Brent rose $1.64/bbl last week to average $69.49/bbl, which was above our expectations. WTI rose $2.84/bbl to average $62.36/bbl. This was Brent’s second straight week of gains and WTI’s fifth week. Moves in managed money were positive but smaller than in previous weeks. For the week ahead Brent is likely to see additional strength, but the psychological $70/bbl barrier could be too much to sustainably overcome, and we expect Brent to average closer to $71.50/bbl.
Friday saw strong US employment data, further easing fears about demand. Non-farm payrolls increased 196,000 jobs in March. Wages increased 0.1% after February’s 0.4% increase, bringing the annual increase to 3.2%. If wages were to increase too quickly, it could stoke fears about inflation and a rate increase from the Federal Reserve.
On the supply side, several developments are afoot. Violence in Libya is again escalating, disrupting supplies. Gen. Haftar has escalated his campaign against the internationally recognized government and ordered his forces to march on Tripoli. Haftar hopes to unite Libya under a singular government, led by him. Additionally, the US has targeted Venezuelan oil shipments to Cuba in an effort to further restrict income to the Maduro regime. These interruptions, on top of a stronger demand outlook, appear to have been enough to counteract the first increase in drilling rigs seen in seven weeks.
The “No Oil Producing and Exporting Cartels Act” was recently introduced in Congress. While the legislation has only a small chance of actually passing, Saudi Arabian officials have come out vehemently against such legislation. Debates around the legislation and what it means for the upcoming OPEC+ meeting could inject uncertainty into markets.
Geopolitical – Positive
Dollar - Neutral
Trader Sentiment – Positive
Supply – Positive
Demand – Positive
Refining Margins - Neutral
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