Crude Oil Price Forecast – Crude Oil Continue to Pressure Upside

WTI Crude Oil

The West Texas Intermediate Crude Oil market has pulled back a bit during the trading session on Thursday, as we sit right at the $65 level. The $65 level of course is a large, round, psychologically significant figure that would attract a certain amount of attention, but part of what has caused the market pull back a bit is that the demand for gasoline in the United States has fallen for the second week in a row. That being said, the ascending triangle that formed previously does suggest that we have more upward pressure going on than down, as we have been in an uptrend anyway. If we do pull back from here it is likely that we would see plenty of support at both the 50 day EMA and the uptrend line that has been part of that ascending triangle.

Crude Oil Video 07.05.21

Brent

Brent markets also look very much the same as you would expect, after forming the same kind of ascending triangle. The $70 level above does offer a certain amount of psychological resistance, so if we can break above there then it is likely that the market would continue to go much higher. A lot of this comes down to the “reopening trade” that a lot of people pay close attention to, so therefore it does make a certain amount of sense that value hunters will be looking to get involved. Once we can clear the $70 level on a daily close, it is very likely that we go much higher, perhaps making a move towards the $72.50 level initially, followed by a move to the $75 level. I have no interest in shorting the market anytime soon.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Mixed Gasoline Inventory Numbers Fueling Trader Indecision

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Thursday as bullish traders take a breather following the release of mixed inventories reports on Tuesday and Wednesday.

Today’s move doesn’t suggest topping action, but rather the potential shifting in sentiment from aggressive traders chasing prices higher to more conservative traders looking for a pullback into a value area.

At 13:56 GMT, June WTI crude oil futures are trading $65.09, down $0.54 or -0.82% and July Brent crude oil is at $68.51, down $0.45 or -0.65%.

Earlier in the week, traders expressed concerns over the pandemic in India and its potential impact on global demand, however, since then these worries have been offset by optimism fueled by the lifting of lockdowns in the United States and parts of Europe.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies fell by 7.7 million barrels for the week ended April 30. Ahead of the report, traders were pricing in at 3.9 million barrel draw.

The API also reported that gasoline stockpiles fell by 5.3 million barrels versus pre-report estimates of a 500,000 barrel drawdown.

Meanwhile, distillate inventories declined by nearly 3.5 million barrels. Traders were looking for a 1.6 million barrel drawdown.

Energy Information Administration Weekly Inventories Report

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.3 million-barrel drop.

U.S. gasoline stocks rose by 737,000 barrels in the week to 235.8 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 652,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 2.9 million barrels in the week to 136.2 million barrels, versus expectations for a 1.1 million-barrel drop, the EIA data showed.

Daily Forecast

The mixed inventories reports may have given buyers a reason to pause. Both the API and EIA reports drawdowns in crude oil and distillate inventories, but the gasoline inventories data yielded mixed results. The API reported a large drawdown, but the EIA report showed an unexpected rise in inventories.

As we approach summer driving season in the U.S., traders will shift their focus to the gasoline numbers. It’s still a little early in the season so the gasoline data wasn’t that big of a deal. However, between May 31 and September 5, bullish traders will be expecting to see stronger demand for gasoline.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Mixed After Better-Than-Expected Initial Jobless Claims Report

Stocks Lack Direction As Traders Wait For New Catalysts

S&P 500 futures are swinging between gains and losses in premarket trading as traders remain cautious while the market is trading near record highs.

The market faced some selling pressure at the beginning of May, but it should be noted that the recent attempt to move lower was quickly bought. Traders seem to be a bit worried about higher inflation which may force the Fed to raise rates sooner than expected, but such worries are not strong. The bond market stays calm, and the yield of 10-year Treasuries has recently failed to settle above the 20 EMA at 1.60%.

At this point, it looks that the market will need additional catalysts to gain momentum and move away from current levels.

Initial Jobless Claims Decline To 498,000

The U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 498,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 540,000.

Continuing Jobless Claims increased from 3.65 million (revised from 3.66 million) to 3.69 million compared to analyst consensus of 3.62 million.

Yesterday, ADP Employment Change report indicated that private businesses hired 742,000 workers compared to analyst consensus of 800,000. The employment picture will not be complete without Non Farm Payrolls and Unemployment Rate reports which will be published tomorrow. Non Farm Payrolls report is expected to show that the economy added 978,000 jobs in April. Unemployment Rate is projected to decline from 6% to 5.8%.

Oil Moves Lower As India Reports Record Number Of COVID-19 Cases

Yesterday, India reported more than 412,000 of new coronavirus cases, putting pressure on the oil market. While oil traders have mostly ignored negative developments in India, the country’s problems may ultimately have a notable impact on demand for oil.

Meanwhile, the recent EIA Weekly Petroleum Status Report indicated that crude inventories declined by 8 million barrels compared to analyst consensus which called for a decline of 2.35 million barrels. The U.S. domestic production remained unchanged at 10.9 million barrels per day (bpd) which was bullish for oil.

The recent data suggests that oil demand is picking up, so oil will have good chances to continue its upside move when the situation in India shows signs of stabilization.

For a look at all of today’s economic events, check out our economic calendar.

The Black Stuff and The Green List: Oil Volatility is On Its Way!

Those 55 miles per hour speed limits on the highway in the 1970s were largely down to shortages of supply and were designed to ensure less fuel was used by motorists as a result of war rather than for the purposes of road safety which they were largely perceived as.

