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Oil Prices Knocking On Door Of Technical Breakout

Tuesday, Mar 12 2019
Market Talk

Oil prices are knocking on the door of a technical breakout this week, with both Brent and WTI trading within a few cents of their February highs overnight, aided by reports of further intentional output cuts by Saudi Arabia and unintentional reductions in Venezuela.

The Venezuelan turmoil seems to be reaching an inflection point this week as widespread power outages have taken the situation for most citizens from bad to worse. The amount of oil the country is producing, already at 30-year lows, is estimated to have been cut in half in the past week as the lack of power shuts operations. While this news may be short term bullish for energy markets, it could also be long-term bearish as the more dire the situation, the more likely a regime change seems to be.

RBOB gasoline futures are already in technical break-out territory after settling above their 200 day moving average Monday and pushing ahead to a fresh 4.5 month high at 1.8397 overnight. The gasoline supply situation continues to show signs of being tighter than normal along the East Coast as the spring RVP transition gets into full swing, driven by refinery runs that reached 8 year lows in the past 2 weeks. NYH gasoline is trading at a 9 cent discount for winter vs summer barrels this week, compared to a 19 cent discount this time last year.

The annual CERAWeek conference is underway in Houston, with the leaders of the energy industry convening to discuss new ideas and debate the future of petroleum markets.

Among the presentations Monday, the IEA’s 5 year energy forecast provided plenty of headline-worthy notes. The charts below highlight the agency’s predictions that US Shale production will be a driver of global oil supply, and that the US might rival Russia and Saudi Arabia for export volumes in the coming years. In addition, the low Sulphur content of shale oil should further aid the US in a post IMO 2020 environment where low Sulphur refined products are increasingly in demand.

CLICK HERE for a PDF of today's charts

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