Yesterday the market finally gave back some of the gains from the rally that has been happening over the past 2 weeks. WTI crude closed down $1.40/bbl to $36.50, RBOB closed down $0.0049/gal to $1.3878, and HO finished down $0.0225/gal to $1.20. The rally was thought to have been overdone, however, the market is back up this morning despite the bearish API data reported last night. The APIs showed another build in crude of 4.4 million barrels. It was reported gasoline had a 2.1 million barrel draw, and distillates had a small draw of 130,000 barrels.
The market continues to rally as the morning goes on, driven once again by talks of an OPEC/non-OPEC production cut meeting. The meeting was supposedly scheduled for March 20th, but the Russian energy minister revealed the date has yet to be finalized. With that being said, it seems as if Iran is not in agreement with the talks and wants to reclaim its market share. Iran’s crude oil exports are at 1.8 million barrels per day, and will likely be at 2 million barrels per day by summer.
The key resistance level for RBOB is 1.3896. Yesterday the contract went through this level but finished 18 points below. Currently, RBOB is above this level, but the key is whether it will hold. If it does close above this level, it will affect the where crude and distillates are heading as well. Also note, oil prices are very volatile in the spring. As PVM Oil cleverly put it, “spring seems to make oil bulls frisky.” Last spring’s rally amounted to a $24/bbl gain from mid-January to the end of April, and so far this year is up about $10/bbl.
The DOE statistics released today at 10:30 a.m. ET showed a build in crude of 3.9 million barrels, 690,000 barrels of which is in Cushing, OK. Refined products both had much larger draws than the API report. Gasoline had a 4.5 million barrel draw and distillates had a 1.1 million barrel draw. The draw in gasoline is not unusual; we typically see draw-downs in gas inventory as the U.S. starts the transition to lower RVP summer grade gasoline.