Default Concerns Add Fear to the Market
May 3, 2023
The average estimates for today’s DOE inventory report from the Bloomberg survey are for crude oil inventories to be down 1.494 million barrels, gasoline down 2.011 million barrels and distillates down 906,000 barrels.
The API update released late yesterday afternoon had crude oil inventories down 3.9, gasoline up 351,000, and distillates down 975,000.
Yesterday’s market had prices selling off as systemic risk was a big concern that had many traders long the market getting out and minimizing their losses. The down day yesterday keeps the downtrend intact and has lower downside price targets to be tested. Despite the sale of First Republic Bank the market still has concerns about other banks furthering the selloff in energy.
The other big announcement that added fear and selling to the market and helped prices sell off was Secretary of State Janet Yellen saying that the US government could be out of money and default on its obligations by early June. This news really helped to create selling for those that might be underwater at this point. The lower Chinese PMI was also a big factor as China is a big wild card for energy demand and where price go.
The move lower yesterday took more length out of the market but there are still more speculators that likely need to see more downside to get out and take this market to an oversold condition. The downside move is likely not over yet barring some major change of events.
The managing director of Velandera Energy Partners said ”Recession fear is like a hurricane that destroys everything along its path – oil included. It does not matter that the fundamentals for oil are now stronger than ever with rising demand and falling supply in the foreseeable future.
The estimates for the propane inventory update today are for supplies to increase by 1.5 million barrels.