Near-term demand for fuel remains suppressed, but more broadly there is still a belief the economy is in the midst of a steep recovery…..sentiment furthered by the surge in new home sales in March (up 27%). Clearly this was tax credit driven, but for many the idea that individuals are ready to engage the economy (and most importantly the credit markets) has them bullish the current economic cycle. Corporate earnings continue to beat most estimates despite still being below the peaks seen a few years ago, and interest rates overall remain in check and off their highest levels of the last couple months.
Overall energies continue to trend with equities as sentiment shifts from optimism to caution and then back to optimism. We expect the market to remain range-bound near-term as it struggles with its own fundamental weakness and the reluctant climb by equities during this Q1 earning’s season. Tomorrow’s stocks report will be key to oil’s near-term direction, and already the market is looking for another round of builds in the products of 2 mb and 1.5 mb gasoline/ distillate respectively (oil expected to decline slightly) to further cushion already burgeoning inventories. For now the market continues to be in a holding pattern more or less with $80/bbl representing the low-end and $85/bbl indicating the high-end of the trading range.