Today, very little has changed, despite the substantial investment in renewable energy and alternative methods of generating motive power for everything from central heating to transport, and the value of the sticky black stuff is still inexorably dependent on the utterings of government leaders.

Over the past year, to consider oil to have been a volatile commodity is an understatement, its value having dropped into negative equity around one year ago for the first time in history, and the ensuing lockdowns and travel bans having created lower prices in the Western markets whilst demand in South and South East Asia has remained very high.

Today, crude oil is absolutely under the microscope. Even the OPEC countries are publicly discussing its immediate future, with Ihsan Abdul Jabbar, the Oil Minister of Iraq, OPEC’s second largest producer, noted that oil could probably remain around US$65 a barrel.

Standard data is scheduled for release within the next 24 hours in the United States, in the form of the weekly inventories from the American Petroleum Institute, which will be compared to the unexpected climb last week to 90,000 barrels, however this is a bland, routine spreadsheet exercise.

The matter of real interest is that commercial consumers and distributors will likely be assessing a huge increase in purchasing refined petroleum products such as gasoline for cars, and perhaps more specifically, kerosene for aircraft, meaning that more crude oil will be bought by refineries, as the perpetually locked down European Union and its Trans-Atlantic neighbours on the entire North American continent begin to lift travel restrictions.

A combination of pent-up will to travel after a year of blocked borders and a desperate travel industry wanting to regenerate its lost earnings would result in skies full of aircraft, especially as the summer begins and the lure of cut-price tourism gives those seeking refuge from the four walls of constraint.

Companies such as Wizz Air, easyJet and Ryanair have all been advertising cheap flights recently, and have been targeting members of the public who would look to fly within Europe as soon as the travel ban is lifted. This means lots of reservations and therefore a demand for fuel.

The European Commission put forward a proposal on Monday this week to expand the list of countries whose citizens may visit the European Union for nonessential reasons and its president, Ursula von der Leyen tweeted “Time to revive EU tourism industry & for cross-border friendships to rekindle – safely. We propose to welcome again vaccinated visitors & those from countries with a good health situation.”

The decision to lift further restrictions for tourism and non-essential travel will be up to the member states and the proposal was discussed at length yesterday.

India has been a huge consumer of oil in recent weeks, and despite Iraq’s oil minister’s predictions, there is speculation within India that it may rise to $80 by the summer of this year, substantially higher than Mr Abdul Jabbar’s prediction of $65.

India, the world’s third-largest oil importer, has increased its use so dramatically recently that OPEC+, out of its own necessity, has intervened in the oil market on the supply side of the equation to offset the oil demand.

As of April 6, the EIA saw global oil demand at 97.7 million bpd this year. Compared to Brent prices that were near $65 per barrel in March, the EIA sees not much movement in the price of Brent, estimating $65/barrel in Q2 2021, $61 per barrel in H2 2021, and even worse–$60 per barrel in 2022.

The US Energy Information Administration (EIA) has overseen a global oil demand at 97.7 million barrels per day this year as of April 6, the EIA Compared to Brent prices that were near $65 per barrel in March, the EIA sees not much movement in the price of Brent, estimating $65/barrel in Q2 2021, $61 per barrel in H2 2021, and even worse–$60 per barrel in 2022, which is a contrasting forecast to what the market analysts and OPEC commentators are expecting!

Such diverging views is a clear sign that volatility is likely to remain for some time yet.

Go figure!

Andrew Saks, Head of Research and Analysis at ETX Capital


Risk warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.5% of retail investor accounts lose money when spread betting or trading CFDs with ETX. You should consider whether you understand how spread bets or CFDs work and whether you can afford to take the high risk of losing your money.
Authorised and regulated by the Financial Conduct Authority, with Firm Reference Number 124721.

Oil Prices Rise on Drawdown in U.S. Crude Inventory

By Jessica Jaganathan

Brent crude oil futures rose by 17 cents, or 0.3%, to $69.13 a barrel by 0643 GMT, and U.S. West Texas Intermediate (WTI) crude futures gained by 9 cents, or 0.1%, to $65.72 a barrel.

Both benchmarks hit their highest since mid-March on Wednesday, before retreating to end little changed following two days of gains.

Easing coronavirus restrictions in Europe have led to a pick-up in fuel demand, analysts from Citi said in a note.

“As the roll-out of vaccines continues and a pent-up summer driving season continues to manifest, this trend should accelerate, keeping demand for motor fuels robust and boosting market confidence in the recovery story,” they said.

U.S. crude stocks fell more than expected last week as refining output rose and exports surged, the Energy Information Administration said on Wednesday. [S/EIA]

Crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with expectations in a Reuters poll for a 2.3 million-barrel drop.

U.S. gasoline stocks rose by 737,000 barrels in the week, the EIA said, against a forecast for a 652,000-barrel draw.

“We think U.S. demand is strong,” said analysts from Commonwealth Bank of Australia. “The U.S. refinery utilisation rate is now above the five-year average.”

U.S. jet fuel demand is expected to surge by 30% in the second quarter compared with the first quarter on increased domestic travel, they added.

Pandemic-related restrictions in the United States and parts of Europe are easing, but infections are still on the rise in major crude oil importers India and Japan, capping price gains.

Meanwhile, militants using bombs attacked two oil wells at an oilfield close to the northern Iraqi city of Kirkuk on Wednesday, killing at least one policeman and setting off fires, the country’s oil ministry said.

Industry sources said the attack had not affected output. An oil ministry statement did not comment on production.

