The Phil Flynn Energy Report
Oil prices look like they’re on a quest to retest key Bollinger Band support. Yesterday's unconvincing rally left the market bulls feeling less confident that the lows were in and could now retest the 5866 support. Oil's failure to hold its rally was helped by questions surrounding the AstraZeneca vaccine: not in Europe this time, but in the United States.
The Wall Street Journal reported that “U.S. officials said they were told AstraZeneca may have released outdated information in its disclosure of trial results for its Covid-19 vaccine that could have provided an incomplete view of the efficacy data.” This news freaked out the markets and pushed back oil demand recovery expectations as traders attempted to digest the new information. How can this be the case when Dr. Fauci said the vaccine was safe?
Reuters reports that “the Kremlin said on Tuesday it had deliberately decided it would not reveal the name of the Russian-made vaccine which President Vladimir Putin is due to take later on Tuesday. ‘We are deliberately not saying which shot the president will get, noting that all three Russian (-made) vaccines are absolutely reliable and effective,’ Kremlin spokesman Dmitry Peskov told reporters.”
Oil products are also fretting about the possibility of lagging jet fuel demand even though we’re seeing the most amount of air travel since the pandemic began.
Argus Media points out that India's jet fuel exports in February rose to an 11-month high, against higher refinery output and a gloomy domestic jet fuel demand outlook. Bloomberg reports that the consumption of jet fuel in the U.S. has held above 1 million barrels per day (bpd) since October, a marked improvement from the end of May 2020 when demand was around 600,000 bpd.
Overall, we believe that this is just a correction in a strong bull market. Sometimes at the end of March, the shoulder season overwhelms us a bit. That said, we expect a big drain on inventories in the coming weeks thanks to an expected rebound in gasoline demand as more people get vaccinated. We also look for gas demand to get a surge as the weather improves, and there are a lot of signs that this is already happening.
The oil may also get moved by Fed Chair Jerome Powell. While what we heard from him yesterday wasn’t a surprise, he did say the economy is coming back stronger than expected— but we still have a long way to go. Powell also says that the economy depends on the state of the Covid-19 situation.
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