Last Friday we saw a significant rally in the market, the third largest of the year to be exact. May NYMEX crude gained $2.46/barrel on the day and settled at $39.72. Prompt month May RBOB and heat also had noteworthy gains of $0.0825/gal and $0.0747/gal respectively. Analysts attribute such upward momentum in the market to a combination of things. One could be in anticipation of this Sunday’s OPEC and non-OPEC production freeze meeting in Doha, even while some analysts (such as Goldman Sachs) believe the outcome of this meeting will not address the oil market imbalance. Another could be the larger-than-expected draw in crude oil stockpiles here in the U.S. Crude inventories drew 4.9 mbbls through the week ending April 1, largely due to crude demand holding strong over 9 million bbl/day and signs of global economic well-being. Lastly, the Keystone pipeline, which leaked last week and caused TransCanada to shut the line from Alberta to Cushing and to Midwest refineries, was restarted today at reduced pressure.
- Baker Hughes U.S. rig count fell by 8 to 354, down from 1609 in October 2014. Last week was the third consecutive weekly decline.
- Cash prices for NY Harbor higher RVP RBOB swelled 9 cents higher on Friday as there is limited production and supply of winter-grade gasoline.
- On that note, OPIS pricing rolled forward to lower RVP, summer-grade gasoline this weekend.
- Saudi Arabia, the world’s largest crude producer, remains firm and will only agree to the freeze if Iran and Iraq join. Iran says it will only consider this once it reaches its pre-sanction level of 4mbpd.
- In addition to Goldman, several other analysts do not believe in this rally.
- In an article published on Bloomberg last Friday, Stewart Glickman, an equity analyst at S&P Capital IQ in New York said, "I’m not buying this rally. We went from $26 to $41 on optimism that something will happen to curb supply. The risks of a sharp downturn remain greater than those for a rally.
- Last week’s rally is continuing into today. WTI crude is up $0.71 to $40.43, RBOB is up $0.0407 and heat is up $0.0177.