(Reporting by Jessica Jaganathan; Editing by Tom Hogue and Richard Pullin)

World Shares Resilient, Drugmakers Hit by Biden’s Move on Vaccines

By Hideyuki Sano

MSCI’s broadest gauge of world stocks, ACWI, was up slightly and European stocks are expected to open flat with both Euro Stoxx futures and Britain’s FTSE futures little changed.

Japan’s Nikkei jumped 1.8% as it reopened after a five-day holiday.

But MSCI’s index of Asia-Pacific shares outside Japan lost 0.15% as Chinese shares, also resuming trade for the first time since last week, wobbled. The CSI300 fell 1.3%, led by falls in biotech firms.

China’s healthcare share index dropped more than 4% after U.S. President Joe Biden threw his support behind waiving intellectual property rights for COVID-19 vaccines.

Biden’s move hit U.S. vaccine makers, too, including Moderna, but Wall Street was supported overall by gains in energy and other cyclical shares.

Dow hit a record high overnight, having risen 0.29%, while the S&P 500 added 0.07%.

“This year, both the U.S. and Chinese economy could grow 6% or more. If the world’s two biggest economies are growing that much, clearly that’s positive,” said Norihiro Fujito, chief investment strategist, Mitsubishi UFJ Morgan Stanley Securities.

Against this backdrop, commodity prices are riding high, with copper flirting with 10-year peaks.

Oil prices extended gains to edge near their March tops as crude stockpiles in the United States, the world’s largest oil consumer, fell more sharply than expected.

U.S. crude futures stood at $65.65 per barrel, little changed on the day but just below Wednesday’s two-month high of $66.76. [O/R]

As agricultural products such as corn, soybeans and wheat, have gained sharply in recent weeks, Thomson Reuters CRB index has risen to its highest level since 2015, having gained more than 21% so far this year.

BONDS AND CURRENCIES

Higher commodity prices are fuelling inflation expectations in the bond market.

The U.S. breakeven inflation rate, or inflation expectations calculated from the yield gap between inflation-linked bonds and conventional bonds, rose to as high as 2.48% overnight.

But the U.S. nominal bond yields held relatively stable, with the 10-year U.S. Treasuries yield little changed at 1.584%.

“Bonds were supported partly because the pace of vaccinations has slowed in the States and as real-money investors are starting to buy,” said Naokazu Koshimizu, economist at Nomura Securities.

“The rise in inflation is also driven more by supply constraints than demand, which is why we are seeing rising inflation expectations and a fall in nominal yields,” he added.

In currencies, the Australian dollar briefly dropped as much as 0.6% after China said it was indefinitely suspending all activity under a China-Australia Strategic Economic Dialogue, the latest setback for their strained relations.

It last stood down 0.15% at $0.7734

The British pound was flat at $1.3910 ahead of a central bank policy review.

The Bank of England could slow the pace of its bond buying to allow its quantitative easing programme to last until the end of the year, as it could reach the cap by September at the current pace of buying.

Investors also looked to Scotland’s election that could trigger a showdown with British Prime Minister Boris Johnson over a new independence referendum.

Other currencies were little moved, with the focus on Friday’s U.S. monthly jobs report which is expected to show that nonfarm payrolls increased by 978,000 jobs last month.

The euro stood flat at $1.2004 while the yen changed hands at 109.35 per dollar.

(Editing by Himani Sarkar and Kim Coghill)

Crude Oil Price Forecast – Crude Oil Markets Break Above Triangle

WTI Crude Oil

The West Texas Intermediate Crude Oil market has gapped higher to kick off the trading session on Wednesday, pulled back a bit to fill that gap, and then turned around to show signs of strength. Ultimately, this is a market that is trying to go higher, and therefore I think what we are looking at is a potential move towards the $70 level given enough time. All things been equal, I think that the market is likely to be to see the uptrend line from the previous triangle and the 50 day EMA. All things been equal, this remains a “buy on the dips” type of scenario as the world trade to the “reopening trade.”

Crude Oil Video 06.05.21

Brent

Brent markets have gapped higher to kick off the trading session as well, reaching towards the $70 level before pulling back a bit and then bouncing again. If we can get a daily close above the $70 level, then it is likely that we go much higher. If we break above there, then we are looking at a potential move to the $75 level. All things been equal, it is very difficult to imagine a scenario where I would be a seller, so with that being the case I am simply looking at this as a “long only” trade, but I also recognize that with the jobs number coming out on Friday it is very likely that we will continue to see a lot of choppy action between now and then. Regardless, I see no scenario in which I would be a seller as we are so strong in general.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Rally Stalls After EIA Gasoline Build Disappoints Bulls

U.S. West Texas Intermediate crude oil futures are retreating from their intraday high on Wednesday, shortly after the release of the government’s weekly inventories report that showed a drop in U.S. crude stocks and distillate inventories, and a rise in gasoline inventories. The price action suggests traders were disappointed by the numbers.

At 15:00 GMT, June WTI crude oil futures are trading $66.29, up $0.60 or +0.91%.

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.3 million-barrel drop.

U.S. gasoline stocks rose by 737,000 barrels in the week to 235.8 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 652,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 2.9 million barrels in the week to 136.2 million barrels, versus expectations for a 1.1 million-barrel drop, the EIA data showed.

Daily June WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $66.76 will signal a resumption of the uptrend. A move through $62.91 will change the main trend to down.

The new minor range is $62.91 to $66.76. Its 50% level at $64.84 is the new potential downside target.

