Well, it’s 16.8 million gallons (63.6 million liters), so roughly about enough to fill up 25 or 26 Olympic-sized swimming pools. Or, enough to produce around 7.6 million gallons of gasoline.
But apparently it’s also enough to put the brakes on a sharp down move in crude oil prices, at least for a day.
After falling to their lowest level ($63.40/barrel) in more than two months, yesterday August WTI crude oil futures (CLQ8) rallied to close higher after reports that OPEC was considering increasing output by only 300,000–600,000 barrels a day—in other words, less than the one million barrels a day it had previously announced in May (Russia had floated a 1.5 million barrel increase).1
Even assuming an adjustment at the lower end of the estimated range, 400,000 fewer barrels a day seemed to be enough to entice some bulls back into the crude market. After a bit of a slow start the market rallied more an 3% off its low, and the rebound also followed Friday’s 4% tank job (part of an 11% sell-off since May 22). Traders will also note that May 25—the crude market’s biggest down day of the year, and the move that kicked the current downswing into gear—happened to coincide with the news that OPEC and Russia were discussing that million-barrel daily increase.2 A reversal point? Unknown, but the market at least stopped the bleeding.
Traders seemed to be even more bullish on certain oil stocks yesterday, including ConocoPhillips (COP), which shot up more than 3% after a 4% downturn on Friday brought it close to a support zone (roughly $64-$64.50) encompassing its April and May lows:
The stock, which in April broke out above a long-term resistance level, demonstrated its relative strength by surviving the crude downturn better than many oil stocks—consolidating rather than entering a downtrend of its own, and declining only 7.3% between May 21-25—and could be positioned to challenge recent highs near $72 if the crude rebound isn’t a fluke.
COP also needs to hold above its support, which is where yesterday’s bounce comes in. Analysis of 215 prior times since 1981 that COP made at least a new 10-day low and then rallied more than 2% the next day showed better-than-average odds of an up move over the next several days: Whereas COP overall had a 51% chance of being higher after any given five-day period (and had a 0.18% median gain), after the 10-day lows/2% rebounds, the stock was up more than 56% of the time and had a median gain of 0.86%.
Even if yesterday’s rebound could be considered a bit too enthusiastic, some traders will be looking for signs of a short squeeze in the event crude, and oil stocks, add to yesterday’s gains. OPEC & Co. will be meeting in Vienna this week, so traders will be looking for confirmation of yesterday’s news.
Market Mover Update: Speaking of markets posting potentially meaningful up days, after closing lower 12 out of the past 14 days and falling more than 13% amid Chinese tariffs, yesterday July soybeans (ZSN8) closed higher—and above the open—for only the second time since May 25.
1 Bloomberg.com. Oil Climbs Amid Talks of Smaller-Than-Expected OPEC Output Rise. 6/17/18.
2 CNBC.com. OPEC, Russia discuss raising oil output by about 1 million barrels per day: Sources. 5/25/18.