WTI stages stunning recovery, surges back to upper-$61.00s from under $58.00

• WTI staged a stunning recovery on Wednesday, surging back to upper-$61.00s from under $58.00 amid a duo of bullish events.
• A tanker is still blocking the Suez Canal, a key chokepoint for oil markets and inventories were bullish.

Crude oil markets staged a stunning recovery on Wednesday, with front-month futures contracts for WTI rallying from sub-$58.00 lows to at one point above $61.00, meaning that almost all of the steep losses incurred on Tuesday were recouped. That equated to on-the-day gains of over $3.00 or roughly 5.3%. WTI now (again) sits roughly equidistant between its 50-day moving average (DMA) to the downside at $58.87 and its 21DMA to the upside at $62.97.

Driving the day

The news that a large tanker ship had run aground in the Suez Canal, triggering supply shortage concerns in Europe and North America (regions which are heavily reliant upon imports from the middle east that typically transverse the Suez Canal), was a saving grace for crude oil markets on Wednesday. Ten tugboats tried to free the giant marooned tanker but to no avail. Efforts will restart on Thursday. A Mizuho analyst  commented to newswires that events in the Suez Canal are just “one of those wild cards that is unique to the crude oil industry”.

Meanwhile, the latest weekly EIA crude oil inventory report seems to have been taken as bullish on balance; yes, there was a larger than expected build in headline (and distillate) inventories, but gasoline saw a larger than expected draw and refinery activity accelerated – market commentators suggest this means that US refiners are now mostly recovered from the disruptive cold weather that hit oil-producing regions in February. The senior analyst at Price Futures Group, Phil Flynn, commented that “refiners are coming out of maintenance and recovering from the power outages”¦ the expectation is now that they’re getting back to work, we will see crude inventories trending lower in the coming weeks”.

Looking ahead, crude oil market participants will continue to be wary of events in Europe (tougher lockdowns and higher Covid-19 infection rates ahead?). Additionally, attention will now increasingly turn to OPEC+, who is scheduled to meet on 1 April (next Thursday). The cartel will decide whether to lift output again. Most analysts suspect that, following the recent drop in prices which has been fuelled by a worsening of the pandemic outlook in Europe, the prospect of another output hike is very low. OPEC+ sources speaking to newswires alluded to as much earlier on in the session, saying that the cartel is likely to make a similar decision to its last gathering, where output was held mostly steady.