Daily Swing Chart Technical Forecast

The direction of the June WTI crude oil futures contract into the close on Wednesday will be determined by trader reaction to $65.69.

Bullish Scenario

A sustained move over $65.69 will indicate the presence of buyers. If this generates enough upside momentum then look for a breakout over the intraday high with the March 8 main top at $67.29 the next upside target, and potential trigger point for an upside breakout.

Bearish Scenario

A sustained move under $65.69 will signal the presence of sellers. If this move creates enough downside momentum then look for a move into the new minor pivot at $64.84.

Side Notes

A close under $65.69 will form a closing price reversal top. If confirmed, this could lead to a 2 to 3 day correction with $64.84 the first target.

For a look at all of today’s economic events, check out our economic calendar.

What Is Backwardation?

Backwardation of commodities hit the steepest level in nearly 15 years this week, driven by a worldwide shortage of raw materials. Massive stimulus, low-interest rates, and the light at the end of the pandemic tunnel have driven this surge in demand, which is coinciding with the first commodity uptrend in a decade. Metals, agriculture, and the energy markets have all been moved by this historic impulse, which ironically predicts lower commodity prices in the coming months.

Understanding backwardation requires learning three key terms. First, the spot price denotes the current commodity price. Theoretically, anyone can walk into a commodity store and walk out with that commodity at the spot price, which changes over time due to the market forces of supply and demand.  Second, the futures contract denotes an agreement to buy or sell the commodity at a specified delivery date in the future, with contract maturity as short as a month or up to 10 years in the future.

Third, the futures curve illustrates the relationship between the spot price and futures prices. A futures curve is in backwardation when the slope is declining, predicting the commodity price will be lower ‘n-months’ into the future. Conversely, a futures curve is in contango when the slope is rising, predicting the commodity price will be higher ‘n-months’ into the future. This information is so actionable it can be used to gauge market sentiment, in addition to pricing.

What is Backwardation?

Simply stated, a commodity futures contract and spot market enter backwardation when shorter-term pricing is higher than longer-term pricing. As in 2021, this phenomenon can reflect intense short-term scarcity that forces suppliers of these commodities to raise prices at a rapid rate. This is significant because futures with longer maturities have to include inventory carrying and storage costs in addition to fundamentals and market-driven demand estimates.

Backwardation can be short-term (bottlenecks that will soon be eased) or long-term (supply and demand imbalances that persist for months or years). In the current phenomenon, futures traders expect that short-term scarcity will ease as production and supply ramp-up, putting a dampening effect on longer-dated contracts. However, backwardation can also end with futures ramping up to higher prices to match spot prices, generating a nearly perfect storm for rising inflation.

Decade-long cycles drive commodity prices and backwardation may set off warning signs that demand has overtaken supply on a semi-permanent basis, set to generate significant inflationary pressure. However, the curve’s downslope indicates that expectations remain within boundaries, at least in the short-term, reacting to balanced conditions. As a result, those tasked with rate analysis have to watch the futures curve, looking for signs of stress that can translate into higher prices.

Traders seek to profit from backwardation by selling short at the spot price and buying back at the futures contract price. In theory, the practice will eventually restore normal conditions, inducing the spot price to fall until it is lower than or equal to longer-dated securities. Expiration can help or hurt this process, as illustrated during the 24 hour period ahead of April 2020 expiration, when the expiring WTI crude oil contract fell below minus $40 due to a massive short-term exodus.

Contango vs. Backwardation

Contango, also known as forwardation, is the opposite of backwardation.  This market condition occurs when each successively longer-dated futures contract costs more than the next shorter-dated futures contract, generating an upward slope.  For example, when a futures contract rotates on a monthly bases, the price of the July contract will be higher than the price of the June contract, which will be higher than the May contract, and so on. Futures contracts can shift rapidly between contango and backwardation, or get stuck in one state that persists for years.

It is assumed that spot prices will rise to meet futures prices when contango is in effect. As a result, market players will sell short higher-priced futures contracts and attempt to buy back the exposure through spot prices, pocketing the difference. This technique has a self-perpetrating effect, i.e. generating even greater demand that drives the spot price higher until it matches or exceeds futures prices, ending the contango. The expiration date affects this process, capable of generating high volatility when market forces are in conflict.

Interpreting Backwardation and Contango

Traders engaged in backwardation and contango strategies can get trapped when the spot/futures relationship doesn’t follow expectations. As noted above, both imbalances can result from short-term influences or long-term paradigm shifts. In 2021, we’re coming out of a pandemic that disrupted supply chains and forced factories to shut down but we don’t know if supply can ramp up quickly enough to keep futures prices lower than spot prices. We also don’t know if we’re facing a short-term bottleneck or multiyear phenomenon.

Commodity traders keep close watch on other markets for clues about the persistence of backwardation and contango. The bond market is especially useful in this endeavor because it reflects the investment community’s consensus about interest rates along the yield curve. At the moment, this group of ‘traders’ is more bullish about interest rates than the futures crowd, who have chosen  by consensus to keep longer-term pricing at lower levels than spot pricing.

Finally, backwardation is considered to be a leading indicator, predicting that spot prices will be lower in the future. This prognosis works well if suppliers can boost production quickly and bring supply/demand back into balance, but bullish and bearish signals fail when macro events overtake short-term conditions.  Once again, cross-market verification is an absolute necessity to increase futures curve signal reliability and to reduce whipsaws.

