Crude Oil Prices Spike on Israeli Comments on Iran

Crude oil prices rebounded from session lows rising above 68-per barrel mid-day after testing below that handle early in the North American trading session. As oil exports are on the rise, higher prices are increasing demand for WTI which is much lower than Brent given its land locked nature.  Comments from the Israeli PM about Iran’s Nuclear program has generated upward momentum in crude oil prices.

Technicals

Crude oil prices moved higher and are poised to test resistance near a short-term downward sloping trend line that comes in near 69.08. Addition resistance is seen near the April highs at 69.55. Support is seen near the 10-day moving average at 68.11.  Momentum is neutral and turning negative as the MACD (moving average convergence divergence) index is poised to generate a crossover sell signal. The RSI turned higher which reflects accelerating positive momentum, but the fast stochastic is printing a reading of 80 at the oversold trigger level which could foreshadow a correction.

Netanyahu Addressed Country on Iranian Nuclear Issue

Prime Minister Benjamin Netanyahu made a statement on a significant development regarding the nuclear agreement with Iran, Israeli media reports indicate Netanyahu will address the Iran nuclear deal and how he believes Iran is cheating which sent oil prices higher.

Oil Exports Continue to Rise

U.S. oil exports just hit a record high, a sign that the shale boom will continue to lead to higher shipments abroad, despite some infrastructure bottlenecks. Last week, the U.S. averaged 2.3 million barrels per day in crude oil exports, the highest average for any week on record.

Another reason for the upward trend in exports is the renewed price differential between Brent and WTI. While the oil market is global, the two benchmarks reflect some unique geographical circumstances. WTI is dragged down by the surging U.S. shale supply, while Brent is seeing tighter conditions, in part because of the OPEC production cuts, but also because of strong demand in much of the world.

Gasoline Prices Are Expected to Rise in Tandem with Crude Oil

Gasoline prices have yet to take the lead as the driver of the petroleum complex.  Gasoline stocks are below the top end of the 5-year historical range, but the decline in last weeks production could be a sign that refiners have enough stocks. The EIA forecasts that U.S. drives will pay more for gasoline than they have paid in the last 4-years, which could generate some demand destruction. Demand remains strong rising approximately 3% year over year according to the latest Department of Energy Figures.

The EIA Sees Higher Gasoline Prices

The Energy Information Administration currently forecasts that drivers in the United States will pay an average of $2.74 per gallon this summer for regular gasoline, the highest average summer gasoline price in four years. EIA’s forecast gasoline price for summer 2018 will be $0.26 per gallon higher than the average price last summer, largely reflecting changes in crude oil prices. Overall gasoline expenditures in 2018 are expected to be about $2,300, or nearly $200 more per household than in 2017. This represents an increase of nearly 10%.

The EIA also projects that monthly average gasoline prices will reach a peak of $2.79 gallon in May before falling to $2.65 per gallon in September. Gasoline prices are often higher in summer months when gasoline demand is higher. In these months, federal and state environmental regulations require the use of summer-grade gasoline, which is more expensive to manufacture.

Canada’s IPPI grew

Canada’s IPPI grew 0.8% in March month over month after a revised 0.3% gain in February. Higher prices for energy and petroleum products led the way higher, as expected, with the category seeing a 1.3% gain in March after the 1.8% drop in February. Higher prices for pulp and paper products also featured. Excluding the impact of the currency move leaves a 0.1% gain for the IPPI. The IPPI grew at a 2.3% year over year pace in March, matching the growth rate in February. The raw materials index expanded 2.1% in Mach month over month following the revised 0.4% dip in February. This report was as expected and is unlikely to have much impact on the market. Moreover, the more timely CPI tends to capture the market’s attention in terms of Canada’s monthly inflation figures.

U.S. personal income rose

U.S. personal income rose 0.3% in March, with spending rising 0.4%. The 0.4% income gain from February was revised to 0.3%, while the 0.2% spending increase was bumped to down unchanged. Wages and salaries increased 0.2% versus the prior gains of 0.4% in February which was revised from 0.5% and 0.5% in January revised from 0.6%. March disposable income was up 0.3% versus the prior 0.3% revised from 0.4%. The savings rate dipped to 3.1% from 3.3% revised from 3.4%. The PCE deflator was unchanged versus February’s 0.2%. The core rate was up 0.2%, as it was in February. On a 12-month basis the headline index rose to 2.0% year over year compared to 1.7% year over year previously revised from 1.8%, with the core rate at a 1.9% year over year clip versus 1.6% year over year.