Crude Oil Six Cents Shy of $60

The West Texas Intermediate (WTI) crude oil benchmark crossed above the $60-mark Tuesday but failed to stay there.

May WTI futures peaked at $60.38 per barrel but ended the day at $59.94, which nevertheless reflects a $1.12 day-on-day gain. Tuesday’s intraday low for the WTI was $59.04.

Brent crude oil for May delivery posted a 76-cent gain Tuesday, settling at $67.97 per barrel.

“The lights have gone out in Caracas again, just as U.S. oil tank readings are expected to have dipped for a third week in a row, to OPEC’s joy,” Barani Krishnan, senior commodities analyst with Investing.com, told Rigzone. “But once Wednesday comes and goes, economic worries and how those influence oil demand might matter even more.”

Krishnan explained that, with the imminent release of the latest U.S. weekly oil inventory data, tight crude supplies again command the oil market’s attention. He noted that the supply situation stems from sanctions on crude from Venezuela and Iran as well as production cuts by OPEC, Russia and their allies under the OPEC+ pact. The market anticipates a drawdown of just above 1 million barrels in U.S. crude stockpiles for last week, adding to the nearly 13 million barrels drawn over the two previous weeks, Krishnan said.

“Even if Wednesday’s dataset shows a lower drop than forecast, a third straight week of declines could immediately strengthen the tight supply narrative driven by Saudi Arabia, which is aspiring for Brent to at least hit $70 a barrel,” continued Krishnan. “That target is apparently a concession from initial aspirations for $80 oil, which the Saudis probably dialed back after considering how unsupportive the current economic backdrop might be.”

Krishnan added that technicians see further consolidation and sideways trading for oil on demand concerns unless Brent clears the $70-mark and the WTI gets above $61 – at least to decisively break with the 2019 highs from last week.

“But above any deterrence posed by the economy, the Saudis may also have re-energized the U.S. President back in the ring to fight them should they have any unrealistic aims for oil prices,” said Krishnan. “On a high from his immediate victory over the Mueller probe, Trump could be in the mood for another high-stakes battle with OPEC to try and subdue oil prices. And his range of responses could run the gamut from his favorite tweeting option to granting generous sanction waivers – again – for buyers of Iranian oil, and even selling emergency U.S. oil stocks from the Strategic Petroleum Reserve.”

The price of a gallon of reformulated gasoline (RBOB) also increased Tuesday. The April RBOB contract added nearly two cents to settle at $1.96.

April Henry Hub natural gas futures fell more than one cent to end the day at $2.74.