One day after crashing into a bear market, crude continued to plunge.
As a reminder, sentiment is God awful as supply worries far outweigh “hope” (and at this point that’s all it is) around the extent to which OPEC can balance the market.
We got EIA data this morning and it was ostensibly bullish:
Crude -2,451k Bbl, Median Est. -1,200k Bbl
Cushing crude -1,080k
PADD 3 crude +898k
Gasoline -578k vs est. +500k
PADD 1B gasoline -283k
Distillates +1,079k vs est. +500k
PADD 1 Distillates +1,904k
Refinery utilization -0.4 ppt vs est. +0.0 ppt
Refinery crude inputs -104k b/d
Crude imports -149k b/d
Crude production +20k b/d
But the rally it occasioned was fleeting (to say the least), and within 30 minutes, WTI was back to pre-release levels.
“The EIA report was mildly supportive at best. The crude oil inventory drop was within expectations and while there was a rise in gasoline demand back to more normal levels, it should have been even stronger than it was,” John Kilduff, a partner at Again Capital, told Bloomberg by phone. “The deal could be falling apart as tensions in the Middle East region rise,” he added.
You’ll note that the Mohammed bin Salman news is material, as he’s generally hawkish on foreign policy, which could be bearish or bullish, depending on how you look at it.
Ultimately, Brent fell below $45 for first time since November, and WTI futs hit their lowest level since August:
As Bloomberg notes, “HY investors have become more nervous as they shy away from new issues with the Bloomberg Barclays HY Energy Index yield hitting a 7-mo. high of 7.14% and with negative MTD returns of 2.56%.” In short, HY Energy is starting to decouple from HY:
Here’s a look at spreads blowing out:
“We’re fundamentally disconnected right now,” Michael Tran, a commodities strategist at RBC Capital Markets in New York said.
I guess. All we know for sure is that this is getting worse by the day, and materially so.