Morning Market Overview
NYMEX West Texas Intermediate futures eased Monday while oil products and the Brent contract on ICE gained in choppy trading to open the week’s first session, caught between concern over economic growth and knock-on effect with oil demand and declining global oil supply.
NYMEX May WTI futures settled down $0.22 at $58.82 bbl, its second daily decline after ending at a $59.98 better-than four-month high settlement on the spot continuous chart late last week. ICE May Brent edged up $0.18 at $67.21 bbl, holding above last week’s $66.20 bbl low. NYMEX April ULSD futures advanced 1.45cts to settle at $1.9804 gallon, again shaking off early losses after testing retracement support at $1.9509 which coincides with the $1.9507 50-day moving average. NYMEX April RBOB futures continues to grind higher, settling up for a seventh consecutive session amid bullish seasonal features, ending at a $1.9379 gallon fresh better-than five-month high settlement on the spot continuous chart, up 1.2cts. NYMEX April products and ICE May Brent futures expire at Friday’s close (3/29).
The back-and-forth trade coincided with choppy activity in major U.S. equity indices, which sold off sharply on Friday amid an inversion in the bond market that has been an accurate precursor to recession. The inversion follows a worsening outlook for the global economy highlighted by contractions in the manufacturing sectors in Europe and China while the expansion in U.S. manufacturing has slowed.
Beijing and the European Central Bank have announced various efforts to provide stimulus to bolster their economies, while the Federal Reserve pledged a cautious approach before again lifting interest rates, signaling last week a rate hike was unlikely in 2019. The U.S. dollar, which sold off sharply last week on the Fed announcement and 0.2% downgrade to U.S. economic growth expectations this year to 2.1%, softened Monday.
Against demand worries, production cuts by the Organization of the Petroleum Exporting Countries have prompted drawdowns in global oil supply, especially in the United States, where a 15-month high in total commercial crude and oil products inventories in mid-January declined to a 6-1/2 month low in mid- March.
The partial closure of the Houston Ship Channel following a release of benzene on the heels of fog-related closure last week is likely to skew supply data, with U.S. exporting an increasing amount of crude alongside ongoing shipments of gasoline and distillate fuel. It’s unclear how long the partial closure to the channel will last, as the Coast Guard bars ship movement in order to capture the toxic chemical. The benzene release is a result of the March 17 industrial accident at the Deer Park petrochemical facility in Texas. Several tanks owned by Intercontinental Terminals Co. have burned and collapsed.