Fueling Strategy: Please partial fill only today due to prices are UP over 7 cents but will drop 1.5 cents Thursday~Be Safe

NMEX Crude      $ 72.83 UP $1.9700

NYMEX ULSD     $2.4226 UP $0.0587

NYMEX Gas       $2.5692 UP $0.0901

NEWS

June WTI crude oil on Wednesday closed up +1.97 (+2.78%), and June RBOB gasoline closed up +9.01 (+3.63%).   June Nymex natural gas (NGM23) is down -0.024 (-1.01%).

Crude oil and gasoline prices Wednesday rallied sharply, with gasoline climbing to a 2-week high.  Wednesday’s main bullish factor is the broad rally in risk markets on hopes that U.S. lawmakers will soon agree to raise the debt ceiling.  Crude prices moved higher Wednesday despite a rally in the dollar index to a 7-week high and an unexpected increase in weekly EIA crude inventories.

Stronger-than-expected global economic news Wednesday was positive for energy demand and crude prices.  U.S. Apr housing starts unexpectedly rose +2.2% to 1.401 million, stronger than expectations of a decline to 1.400 million.  Also, Eurozone Apr new car registrations rose +17.2% y/y to 803,000, the ninth consecutive month that registrations have increased.  In addition, Japan’s Q1 GDP rose +1.6% (q/q annualized), stronger than expectations of +0.8%.

Crude prices also have support on crude buying by the government to refill the Strategic Petroleum Reserve (SPR).  The Energy Department announced Monday that it is soliciting bids for up to 3 million bbl of sour crude to refill the SPR with deliveries in August and that it plans to purchase more oil later this year.

The outlook for stronger U.S. fuel demand is bullish for crude prices.  AAA is forecasting that as many as 42.3 million Americans will travel 50 miles or more from home this Memorial Day weekend, up +7% y/y and the highest for a Memorial Day weekend since 2005.

Crude has support on reduced Canadian crude output as wildfires in Alberta have halted at least 240,000 bpd and possibly 300,000 bpd of crude production from several Canadian crude producers.  The total number of wildfires in Alberta rose to 92 on Wednesday from 86 on Tuesday, with 27 still considered out of control.

In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +9% w/w to 86.69 million bbl in the week ended May 12.

The ongoing halt of Iraqi crude exports from the Turkish port of Ceyhan is tightening global oil supplies and is bullish for crude prices.  The Turkish government said it wants to negotiate a $1.5 billion settlement that it has been ordered to pay before allowing Iraqi crude exports to resume through its pipeline.  Oil exports of 500,000 bpd from the Turkish port of Ceyhan have been halted since March 25 after Iraq won an arbitration case from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.

Crude oil prices are being undercut by signs that Russia has not delivered on its threat to cut crude output.  Tanker-tracking data from Bloomberg shows Russia’s crude exports jumped above 4 million bpd in the week of April 28.  Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.

Crude prices surged on April 3 after OPEC+ announced a surprise oil production cut of more than 1 million bpd starting May 1.  Saudi Arabia said the cuts were a “precautionary measure aimed at supporting the stability of the oil market.”  OPEC Mar crude production fell by -80,000 bpd to 29.16 million bpd.

Wednesday’s weekly EIA inventory report was bearish for crude.  EIA crude inventories unexpectedly rose +5.04 million bbl versus expectations of a -2.0 million bbl draw.  Also, EIA distillate stockpiles unexpectedly rose +80,000 bbl versus expectations of a -1.5 million bbl draw.  In addition, crude supplies at Cushing, the delivery point of WTI futures, rose +1.46 million bbl.  Finally, EIA gasoline inventories fell -1.38 million bbl, a smaller decline than expectations of -2.0 million bbl.

Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of May 12 were -0.1% below the seasonal 5-year average, (2) gasoline inventories were -6.4% below the seasonal 5-year average, and (3) distillate inventories were -16.4% below the 5-year seasonal average.  U.S. crude oil production in the week ended May 12 fell -0.8% w/w to 12.2 million bpd, only 0.9 million bpd (-6.9%) below the Feb-2020 record-high of 13.1 million bpd.

Have a Great Day,

Loren R Bailey, President

Office: 479-846-2761

Cell: 479-790-5581

 

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