Oil prices brushed off a bit of selling Tuesday morning, reversed course mid-day and are now on the move higher for a 7th straight session.

Yesterday reports that Saudi Arabia supported extending the OPEC production cuts for another 6 months seemed to be the catalyst for the turnaround in prices mid-morning, then the API reportedly showed declines in inventories across the board (-1.3 million barrels for crude, -3.7 million for gasoline, -1.6 million for diesel) that kept values moving higher through the overnight session.

That brief bit of selling yesterday relieved some of the over-bought warning signals, and the recovery puts the momentum clearly in the bulls favor, suggesting we should see WTI and Brent test the top end of the previous trading ranges at $55 and $57 respectively before this run is finished.  The bigger question (since we’re so close to the top of the range already) is whether or not this rally can continue beyond levels that have stifled prices all year, or if we’ll find ourselves right back in that sideways pattern.

The tragic situation in Venezuela is hitting closer to home after concerns were raised that a default by PDVSA could put Citgo in Russian hands.  Given the federal denial of the Morgan Stanley asset sale to a Russian firm 2.5 years ago, it’s clear that intervention is likely if Citgo is taken over.

The EIA monthly Short Term Energy Outlook was released yesterday.  Notable items include US Diesel consumption plus exports reaching an all-time high for the month of March this year, while first quarter gasoline consumption declined year on year for the first time since 2012.  The agency held  a status quo outlook for the next couple years, predicting that crude oil prices will average in the low to mid $50s through 2018, while US crude production ramps up from 8.9 million barrels/day in 2016 to 9.9 million in 2018.

In a separate report on Crude Oil imports released yesterday, the EIA noted that US Imports of crude oil rose 500,000 barrels/day last year, and that Canada delivered more crude to the US than all OPEC nations combined.  The report also noted how crude flows are heavily influenced by the country’s new role as refiner to the world, as the US has gone from being the largest net importer of refined products in 2005, to the largest net exporter in 2016.

CLICK HERE for a PDF of today’s charts

Market Update (10)Presentation1