With recurring statistics showing an oversupplied market and talks of a long-term production freeze, it’s no secret that the market is having some trouble finding its way. Yesterday, DOE statistics showed a 10.4 million build in inventories, so why are we bumping up against the next set of resistance levels (WTI: $34.82, HO: $1.1181, Rbob 1.3377)? It seems the market is seeking new information to break it out of the monotonous range levels we seem to be stuck in.
On March 20th, leading members from OPEC will travel to Russia with the intention of advancing conversations with other non-OPEC producers regarding the proposed production freeze. There will be a “dramatic price movement when the meeting takes place,” says Nigerian Minister of State for Petroleum Resources Emmanuel Kachikwu.
If nothing new comes from this meeting, it is likely that the market could start to focus more on the current supply glut, rather than thinking about the “what-ifs” regarding the production freeze. For now, there is little indication what will happen next, so we’ll sit tight and wait for the next piece of news to come.
Yesterday for prompt April futures: Heating Oil settled up .0070 at 1.1065 and .0072 on RBOB at 1.3107.
- Weekly U.S. demand for refined products was down, with gasoline lower by 450,000 bpd and distillate down by 340,000 bpd
- Bloomberg.com reports that Deutsche Bank AG, the world’s second largest currency trader, expects the dollar to surge this year. Since crude oil is traded in dollars, there is an inverse relationship between the strength of the dollar and crude prices. A surging dollar could be expected to put additional pressure on prices.
- Some U.S. shale producers indicated this week they would ratchet up production once prices reach $40-45/barrel.