(Oil & Gas 360) – Expectations And Oil Prices Have Bottomed With Heading-UP-To-Summer And Much Needing To Be Done Increasing With The Tariff Strategy.
The drop in the price of crude oil, from its Winter high to a Spring-Time low exaggerated by Tariff Fear has us conclude the drop has bottomed. Cold air tugged the price of West Texas Intermediate (WTI) crude oil up above $80 per barrel mid-January (Figure 1, red line). Tariff fear extended and exaggerated the drop to $60. Hours of daylight increasing and the futures contract price now above $63 keep us concluding: UP is the direction we head.
The fast, quick drop in stock prices helped by tariff fear adding to and exaggerating uncertainty, but meaningfully up from last week’s lows also keep us concluding: UP is the direction we head. Much needing to be done helped by Winter Changed to cold has the Natural Gas Index (XNG, Figurer 2, line) up 1.6% year-to-date (YTD) despite the large, quick drop. The other major indexes (bold, green, red, yellow) are all up from last week’s lows.
The crude oil price drop has been encouraged by the steady increase in U.S. crude oil inventory. U.S. commercial crude oil inventory declining into January tugged the spot price of WTI crude oil up to $80 per barrel (Figure 1). This inventory increasing since mid-January (Figure 3, red line) has helped it (with the big increase in fear and uncertainty) drop to $60. And the drop in oil prices encouraging recession fear has helped drop stock prices.
However, the increase in crude oil inventory reflects the need to do oil-refinery maintenance and turnarounds. The consensus is set up to be caught short by refinery runs next increasing. Refinery runs increasing to a multi-year high mid-January to fuel Winter (Figure 4, blue dot and red line) reduced crude oil inventory (Figure 4). Declining below last year’s level (blue line) of late has extended the inventory increase. That will result in the increase to fuel Summer larger.
While recession fear and uncertainty have significantly increased of late, desire to Do/Be/Have continues indicating growth happening. Although the drop in stock prices already looks like we are in a recession, other indicators continue indicating growth. The number of Air Travelers counted at U.S. Airport Check Points (Figure 5, red line) continues showing year-over-year (YOY) growth (versus blue line).
By oilandgas360.com contributor Michael Smolinksi with Energy Directions
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