FIS: Crude Oil Market Overview: More steam for crude prices to run over the $100/bbl mark
Crude oil prices had eased under the $100/bbl mark for a short while, as the US released an historic amount from its strategic oil reserves of around 180 million barrels.
The US Strategic Petroleum Reserves (SPR) will be released in two phrases with the first 90 million barrels being delivered between May and July period, then another half to be released on the Aug and Oct period this year.
So far, the releases had exceeded previous market expectations at six times larger than the previous outright SPR sale, which will likely to reduce the remaining strategic inventories to a mere 388 million barrels by the end of the stock draw.
However, the release only had short term impact on crude, as the prices soon bounced back as more potential sanctions were heard to be directed at Russia for war atrocities committed in Ukraine.
The city accounts nearly 4% of China’s GDP and the lockdown is estimated to restrict the social movement of 14 million residents, though airports, railways, international shipping, and the stock exchange are expected to remain opened during the lockdown period.
The rising Chinese covid cases are slated to affect oil demand which is estimated at 15 million barrels per day (bpd) and was reflected in recent selloffs in the future market.
US oil stocks will decline further and be lower than the 5 years average range, after the recent announcement of the SPR releases.
The market feared that EU nations may press for sanctions on Russian energy exports for war crimes, though fighting had ceased around Kyiv, but battles intensified for control of southern Ukraine.
Germany is expected to suffer more from the sanctions on the Russian energy products as the country is very dependent on Russian gas for power generation and thus may not go fully along with proposed EU energy sanctions.
Likewise, other nations like China and India would also come under increasing pressures from Western countries to back down from their purchases of the discounted Russian oil cargoes.
Of these, India was heard to snap up around 5 cargoes of Russian oil at around 6 million barrels in early March, and these cargoes were scheduled for discharges in early April, according to Kpler.
Technical view of the crude oil market:
June Futures – Intervention from the U.S. Government has seen a stabilization of the futures after they announced they will release 1 million bpd from their strategic reserves over the next 6 months. This has put the futures into a neutral phase.
The longer-term trend remains bullish, with the price holding above the USD 96.93 support (USD 3.02 higher today at USD 107.39). Downside moves below the USD 96.93 level will warn the USD 90.12 support level could be tested.
If broken, the intervention will have been successful as it would suggest the long-term Elliott wave cycle will have failed. There is lots of outside influence in this technical, with the recent accusation of war crimes by Russia opening the possibility to further sanctions and potentially even a complete withdrawal of purchasing gas supplies by Germany.
Strategic oil reserves are influencing the technical. At this point it remains bullish, but with a neutral bias. If we close today above the USD 106.24 level, we could see further tests to the upside.
Written by Titus Zheng Shujian and Edward Hutton, Edited by Chris Hudson (https://freightinvestorservices.com/fis-live/).
