Energy Fundamental + Technical Macroeconomic Update | 3.14.23WTI Crude Futures Rebound, Brent Crude Futures Rise
On Wednesday, Brent crude futures rose above $78 per barrel, rebounding from three-month lows as OPEC raised its forecast for Chinese oil demand growth in 2023 due to the country's exit from the zero-Covid policy. However, the group left its outlook for global demand unchanged, citing potential downside risks for global growth. On the supply side, Saudi Arabia's energy minister confirmed that OPEC+ would continue with production cuts agreed upon in October until the end of the year. Meanwhile, the international oil benchmark remained down by more than 5% this week due to the turmoil in the US banking sector and the prospect of another interest rate hike from the Federal Reserve.
Heating Oil Futures Fall
Heating oil futures extended losses and were priced at around $2.7 per gallon, approaching their lowest point since February 2022. This was due to weak domestic demand and concerns about a recession caused by the Fed. The unusually warm winter season significantly reduced demand and increased supply. According to the latest EIA data, distillate stockpiles, including diesel and heating oil, rose by 0.138 million barrels in the week ending March 3rd, while analysts predicted a decrease of 1.038 million barrels.
Gasoline Futures Dip
Gasoline futures fell below $2.6 per gallon, slipping further from an over one-month high of $2.8 reached last week. This was due to overall weakness in energy markets and persistent concerns about low domestic demand, exacerbated by the failure of SVB and the closure of Signature Bank. Despite this, the upcoming peak demand season for gasoline and increased demand from China could lead to higher gasoline prices in the medium term. OPEC's reluctance to raise production should also keep a floor under the cost. According to the latest EIA report, US gasoline stocks fell by 1.134 million barrels in the week ending March 3rd, 2023.
Gold Prices Unchanged
Gold prices remained steady at around $1908 an ounce on Tuesday, near high levels not seen since early February. Investors are digesting the latest US CPI report and adjusting their monetary tightening expectations. Concerns regarding the collapse of SVB and Signature Bank, and news that Credit Suisse found "material weaknesses" in its reporting, continue to raise fears of contagion to other banks, leading to a risk-off mood. The inflation rate in the US slowed as expected, but the core monthly rate accelerated, indicating that inflationary pressures remain elevated. Most investors now expect a 25bps rate hike from the Fed next week, while the ECB is expected to raise rates by either 25bps or 50bps.