Summary

Backwardation indicates the futures curve is falling, with spot markets and short-term futures contracts priced higher than longer-dated contracts. Conversely, contango indicates the futures curve is rising, with progressively higher prices between spot markets and longer-dated futures contracts.  Both market conditions are normal but can sometimes signal significant long-term shifts in market behavior.

Oil Price Fundamental Daily Forecast – Big Price Surge Expected if EIA Gasoline Draw Exceeds Expectations

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday shortly after the New York opening and ahead of the release of the U.S. government’s weekly inventories report at 14:30 GMT.

Prices are up for a third session as the easing of lockdowns and restrictions in the United States and parts of Europe led to optimistic forecasts calling for a boost in fuel demand during the summer and offset concerns about the rise of COVID-19 infections in India and Japan.

At 13:00 GMT, June WTI crude oil futures are trading $66.59, up $0.90 or +1.37% and July Brent crude oil is at $69.83, up $0.95 or +1.38%. Both futures contracts exceeded their March 8 tops.

Domestic and international crude oil prices were also supported by a large fall in U.S. inventories. Traders are now awaiting data from the U.S. Energy Information Administration (EIA) due at 14:30 GMT on Wednesday to see if official data shows such a large fall.

Vaccine Rollouts, Economic Data Underpinning Prices

The rise in oil prices to multi-month highs earlier today has been supported by COVID-19 vaccine rollouts in Europe and the United States where more than 40% of U.S. adults have received a vaccine.

Euro Zone business accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.

In the United States, private job growth accelerated in April but fell a bit short of Wall Street expectations, according to a report Wednesday from payroll processing firm ADP.

Companies added 742,000 workers for the month, a jump from March’s upwardly revised 565,000 but a bit shy of the 800,000 forecast from economists surveyed by Dow Jones.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies fell by 7.7 million barrels for the week ended April 30. Ahead of the report, traders were pricing in at 3.9 million barrel draw.

The API also reported that gasoline stockpiles fell by 5.3 million barrels versus pre-report estimates of a 500,000 barrel drawdown.

Meanwhile, distillate inventories declined by nearly 3.5 million barrels. Traders were looking for a 1.6 million barrel drawdown.

Daily Forecast

Today’s EIA report is likely to set the tone for the rest of the session. Traders are looking for a crude oil drawdown of 1.9 million barrels.

Prices could spike higher if the number is higher than expected, especially if it exceeds the API’s 7.7 million barrel draw. Traders will also be watching the gasoline numbers closely. A stronger-than-expected draw in gasoline stockpiles will be further confirmation that the economy is heating up.

“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Move Higher As Traders Shrug Off Inflation Worries

Stocks Set To Open Higher After Yesterday’s Sell-Off

S&P 500 futures are moving higher in premarket trading as traders look ready to buy stocks after yesterday’s pullback.

Yesterday’s sell-off in the tech space was caused by comments of Treasury Secretary Janet Yellen which stated that interest rates may have to move higher to ensure that the economy did not overheat. These comments put immediate pressure on the tech-heavy Nasdaq which finished the day down by almost 2%.

Yellen later added that she was not predicting or recommending the move, and it looks that this was sufficient enough to calm traders. Interestingly, the bond market did not show a strong reaction. Currently, the yield of 10-year Treasuries is trying to settle above the 20 EMA at 1.61% which served as resistance for several trading sessions.

ADP Employment Change Report Misses Analyst Consensus

The U.S. has just released ADP Employment Change report for April. The report indicated that private businesses hired 742,000 workers compared to analyst consensus of 800,000.

Later, traders will take a look at the final reading of Services PMI report for April. Analysts expect that Services PMI increased from 60.4 in March to 63.1 in April as the economy continue to rebound at a robust pace.

WTI Oil Tests The $66 Level As Rally Continues

WTI oil is currently trying to settle above the $66 level as traders continue to bet on the strong recovery of oil demand. Yesterday, API Crude Oil Stock Change report indicated that crude inventories declined by 7.7 million barrels compared to analyst consensus which called for a decline of 2.19 million barrels.

Today, the market’s focus will shift to EIA Weekly Petroleum Status Report which usually has a bigger impact on the market compared to API Crude Oil Stock Change report. If EIA numbers confirm that crude inventories declined at a robust pace, the oil market may get additional support.

For a look at all of today’s economic events, check out our economic calendar.

IPO Fever Heating up Arab Gulf National Oil Companies

After the world’s largest IPO ever by Saudi national oil company Aramco, others have been putting up part of their assets also up for sale. Saudi Arabia and the UAE have been leading the flock. Now a new star could emerge, Bahrain’s national oil company NOGA is considering options to access private-equity funding for some infrastructure assets.

Bahrain’s minister of oil Mohammed bin Khalifa Al Khalifa stated to Bloomberg Television that they are considering selling energy assets. The minister indicated that “we have got a lot of infrastructure assets that can easily be” structured for private-equity funding. First target could be to open up Bahrain’s pipeline to Saudi Arabia for a private equity deal. Other options could be an LNG import vessel and several upstream assets. Manama seems to be jumping on the train set in motion by Saudi Arabia, UAE, Qatar and others, to sell energy assets or issue bonds based on these assets.

No specific details yet have come forward, but a potential offering of a stake in the Saudi-Bahraini crude oil pipeline, which is supplied by Aramco, as an another outlet for Saudi oil, but also is used to supply Bahraini petrochemical and refinery projects, could be a major source of income. The so-called AB-4 pipeline was inaugurated, to replace an older one, in 2018. The new 112-km long AB-4 oil pipeline has a capacity of over 350,000 barrels of crude oil per day, which will replace the existing 73-year-old pipeline system. The new oil pipeline starts from Saudi Aramco’s Abqaiq Plants and finish at the Bahrain Petroleum Company (Bapco) Refinery in Bahrain.

