Head of Commodity Strategy, Saxo Bank Group
Summary: Brent crude oil trades back above $70/barrel for the first time in five months while WTI is attempting to re-enter the $65 to $75 range where it spend six months last year before the November to December collapse.
WTI crude oil is attempting a return to its 2018 upper range:
Following the murder of dissident journalist Jamal Khashoggi last year, the Saudis, in need of political friends abroad ,jumped when the US asked them to increase production ahead of the introduction of sanctions against Iran. What followed was the biggest slump in oil prices in years after the US surprisingly granted waivers to eight buyers of Iranian crude. As a result of being blindsided by the US and because of their need to support the price of crude oil, Saudi Arabia made a 180 degree turn: During a four-month period from December to March the kingdom’s production slumped from a record to a four-year low, well below the level they had agreed as part of the Opec+ deal to cut production.
With Trump being very focused on (high) stock market prices and (low) gasoline prices the fact that US consumers are now paying the highest seasonal price for gasoline since 2014 could potentially limit his ability to tighten the screws on Iran.
Later today at 14:30 GMT (CET+2 and ET-4) the EIA will publish its Weekly Petroleum Status report with the API and surveys both pointing to an increase in crude oil stocks and a continued drop in products.
According to a Bloomberg news story today, the Opec update confirms market expectations of a plunge in last month's crude output, with the impact of planned cutbacks exacerbated by the political crisis in Venezuela. Opec oil output, it said, tumbled by 534,000 barrels a day to just above 30 million a day in March. It added that "If output remains at current levels, global oil inventories will decline sharply this quarter and next."