Oil Gains as Export Statistics Indicate Strong Demand, Fed Sticks to Plan

Driven by positive export data as well as a lack of shocks from the Federal Reserve, oil increased to settle above $70 per barrel for the second time in a week.

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The Energy Information Administration reported on Wednesday that exports of oil and processed products increased to a record 12 million barrels per day, pointing to a more optimistic view for demand. In the meantime, the Fed raised rates by 25 basis points for the second time in a row, in line with forecasts.

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According to Daniel Ghali, a commodity analyst at TD Securities, "the knee-jerk reaction in riskier assets is to the positive as the market expects the conclusion of the tightening bias was near and cuts could be approaching."

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Crude fell to a 15-month low this past week as a result of banking upheaval and dwindling risk appetite among traders. Famous oil trader Pierre Andurand is one of the investors who has been taken off guard by the downturn; losses in March contributed to a 40% decline in his hedge fund. Nonetheless, despite China's recovery from Covid lockdowns, Andurand and others are still bullish on the prospects for crude, with some predicting prices of $140 per barrel even by end of the year.

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According to the most recent Commodities Futures Trading Commission statistics, a change in posture also followed last week's collapse as bullish wagers by money managers on WTI dropped to their lowest level that since coronavirus pandemic. While positioning was torched last week, this change allows "little friction to upward in oil," according to Rebecca Babin, senior petroleum trader at CIBC Private Wealth.

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