Oil futures: Crude rebounds from lows as US firms face gasoline showdown

22 Jun 2022

Quantum Commodity Intelligence – Crude oil futures Wednesday retreated ahead of the showdown between the Biden administration and US energy firms, although staged a strong rebound with the earlier sell-off seen overdone. 

Front-month August ICE Brent futures were trading at $111.33/barrel (1925 GMT), compared to Tuesday’s settle of $114.65/b, although up from Wednesday's low of $107.03/b as price recovered in late-afternoon European hours.

At the same time August NYMEX WTI was trading $105.96/b, versus Tuesday’s settle of $109.52/b.

President Joe Biden was expected on Wednesday to call for a temporary suspension of the 18.4-cents a gallon federal tax on gasoline, which had been viewed as bullish for gasoline, with prices in both Asia and Europe surging on Tuesday.

Seven oil companies are set to meet Biden on Thursday, under pressure to drive down fuel prices as they make record refining profits, but oil executives have hit back.

“Addressing this situation requires thoughtful action and a willingness to work together, not political rhetoric... your administration has largely sought to criticize, and at times vilify, our industry,” said Chevron boss Mike Wirth in a letter published late Tuesday.

Oil markets have been under pressure since last week when the US Federal reserve hiked interest rates by 0.75%, highlighting inflationary and recessionary concerns. 

"Concerns about a recession and tomorrow’s meeting between US oil industry representatives and US President Biden are being cited as the reasons for the renewed price slide," said Carsten Fritsch of Commerzbank.

However, a record number of Americans will hit the road during the upcoming Independence Day weekend (June 30 – July 4) despite retail diesel and gasoline prices trading near record highs, US motoring association AAA said on Tuesday.

The AAA predicts a total of 47.9 million people will travel 50 miles or more from home during the weekend, with 42 million people set to take the car.

The wider industry remains mostly bullish with Vitol CEO Russell Hardy saying that global consumption of gasoline and jet fuel was still below 2019 levels and that the market could expect to see high prices remain until demand for energy drops.

“There’s still two to three million barrels a day of demand to come back next year,” said Hardy, commenting at the Qatar Economic Forum in Doha.

Speaking at the same forum, Exxon CEO Darren Woods said global oil markets could remain tight for another three to five years due to the lack of investment in the industry since the pandemic began.

On the Covid front in China, cases in Beijing and Shanghai continued to fall, but increases were reported in the in southern technology hub of Shenzhen, triggering mass testing and lockdowns in some neighborhoods.