Sigh Of Relief Rally Extends

The sigh of relief rally is extending for a second day in energy and equity markets as more signs appear that the damage done by the coronavirus may not be as widespread as once feared.

It’s still too early to say that the we’ve seen the worst of the selling, the virus is still spreading and it seems to be nearly as contagious as the fear it produces. For energy futures, the first test will be whether or not prices can hold onto these gains and end the week higher. If not, this rally looks like just a speed bump on the road to lower prices.

The API was said to show U.S. oil inventories dropped more than four million barrels last week, while gasoline stocks increased by 3.3 million barrels, and distillates drew by a rounding error of 141,000 barrels. Once again, RBOB is a bit of a head scratcher, leading the move higher in prices this morning despite its stats looking the weakest in the latest API headlines. The DOE’s weekly report is due out at its regular time this morning.

The EIA published a look back at the biodiesel blenders tax credit, predicting that the forward reinstatement of the $1/gallon subsidy should lead to substantial increases in both domestic production and imports of bio and renewable diesels over the next two years.

The FOMC is meeting today, and the CME’s FedWatch tool shows zero expectation for a rate cut at this meeting, with a 13 percent chance of a rate increase. The forward outlook for rates has changed notably this week with traders now pricing in 40 percent odds of at least one rate cut by the summer, up from 30 percent just a week ago, as more people bet the FED will need to step in to minimize the impact of the coronavirus.

Desperation setting in: Venezuela seems to be throwing a Hail Mary, floating the idea of turning its oil industry back over to the private sector to try and save its collapsing economy.

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