The remarks that potentially upstream assets could also be in the offering is opening up a new discussion. Even that Bahrain is a very small oil producer, slated to produce around 50,000 bpd from its own fields, and shares production of a Saudi-Bahraini field of 150,000 bpd, the potential could however be much bigger. As indicated last month, NOGA, the National Oil and Gas Authority or national oil, is discussing at present a major tender round for its offshore shale Al Khaleej field.

The potential of that field is still unclear, but inside information links it to a major production expansion potential of the tiny island state. The Gulf Arab state in 2018 announced the discovery of the Khaleej al-Bahrain field, its largest oil and gas find since 1932, situated off Bahrain’s west coast and estimated to contain at least 80 billion barrels of tight (shale) oil and the country has been looking for foreign investment to help to develop it. Bringing in additional financial backup to start up production in 2022 is possibly a main driver for the current private-equity discussion. Bahrain is also rumored to be talking to major oil and gas companies, such as ENI, but also Gazprom and others, to start up the world’s first shale oil and gas field very soon.

Production comes from just one field – the onshore Bahrain Field (also known as Awali) – which was discovered and brought onstream in 1932. Bahrain also receives a 50% share of production from the Abu Sa’fah field in Saudi Arabia.

At the same time, IPO fever is growing. Abu Dhabi’s national oil company ADNOC is slated to be close to hire First Abu Dhabi Bank and JPMorgan as primary arranger for the drilling unit IPO. The Abu Dhabi giant is expected to sell a minority stake in the drilling unit, valued at around $10 billion. ADNOC Drilling already has a minority shareholder, as BakerHughes acquired in 2018 a 5% stake, in a deal putting up the value to $11 billion.

ADNOC is considering an IPO for its drilling unit but also for a fertilizer joint venture called Fertiglobe, The deals could raise more than $1 billion each. If the deal goes ahead, it would be the oil company’s second listing of a unit on the Abu Dhabi stock exchange after it listed ADNOC Distribution in late 2017, raising 3.1 billion dirhams ($844 million).

ADNOC Drilling owns and operates a large fleet of rigs, including 75 onshore rigs, 20 offshore jackup rigs, and 11 well water rigs, according to its website. Emirati sources have indicated that no formal mandates yet have been awarded, but JPMorgan and FAB are front runners. The ADNOC Drilling IPO will be listed on the Abu Dhabi Securities Exchange. The Emirate is trying to revamp its dormant stock market.

Crude Oil Price Update – WTI Hits High of Session Following Release of Bullish API Inventories Report

U.S. West Texas Intermediate crude oil futures are testing their high for the session on Tuesday after a private industry report showed a larger-than-expected draw down for crude oil, gasoline and distillates.

Prior to the release of the report at 20:30 GMT, a bullish tone had been present in the market as traders bet increased demand in the United States, Europe and China would offset any lost demand caused by the surging COVID-19 pandemic in India.

At 20:55 GMT, June WTI crude oil was trading $66.19, up $1.70 or +2.64%.

The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies fell by 7.7 million barrels for the week ended April 30. Ahead of the report, traders were pricing in at 3.9 million barrel draw.

The API also reported that gasoline stockpiles fell by 5.3 million barrels versus pre-report estimates of a 500,000 barrel drawdown.

Meanwhile, distillate inventories declined by nearly 3.5 million barrels. Traders were looking for a 1.6 million barrel drawdown.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier on Tuesday when buyers took out swing tops at $65.47 and $66.15. A new main bottom was formed at $62.91. A trade through this level will change the main trend to down.

The main range is $67.29 to $57.29. Its retracement zone at $63.47 to $62.29 is new support. Trading on the strong side of this zone puts the market in a bullish position.

Short-Term Outlook

The current upside momentum suggests the market has enough fire power behind it to fuel a test of the March 8 main top at $67.29 over the near-term.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Trying to Break Out of Triangle

WTI Crude Oil

The West Texas Intermediate Crude Oil market has broken above the $65 level, and it is looking very likely to try to take off to the upside based upon the whole “reopening trade” that people are paying close attention to. Short-term pullback should continue to be buying opportunities. Underneath, I see the $63 level as support, as it was proven to be resistance previously. All things being equal, this is a market that I think continues to go to the upside, but it will not necessarily be easy to get up there, but it certainly looks as if the market is trying to continue to go higher based upon the overall uptrend. The uptrend line is at the bottom of the ascending triangle, and therefore it looks like there is plenty of bullish pressure.

Crude Oil Video 05.05.21

Brent

Brent markets have also rallied during the course of the trading session to show signs of strength going forward. It looks as if the market is trying to go towards the $70 level, an area that of course will attract a lot of attention as it had been resistance previously. With that being the case, I do like the idea of going long on dips as it gives you an opportunity to pick up value. The 50 day EMA is walking right along the bottom of the triangle, and therefore I think we will continue to see plenty of buyers on these dips, especially as we have the “reopening trade” in the forefront, therefore I think we will continue to see the crude oil markets will attract quite a bit of momentum and inflows.

For a look at all of today’s economic events, check out our economic calendar.

Oil rises on U.S. and European demand growth optimism

By Julia Payne

LONDON (Reuters) -Oil prices rose on Tuesday after more U.S. states eased lockdowns and the European Union sought to attract travellers, though soaring COVID-19 cases in India capped gains.

