Open an Account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open an Account
✖

Petroleum Post: Oil faces choppy trading ahead, long-term bullish

Article By: ,  Financial Writer
March 17, 2023 1:34 PM

The oil market has been extremely volatile, tracking a volatile equity market. Crude oil was down 5% today, with WTI at $66.45. WTI prices have dropped to their lowest price since December 2021, losing over $14 per barrel in 2 weeks. A long-term bull run is still on the cards. However, current market dynamics point to continued downward pressure on prices.

Fundamental data for nearly all petroleum products has been weakening – the recent aggressive sell off across the oil sector has been heavily driven by broad economic concerns over the economic outlook, and more recently bank liquidity crises. When the dust settles next week after the FOMC meeting, there may be a clearer direction on Fed policy and so the economic outlook going forward.

WTI Crude Oil Chart

Source: StoneX

 

Highlights

  • The most concerning development has been the continued flattening of futures market structure in crude oil
  • Diesel futures market structure has collapsed and is essentially flat outside of the first two months
  • Gasoline production margins have held above the 200-day moving average, but were still down 4% on the week
  • Chinese crude oil demand temporally provided bullish hopes, but imports in China are expected to fall in April-June due to refinery maintenance season
  • Inventories in crude oil have recovered significantly
  • The heating oil market structure has continued to flatten, and basis remains weak across the US
  • Although diesel prices remain in backwardation in the front month, where the current price of an underlying asset is higher than prices trading in the futures market
  • The trend of inventory builds and structure collapsing points towards continued pressure on heating oil prices moving forward

Conclusions

The crude oil market is likely oversold at this point, however, until the FOMC meeting next week passes there will be more uncertainty in the broader markets which have been extremely volatile. Prices are likely at good value currently, but there is nothing to point towards strong crude oil prices in the near term.

Prices may be at good value and the current market structure still will make fixed-forward contracts appealing. Long term forward contracts looking ahead to 2024 are priced at levels  that are almost 30 cents lower than the front month contract.

The spread between NYMEX Heating Oil and ICE Brent Crude Oil, or ‘heating oil cracks’, remains near seasonal highs, and market structure remains inverted, both indicating strength in refined products.

Forecasts are provided by StoneX Financial Ltd. These forecasts represent the views of the StoneX Energy team and not necessarily those of FOREX.com or City Index analysts.

Taken from an analysis by Alex Hodes, Energy Analyst

Contact: Alex.Hodes@StoneX.com

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2025