Crude Futures Recover from Two-Day Losing Streak Ahead of Opec Meeting

Strategic Insights -

Crude oil futures posted a mild recovery on Friday as traders squared positions ahead of the Opec meeting, despite concerns about oversupply and price volatility. The light, sweet May contract on the New York Mercantile Exchange (Nymex) settled at $35.73 for a gain of 22 cents, while the May Brent contract on the International Petroleum Exchange (IPE) added 22 cents to close at $32.05 per barrel. Market players are cautious ahead of the Opec meeting, given the group's history of surprise announcements and contradictory statements.

Key Takeaways:

  • Crude oil futures recovered from a two-day losing streak, with the light, sweet May contract settling at $35.73 for a gain of 22 cents.
  • The May Brent contract on the IPE added 22 cents to close at $32.05 per barrel.
  • Opec's meeting on Wednesday is expected to have a significant impact on crude prices, with analysts warning of potential further declines.
  • Traders are concerned about oversupply, with the Energy Information Administration (EIA) revealing a large 7.5 million barrel rise in crude stocks.
  • Gasoline futures strengthened 2.41 cents to close at $1.1229 per gallon, but fell 2.35 cents on the week.
  • Analysts believe that domestic refiners may struggle to meet growing demand for gasoline in the coming weeks.
  • The transition from methyl tertiary butyl ether (MTBE) to ethanol as a gasoline additive is adding to supply uncertainty.
  • Asia is competing with the US for gasoline imports, with China drastically reducing its shipments this year to meet domestic supply shortfall.

Statistics:

  • Crude oil prices lost $1.50 per barrel on Thursday, the biggest single day loss since November.
  • Opec has announced two cuts since September, but analysts believe that the group is still pumping 2 million barrels per day over its current 24.5 million barrel per day ceiling.
  • Gasoline inventories have fallen for six consecutive weeks, with stocks remaining below the psychologically important 200 million barrel level.
  • Gasoline demand has surged 4% year-on-year, with analysts warning of potential supply shortages.

Sources:

  • New York Mercantile Exchange (Nymex)
  • International Petroleum Exchange (IPE)
  • Fimat, quote from Mike Fitzpatrick
  • Energy Information Administration (EIA)
  • Pegasus, market note from Tim Evans