Brent crude futures were up $1.19, or 1.76%, at $68.75 a barrel by 1341 GMT after climbing by 1.2% on Monday.

U.S. West Texas Intermediate (WTI) crude futures rose by $1.05, or 1.63%, to $65.54 after a 1.4% jump on Monday. Both contracts were up about 2% in earlier trade.

Prices are being supported by the prospect of a pick-up in fuel demand as New York state, New Jersey and Connecticut look to ease pandemic curbs and the EU plans to open up to foreign visitors who have been vaccinated, analysts said.

“The current strength is led by U.S. gasoline, where demand is seen as healthy as more motorists take to the roads,” said PVM Oil Associates analyst Tamas Varga.

“Yesterday’s stock market strength is being followed through this morning in the oil market … the market focuses on the successful rollout of vaccine programmes in the U.S. and in other developed countries and not on the devastation in India and Brazil.”

For further signs of rising U.S. oil demand, traders will be watching for reports on crude and product stockpiles from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

Five analysts polled by Reuters estimated on average that U.S. crude inventories fell by 2.2 million barrels in the week to April 30. Oil inventories rose in the previous two weeks.

The rate of refinery utilisation was expected to have increased by 0.5 percentage points last week, from 85.4% of total capacity in the week ended April 23, the poll showed.

A weaker dollar, hit by an unexpected slowdown in U.S. manufacturing growth, also helped to shore up oil prices on Tuesday. The lower dollar makes oil more attractive to buyers holding other currencies.

In India, the total number of infections rose to just short of 20 million after the country registered more than 300,000 new cases for a 12th straight day, which is expected to hit fuel demand in the world’s most populous country behind China.

“Strong demand forecasts for the second part of 2021 are providing a bullish seat for traders to drive rallies, not allowing any strong negative price reaction to drag for long, even at times of crisis, such as the recent one in India,” said Rystad Energy analyst Louise Dickson.

“In fact, looking at balances going forward, prices will likely climb again to about $70 per barrel in the coming months, unless we see another policy change by OPEC+.”

(Reporting by Julia Payne in London, Sonali Paul in Melbourne and Roslan Khasawneh in Singapore; Jan Harvey and David Goodman)

Oil and Gas Investor EnCap Raises $1.2 Billion Energy Transition Fund

By David French

The Houston-based firm is a prolific investor in hydrocarbons, and has raised more than $38 billion since its founding in 1988, with its latest flagship vehicle amassing $7 billion in 2017.

With investors more focused on environmental considerations, capital has been pouring into clean energy production.

“There’s definitely a movement among institutional investors into ESG of all kinds, including in the energy space,” Jason DeLorenzo, EnCap Investments’ managing partner, told Reuters.

EnCap had talked over a long period of time with its investor base about pursuing opportunities in energy transition, he said. Previous EnCap investors contributed around 75% of the new fund’s cash.

EnCap Energy Transition Fund I will invest in wind and solar power and energy storage, according to a statement. It will be run by Jim Hughes, a former chief executive of First Solar Inc, who was part of a quartet EnCap recruited in September 2019 to invest in renewable energy.

The fund has already invested in five companies, with Hughes saying in the same interview that around half the proceeds have been deployed.

Hughes declined to give a specific figure about return targets, but said it would be lower than EnCap’s upstream fund and above what infrastructure funds traditionally generate.

Private-equity firms normally pitch returns in the high-teens percentile, with the expectation for infrastructure funds in the high single digits.

EnCap is not abandoning oil and gas altogether though, with DeLorenzo seeing “robust opportunities” available for deploying the remaining $4 billion of its 11th flagship fund.

Portfolio companies within the energy transition fund could also help EnCap’s existing hydrocarbon-producing and pipeline investments with their own decarbonization efforts, Hughes said.

(Reporting by David French in New York, Editing by Sherry Jacob-Phillips)

Oil Price Fundamental Daily Forecast – Rising Gasoline Demand Expectations Setting Bullish Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher on Tuesday on a more optimistic outlook for demand. The rally is being fueled by the news that more U.S. states eased lockdowns and the European Union sought to attract travelers. This news is helping to offset worries over fuel demand in India as COVID-19 cases soar.

At 12:43 GMT, June WTI crude oil is trading $65.31, up $0.82 or +1.27% and July Brent crude oil is at $68.43, up $0.87 or +1.29%.

Later today at 20:30 GMT, the American Petroleum Institute (API) will release its weekly inventories report.

Fuel Demand Expected to Pick=Up

Prices are being supported by the prospect of a pick-up in fuel demand in the United States and Europe, as New York state, New Jersey and Connecticut were set to ease pandemic curbs and the European Union planned to open up to more foreign visitors who have been vaccinated, analysts said.

The price action suggests buyers are focused on the successful roll-out of vaccine programs in the U.S. and in other developed countries and not on the surge in COVID-19 cases and deaths in India and Brazil.

In India, the total number of infections so far rose to just short of 20 million, propelled by a 12th straight day of more than 300,000 new cases which is expected to hit fuel demand in the world’s most populous country after China.

Could See Further Signs of Demand in Today’s API Report

For further signs of rising U.S. oil demand, traders will be watching for reports on crude and product stockpiles from the API.

Five analysts polled by Reuters estimated on average that U.S. crude inventories fell 2.2 million barrels in the week to April 30. Oil inventories rose in the previous two weeks.

The rate of refinery utilization was expected to have increased by 0.5 percentage points last week, from 85.4% of total capacity in the week ended April 23, according to the poll.

