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Fueling Strategy: Please fill as needed tonight – Be Safe

NYMEX Crude $ 42.64 DN $1.0900
NY Harbor ULSD $1.2903 DN $0.0186
NYMEX Gasoline $1.5131 DN $0.0178

NEWS
Oil futures settled lower on Monday, pulling back after a strong rally last week, on signs of rising global production. Kuwait’s crude production is recovering after its recent workers’ strike and output from Iraq has been climbing. Saudi Arabia will reportedly complete its expansion of a major oilfield next month, but the kingdom also announced an economic reform plan Monday which, ironically, aims to reduce the kingdom’s reliance on oil. West Texas Intermediate crude for delivery in June fell $1.09, or 2.5%, to settle at $42.64 a barrel on the New York Mercantile Exchange. June Brent crude on London’s ICE Futures exchange fell 63 cents, or 1.4%, to $44.48 a barrel.

“While the petroleum markets continue to vacuum up a flow of speculative buying, we note that fresh indications of rising production pose a fundamental threat to the rally,” said Tim Evans, energy analyst at Citi Futures and OTC Clearing, in a note Monday. Last week, oil prices rose by nearly 5% as a three-day strike in Kuwait and hopes that the oil glut would slacken overrode disappointment about the failure of major oil nations to reach an agreement on freezing their production. “Kuwaiti oil production has rebounded quickly from last week’s strike” to 3.0 million barrels a day, and a further increase to 3.15 mmbpd in June is “at least being contemplated,” said Evans. There’s also “talk that exports from Iraq may reach a new record in April.”

Meanwhile, Saudi Arabia’s state-owned Saudi Arabian Oil Co. is set to complete its expansion of its Shaybah oilfield by the end of May, boosting its capacity to 1 million barrels a day from 750,000 barrels, according to Bloomberg News, citing people with knowledge of the plan. “While this is presented as simply to maintain spare capacity, it could also mean increased overall production in the near term, even if it’s just a test,” said Evans. “And with no production freeze agreement, we see no particular restraint on pushing some additional barrels into the market, particularly since the price rally creates the impression that the market would welcome the added supply,” he said.

Meanwhile, Saudi Arabia announced an economic reform plan Monday. The Saudi economy has been crimped by low crude price and the plan is a long-term blueprint for the kingdom’s economic transformation aimed at reducing its dependence on oil. “Saudi Arabia wants to decrease its dependence on oil by investing in other sectors, and by growing other sectors, not by diminishing its oil activity,” said Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies. “Oil’s relative contribution will diminish, but not its absolute contribution.” Deputy Crown Prince Mohammed bin Salman said in an interview aired on Saudi news channel Al-Arabiya Monday that “by 2020, we’ll be able to live without oil.”

Adding further pressure on oil Monday, Genscape reportedly said that crude inventories at the Cushing, Okla. trading hub rose about 1.5 million barrels for the week ended April 22. “A confirmed build of more than a million barrels would seriously undercut the recent bullishness,” said Robbie Fraser, commodity analyst at Schneider Electric. Also, new home sales numbers in the U.S. were a bit disappointing, he said, adding that overall U.S. “economic health is always a key factor for oil, but that’s going to be especially true as we hit summer driving season, where record U.S. demand is going to be relied upon to help ease global storage levels.”

Traders will be eyeing the Federal Reserve policy meeting this week for an outlook on the U.S. economy.