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The Daily Dose: When The Cure Is Worse Than The Problem

Daniel J Graeber profile picture
Daniel J Graeber
42 Followers

Summary

  • The cure to lower oil prices in the US may be worse than the problem.
  • Irrational exuberance may cause the bulls to run for crude oil prices.
  • With economic data relatively thin this week, perception may drive the market more than technical matters.

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The slow reopening of the global economy is breathing new life into crude oil prices as demand starts to eat into supply. The US Energy Information Administration reported total crude oil refinery inputs and finished gasoline supplied to the market, loose proxies for demand, both increased at the end of April.

On the supply side, voluntary curtailments made in the US to stem the financial bleeding are on pace to eclipse 10 million barrels per day. But it will be difficult for some of that production to return. And while that bodes well for a balanced market, it does little to support an industry segment shutting down. Meanwhile, with some signs of relief emerging, the temptation to return to disruptive politics may be overwhelming.

The price for Brent crude oil was up 7.4% as of 8 a.m. ET to trade at $29.21 per barrel. With economic data relatively thin this week, perception may drive the market more than technical matters. Irrational exuberance could run high this week as cabin fever breaks.

The worst of the quarantine economy may be over. That's the word from the big banks on Tuesday. Morgan Stanley (MS) stated the supply and demand mismatch "is probably behind us," but warned that recovery will go through "fits and starts." Demand recovery was apparent in EIA data that showed crude oil input into refineries edged up 305,000 barrels per day for the week ending April 24. Gasoline production increased and total finished product supplied to the market increased 11%. Add to that a new round

This article was written by

Daniel J Graeber profile picture
42 Followers
Daniel is a long-time veteran of oil industry reporting, serving as the lead energy correspondent for United Press International, contributor to OilPrice and Petroleum Economist and former chief editor at ClipperData. Elsewhere, he's served in news radio and teaches occasional courses in international relations theory and general semantics.His blog, The GERM Report, is an intersection between oil markets, geopolitics and language theory. The outlook here is unconventional, drawing on a background in international relations theory and the philosophical aspects of a social culture created by language.

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