the bullish side regarding possible supply shortages. July Brent added 51 cents, or 0.45^, to settle at $112.55 a barrel. Brent for July delivery tacked on $0.51, or  0.46% to settle at $112.55, up $1.00 on the week. June heating oil fell 5.29 cents, or 1.40%, to $3.7391 per gallon, down 18.21 cents or 4.64% on the week. RBOB for June delivery ended the week at $3.8370 a gallon, up 0.53 cents, or 0.14%, but fell 12.08 cents, or 3.05% on the week.

Technical Analysis After dipping at the onset of the week, WTI rebounded, only to find strong buying down around the $105 level. We are still trending within the upward channel that has formed within the consolidation pattern that dates back to the beginning of March. The 10-day moving average has taken on a pivotal role, with WTI finishing above this average eight out of the last eleven weeks. With prices trending within the aforementioned channel, it is safe to say that prices have a good chance of trending higher. That being said, $116.64 is significant resistance.

Fundamental NewsU.S. energy firms this week added oil and natural gas rigs for a ninth consecutive week. Baker Hughes reported that the oil and gas rig count increased by 14 to 728 in the week ending May 20th, its highest since March 2020. U.S. oil rigs increased by 13 to 576 this week, their highest since March 2020, while gas rigs increased by 1 to 150, their highest since September 2019.

IIR Energy reported that U.S. oil refiners are expected to shut in about 881,000 bpd of capacity in the week ending May 20th, increasing available refining capacity by 190,000 bpd. It also reported that offline capacity is expected to fall to 502,000 bpd in the week ending May 27th and to 433,000 bpd in the week ending June 3rd.

Euroilstock reported that European refiners processed 9.728 million bpd of crude oil in April, up almost 7% from a month earlier and more than 9% higher than a year earlier. It reported that Europe’s refinery output in April increased by 6.4% on the month and by 11.3% on the year to 10.293 million bpd.  European gasoline output increased by 6.3% on the month and by 14% on the year to 2.425 million bpd, while middle distillates output in April increased by 5.1% on the month and by 14.2% on the year to 5.185 million bpd, fuel oil output increased by 9.2% on the month and by 4.4% on the year to 971,000 bpd and naphtha output increased by 2.7% on the month and by 13.2% on the year to 942,000 bpd. 

The Emir of Qatar, Tamim bin Hamad al-Thani expressed optimism on Friday that an agreement between the U.S. and Iran can be achieved and voiced his readiness to help in reaching a deal. 

Early Market Call - as of 8:30 AM EDT

WTI - June $111.40 UP $1.12

RBOB - June $3.6831 Down 0.0068

HO - June $3.6391 Up 0.0172