Recap: The oil market on Friday continued to surge higher and settled 12.21% higher as the conflict in the Middle East continued to constrain Middle East crude exports due to the effective closure of the Strait of Hormuz, which is forcing producers to shut in production and refiners and trading houses to seek alternative barrels. Qatar’s Energy Minister said he expects all Gulf energy producers to shut down exports within weeks and the Wall Street Journal reported that Kuwait had started to cut its oil production after it ran out of storage amid the halt in exports through the Strait of Hormuz. The crude market, which was awaiting an announcement from the Trump administration on measures it would take in the oil futures markets to combat rising energy prices, was disappointed amid reports that the administration was ruling out deploying the Treasury Department to trade oil futures for now as it realized that the impact would be limited. The crude market traded to a low of $78.24 in overnight trading before it bounced higher and never looked back. The market rallied $11.60 to a high of $92.61 in afternoon trading amid reports of Kuwait shutting in production following reports earlier in the week regarding output cuts in Iraq. The market was also well supported by the lack of timeline on the end of the conflict, with President Trump stating that there would be no deal struck with Iran except “unconditional surrender”. The market later erased some of its sharp gains ahead of the close. The April WTI contract settled up $9.89 at $90.90 and the May Brent contract settled up $7.28 at $92.69. The product markets also continued to surge, with the heating oil market settling up 8.10 cents at $3.6224 and the RB market settling up 7.57 cents at $2.7466.
Technical Analysis: The crude market will remain headline driven as the U.S.-Israeli war with Iran continues to impact oil production and exports out of the region. With no end to the conflict in site yet, the market will remain well supported as further countries begin to cut their output due to a lack of storage as exports in the region remain halted. The oil market is seen finding resistance at $92.61, $93.10 and $95.03. Meanwhile, support is seen at $85.23, $82.95, $80.66, $78.24, $74.97 and $73.28.
Fundamental News: Bloomberg News reported that Saudi Arabia has intensified direct engagement with Iran to help contain a war in the Middle East. Saudi officials in recent days have used their diplomatic backchannel to Iran with increased urgency to ease tensions and keep the conflict from worsening.
Saudi Arabia is increasing shipments from the Red Sea, but the volumes are far from enough to offset the drop from the crisis-hit Strait of Hormuz. Saudi Arabia and other Gulf producers, including the United Arab Emirates, Kuwait and Iraq, have halted Hormuz shipments since Saturday after the United States and Israel attacked Iran. With hundreds of vessels now stuck near the strait, Aramco has told some buyers to load cargoes at the Red Sea port of Yanbu. According to LSEG data, the terminal loaded 9.4 million barrels or 1.9 million bpd, in the first five days of March, up about 60% from 1.1 million bpd in February and 1.3 million bpd in January.
Baker Hughes reported that U.S. energy firms this week added oil and natural gas rigs for the first time in four weeks. The oil and gas rig count increased by one to 551 in the week ending March 6th. Baker Hughes said oil rigs increased by four to 411 this week, their highest level since early February, while gas rigs fell by two to 132, their lowest level since early February.
According to a Reuters survey, OPEC’s output increased by 530,000 bpd on the month to 28.87 million bpd in February.
IIR Energy reported that U.S. oil refiners are expected to shut in about 1.24 million bpd of capacity in the week ending March 6th, increasing available refining capacity by 61,000 bpd. Offline capacity is expected to fall to 1.2 million bpd in the week ending March 13th.
Early Market Call – as of 8:45 AM EDT
WTI – Apr $100.84, up $9.57
RBOB – Apr $2.9445, up 17.68 cents
HO – Apr $3.9172, up 26.72 cents
