WTI Dropped Below $100 a Barrel, Hitting a Two-Week Low

Market Insights
Heating Oil
May 11, 2022

Recap: Oil futures continued to slide on Tuesday, falling $10.01 or 9.12% over the last two sessions. WTI dropped below $100 a barrel, hitting a two-week low as the demand outlook was pressured by coronavirus lockdowns in China and growing recession risks, while a strong dollar made crude more expensive for buyers using other currencies. Wall Street's main indexes also turned lower in volatile trading on concerns over aggressive monetary policy tightening and slowing economic growth. Early in the session, comments from the Saudi and UAE energy ministers boosted Brent and WTI up by more than $1 a barrel. June WTI lost $3.33 per barrel, or 3.23% to $99.76. July Brent lost $3.48 per barrel, or 3.28% to $102.46, down $9.93 or 8.84% over the last two sessions and the largest two day percentage decline since Tuesday, March 15, 2022. ULSD for June delivery gained 9.73 cents per gallon, or 2.54% to $3.9322, the largest one day dollar and percentage gain since Wednesday, May 4, 2022, snapping a three session losing streak. RBOB Gasoline for June delivery lost 10.04 cents per gallon, or 2.76% to $3.5415, losing 21.75 cents or 5.79% over the last two sessions and the largest two day dollar and percentage decline since Tuesday, March 29, 2022.

Market Analysis:  Trading in the oil markets remain quite volatile, with extended ranges. June WTI came back to test the 10-day moving average to the upside, only to turn lower and blast through the 50-day moving average. As of now, and based upon moving oscillators, we would look for more downside movement, with the potential of hitting $95. Below this level, additional support is seen at $93.53. A break back above the 10-day moving average will most likely trigger cautious buying, as this market remains range bound. Resistance is set at $101.97 and $104.22.

Fundamental News:   In its Short Term Energy Outlook, the EIA reported that total world petroleum consumption in 2022 is expected to increase by 2.22 million bpd to 99.61 million bpd and increase by 1.94 million bpd to 101.55 million bpd in 2023.  Total world petroleum output in 2022 is estimated to increase by 4.32 million bpd to 99.89 million bpd and increase by 1.71 million bpd to 101.6 million bpd in 2023.  OPEC’s oil output is forecast to increase by 2.67 million bpd to 34.45 million bpd in 2022 and by 590,000 bpd to 35.04 million bpd in 2023. The EIA reported that U.S. total petroleum consumption is expected to increase 730,000 bpd to 20.51 million bpd in 2022.  It is down from a previous estimate of an increase of 800,000 bpd.  U.S. petroleum demand is estimated to increase by 270,000 bpd to 20.78 million bpd in 2023, down from a previous estimate of an increase in demand growth of 280,000 bpd.  The EIA also forecast that U.S. crude oil output is expected to increase by 720,000 bpd to 11.91 million bpd in 2022, compared with a previous estimate of an increase of 820,000 bpd, while U.S. crude oil output is expected to increase 940,000 bpd to 12.85 million bpd in 2023. 

United Arab Emirates Energy Minister, Suhail al-Mazrouei, said crude oil markets are balanced and volatility is linked to factors outside the control of the OPEC+ producers group.

The European Union's top diplomat, Josep Borrell, said he hoped for a deal soon on an EU oil embargo on Russia, possibly for EU foreign ministers to agree. Foreign ministers are due to meet on Monday, May 16th. He said if EU ambassadors could not agree this week, foreign ministers could try to break any deadlock, in a bid to win over reluctant states, particularly Hungary.

IAEA Director General, Rafael Grossi, said he is still hopeful for a deal between Iran and world powers to revive the 2015 nuclear pact but added that talks were struggling and the moment could be lost.

Early Market Call - as of 8:10 AM EDT

WTI - June $103.48, up $3.71

RBOB - June $3.6028, up 6.06 cents

HO - June $4.0252, up 9.3 cents

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