ANS hits upper $80s
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Up week for crude despite hawkish Fed as China economy shows resilience
Steve Sutherlin Petroleum News
Alaska North Slope crude took a dive into uncertain waters March 20 shedding $1.03 to close at $85.55 per barrel, as an ambiguous Fed became coy over its plans for benchmark interest rates as American consumers remained resilient in the face of higher prices.
ANS held its toehold in the upper $80s despite the bloodbath.
WTI was hit harder March 20 than ANS, but WTI maintained a foothold in the $80s, plunging $1.79 to close at $81.68. Brent slid $1.43 to close at $85.95.
(See chart in the online issue PDF)
U.S. Federal Reserve Chairman Jerome Powell's press conference March 20 kept the Fed policy rate steady in a range of 5.25%-5.5% and made no major changes to its policy statement. The committee also maintained its forecast for three rate cuts this year.
Powell's press conference, statement and economic forecasts all point to three rate cuts starting in June, said Krishna Guha, vice chairman of Evercore ISI, quoted in MarketWatch.
"This is a Fed that wants to cut rates -- not before it is responsible to do so, but as soon as it is responsible to do so, with June and three cuts this year still it's quite sticky base case," Guha said.
Earlier in the year, traders were much more bullish on a radical movement to lower interest rates, some expecting a half dozen rate changes moving the Fed to a more accommodating stance.
So far, however, the economy is exhibiting some heat, and in that atmosphere, stimulus doesn't deliver the punch it does in a weakening economy.
But it isn't just a robust consumer driving the economy, business investment is ramping up.
An explosion of spending on Artificial Information floats a promise of a more efficient, more intelligent, more humane, and instinctual way of doing business -- it is a revolution.
AI could reduce pollution and waste by eliminating the inefficiencies of doing business in the old fangled way, it is hoped.
Working harder with greater efficiency may serve us better -- particularly in the near term, than a total redesign of our industrial capacity chasing someone's idea of a greener process.
AI needs energy and it needs energy that is available on a reliable and economic basis. Energy also is the lifeblood of the construction and trade that a revolution engenders.
Using what is at hand efficiently will be necessary to balance the energy supply as demand explodes.
U.S. crude production presently leads the world, and a sophisticated refining industry tirelessly turns out a blinding array of fuels, lubricants and products ... from toys to pharmaceuticals.
As such, oil didn't stay down in the wake of the Fed minutes. Oil traded in the green in early Asian trade as Petroleum News went to press March 21.
U.S. crude oil levels took a surprise dive the week ending March 15 according to data released March 20 by the U.S. Energy Information Administration.
Commercial crude oil inventories excluding the Strategic Petroleum Reserve dropped 2 million barrels to 445 million barrels -- 3% below the five-year average for the time of year, the EIA said. Analysts answering a Wall Street Journal poll predicted crude stockpiles would decrease by 1.2 million barrels.
SPR levels rose by 750,000 barrels to 362.3 million barrels.
Total motor gasoline inventories staged a bullish 3.3 million barrel decrease on the week, reaching 230.8 million barrels -- 2% below the five-year average for the time of year.
ANS rose 35 cents March 19 to close at $86.58, as WTI jumped 75 cents to close at $83.47 and Brent added 49 cents to close at $87.38.
Prices leapt higher March 18. ANS jumped $1.49 to close at $86.23, WTI leapt $1.68 to close at $82.72 and Brent popped $1.55 to close at $86.89.
ANS added 5 cents March 15 to close at $84.74, but WTI fell 22 cents to close at $81.04 and Brent edged 8 cents lower to close at $85.34.
ANS advanced $1.27 March 14 to close at $84.69, while WTI leapt $1.54 to close at $81.26, and Brent jumped $1.39 to close at $85.42.
China goes pop! A surprise pop in Chinese industry and retail cheered bullish crude traders March 18.
China's factory output and retail sales bested expectations for January-February, according to official data.
Industrial output rose 7% for the period -- the quickest growth in almost two years, Reuters reported, adding that retail sales slowed to 5.5% from 7.4% in December but slightly beat forecasts.
Chinese stocks closed at a record for the year, recapturing 12% of a lull that started in February, Reuters said. Global stocks and U.S. futures rose on the news.
"The impact of a punchier Chinese economic rebound on global oil and commodities comes at a critical juncture for inflation-watchers, central banks and bond markets," Reuters said.
A surge in Chinese demand may send ripples through Pacific markets, including West Coast markets where most ANS crude trades.
Due to lower refinery runs, some additional Russian crude is available on the world market as Ukraine mounts strikes on Russian oil assets.
A Reuters analysis found Ukrainian attacks have idled some 7% of Russian refining capacity in the first quarter. A March 16 strike sparked flames at the 170,000 barrel-per-day Slavyansk refinery in Krasnodar.
But China will have to compete with fast-growing India for crude. Since Russia invaded Ukraine in 2022, India has increased its imports of Russian crude by 111%, according to International Energy Agency data.
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