Oil futures traded lower on Wednesday as traders bet that rising COVID-19 infections in Asia will hurt energy demand, and as official data revealed an unexpected weekly rise in crude inventories.
“There are a lot of moving pieces in the energy market right now, including rising concerns about global COVID-19 cases derailing the recovery in consumer demand,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
The recent string of robust economic data, specifically in the U.S., is bullish for prices, he said. However, the potential antitrust lawsuits against the Organization of the Petroleum Exporting Countries, for the group’s oil production cap policies that have “largely supported the rebound in oil prices since last fall,” is a bearish development, said Richey.
The U.S. House Judiciary Committee cleared a bill, known as NOPEC, that would leave OPEC open to antitrust lawsuits over production cuts. That’s part of long-running efforts to make it illegal for OPEC to manipulate oil prices. The bill, however, has a long way to go before it potentially becomes a bill signed into law.
“If we see the global coronavirus situation deteriorate, the ‘NOPEC’ movement gain traction in Congress, or OPEC+ increase their production outlook,” prices for U.S. benchmark crude futures may see support in the upper $50s “tested and likely broken, as the 2021 oil rally takes a breather,” said Richey.
Otherwise, “hopes for a continued demand recovery and stable production should support continued sideways trade, with an eventual move higher becoming increasingly likely,” he said.
West Texas Intermediate crude for June delivery CL.1,
All of the factors influencing oil have “conflicting influences on the market right now, which is why the oil prices have appropriately fallen into a consolidation pattern,” said Richey.
WTI prices are “pinned between resistance” near the 2021 highs of $66-$67 a barrel and the March lows of $57 a barrel, he said. They’re likely to “continue to chop sideways in this range until clarity emerges regarding one or more of the fundamental factors listed above.”
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Prices on Wednesday continued to trade lower in the wake of the latest U.S. petroleum supply update.
The Energy Information Administration reported that U.S. crude inventories rose by 600,000 barrels for the week ended April 16. That followed supply declines in each of the previous three weeks.
On average, analysts polled by S&P Global Platts forecast a decline of 4.4 million barrels for crude stocks, while the American Petroleum Institute on Tuesday reported a 436,000-barrel climb.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub declined by 1.3 million barrels for the week, but total domestic oil production was unchanged at 11 million barrels per day.
Gasoline supply was up by 100,000 barrels, while distillate stockpiles fell by 1.1 million barrels for the week, according to the EIA. The S&P Global Platts survey had forecast a supply climb of 800,000 barrels for gasoline, but distillate inventories were expected to fall by 1.3 million barrels.
On Nymex, May gasoline RBK21,
May natural gas NGK21,
For oil, demand prospects remained a key concern.
India reported a record number of cases again on Wednesday, counting more than 200,000 for a seventh straight day. The country’s hospitals are reportedly filling rapidly, with the health system running out of ICU beds and running low on oxygen. News reports said Japanese officials were considering ordering a state of emergency for Tokyo and Osaka due to surging COVID-19 cases.