“The current strength is led by U.S. gasoline where demand is seen healthy as more motorists take on the roads,” Tamas Varga, analyst at PVM Oil Associates, said.

Daily Outlook

The momentum is clearly to the upside and with buyers betting on the reopening of economies in the U.S. and Europe while downplaying the dire situation in India and elsewhere, we expect to see a near-term test of the March highs.

Although a weak API report late Tuesday could put a dent in the rally later today, it should not derail the rally. Traders know it’s just a matter of time before gasoline and distillate demand surges.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Set To Open Lower As Traders Continue To Take Profits Near Record Highs

Stocks Move Lower As Traders Wait For Additional Upside Catalysts

S&P 500 futures are losing ground in premarket trading as traders remain cautious at a time when the stock market trades near record levels.

Yesterday, U.S. provided the final reading of Manufacturing PMI report for April which indicated that Manufacturing PMI increased from 59.1 to 60.5 compared to analyst consensus of 60.6. While the report was a bit worse than analyst expectations, it highlighted the strong growth of the U.S. manufacturing segment.

Today, traders will have a chance to take a look at Factory Orders data for March. Analysts expect that Factory Orders increased by 1.3% month-over-month after declining by 0.8% in February. It remains to be seen whether additional economic data will have a material impact on stocks as traders look increasingly focused on valuations as the market remains close to record levels.

WTI Oil Tries To Settle Above The $65 Level

WTI oil managed to get above the $65 level and made an attempt to get to the test of the $66 level as traders remained optimistic about the speed of oil demand recovery despite current problems with coronavirus in India.

Oil traders continue to bet that problems in India will remain an isolated case, and that the driving season will be strong, boosting demand for oil.

API Crude Oil Stock Change report, which is set to be published today, is expected to show that crude inventories declined by 2.19 million barrels. In case crude inventory draw is bigger than expected, oil may get additional support.

U.S. Dollar Rebounds, Putting Some Pressure On Precious Metals

The U.S. Dollar Index managed to settle back above the 91 level and is currently testing the resistance at the 20 EMA at 91.35. It looks that there is some demand for safe haven assets today, which is bullish for the American currency.

Stronger dollar puts pressure on gold and silver which are losing ground despite falling Treasury yields. Shares of miners enjoyed strong support during yesterday’s trading session, but they look ready for a pullback today.

For a look at all of today’s economic events, check out our economic calendar.

Saudi Aramco Beats Q1 Profit Forecast, Keeps Dividend as Oil Rebounds

By Hadeel Al Sayegh, Saeed Azhar and Alexander Cornwell

Earnings by global energy companies such as Exxon Mobil have increased on the back of crude oil prices, which have risen by about a third this year, as a global oil surplus caused by the pandemic dwindles and fuel demand recovers.

“Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming,” Aramco CEO Amin Nasser said in a statement.

“And while some headwinds still remain, we are well-positioned to meet the world’s growing energy needs as economies start to recover.”

Net income rose to $21.7 billion for the quarter to March 31 from $16.7 billion a year earlier.

Analysts had expected a net profit of $19.48 billion, according to the mean estimate from five analysts.

Aramco said the profit was primarily driven by a stronger oil market and higher refining and chemicals margins, partly offset by lower production.

The OPEC+ group, the alliance of the Organization of the Petroleum Exporting Countries and other leading oil producers including Russia, decided last month to stick to its previously approved action plan to ease output curbs further from May.

Aramco declared a dividend of $18.8 billion for the first quarter, to be paid in the second quarter, in line with company guidance of a $75 billion dividend for this year.

Aramco average total hydrocarbon production came in at 11.5 million barrels per day of oil equivalent in the first quarter of 2021, including 8.6 million barrels per day of crude oil.

(Reporting by Hadeel Al Sayegh, Alexander Cornwell, Saeed Azhar; editing by Jason Neely and Richard Pullin)

Crude Oil Price Update – Needs to Hold $64.19 to Sustain Rally into Close

U.S. West Texas Intermediate crude oil futures are trading more than 1% higher at the mid-session on Monday with the rally being driven by solid Chinese economic figures and an impressive vaccination rate in the United States. Both point toward strong demand in the world’s two-largest economies.

At 16:58 GMT, June WTI crude oil is trading $64.29, up 0.71 or +1.12%.

With the U.S. and China expected to drive a recovery in demand from the coronavirus pandemic, investors have become less worried over the record-breaking infection rates in India, the third-largest fuel importer worldwide, along with higher OPEC+ oil supply.

Daily June WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $65.47 will signal a resumption of the uptrend. The main trend will change to down on a move through $60.61.

The short-term range is $67.29 to $57.29. Its retracement zone at $63.47 to $62.29 provided support earlier in the session.

The minor range is $60.61 to $65.47. Its 50% level at $63.04 actually stopped the selling earlier in the day.

Another minor range is $65.47 to $62.91. Its 50% level at $64.19 is currently being tested.

Daily Swing Chart Technical Forecast

The direction of the crude oil market into the close on Monday will be determined by trader reaction to $64.19.

Bullish Scenario

A sustained move over $64.19 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into $65.47.

Bearish Scenario

A sustained move under $64.19 late in the session will signal the presence of sellers. This could create the downside momentum needed to challenge $63.47 and $63.04.

Aggressive counter-trend sellers may try to stop the intraday rally in an effort to form a minor secondary lower top.

For a look at all of today’s economic events, check out our economic calendar.