Energy prices are treading water this morning, with most contracts recovering to around the break-even mark after a bit of selling overnight. After a steady 2 week rally, prices have flattened out over the past 3 sessions, suggesting we may be in for another period of sideways trading over the next week or so before we see the next big move.
As April draws to a close, we’re approaching the seasonal peaks for gasoline and crude oil prices, not to mention the annual “Sell by May and go Away” trading axiom, which could provide headwinds to any more attempts at moving higher.
Markets around the world seem to be breathing a sigh of relief this morning that the North Korean situation did not escalate after a failed missile test this weekend. That story seems like it will stay on the front page for a while however, and though it has little direct physical impact on oil markets, it certainly could have impacts on the financial demand for risk assets which could influence oil prices.
BP is working to get a leaking well in Alaska’s north slope under control. So far the spilled volumes seem to be relatively contained, and may be a non-issue if they stay that way, but are obviously a concern given the company’s history. Early reports are that the well closure will have no impact on flows of the Trans Alaska Pipeline system.
The net long positions held by money managers increased across the board last week, indicating optimism on the part of speculators as the energy rally stretched to a 2nd week. While some new managed longs were added, the primary driver of the net increase was a large reduction in short positions, winding down the bets on lower prices that swelled during the March selloff.
Just like clockwork, Baker Hughes reported another 11 oil rigs were put to work last week, reaching the highest total in the past 2 years. With the WTI forward curve hanging around the $54 range for the next couple years, there’s no reason to expect this slow and steady increase to change anytime soon.
The ability of US drillers to pick themselves up off the mat in the past year is the subject of numerous articles in the past several weeks, with the tug of war between OPEC Cuts and US Shale gains a key theme in price action on a daily basis, and will likely continue to be a driver for the rest of this year. Most reports are now suggesting that a 6 month extension of the OPEC production cuts are a foregone conclusion, meaning any deviation from that plan may heavily influence prices.