Oil futures were little changed Tuesday, tracking US stock market fluctuations in positive and negative territory as traders await further signs on the White House's direction on trade policy.
US President Donald Trump's vow last week to impose broad tariffs on imports of steel and aluminum has rattled global financial markets.
But some pushback by Republican congressional leaders and reports that economic adviser Gary Cohn could leave if Trump follows through with his threat seemed to shift the odds.
The potential for a trade war that could hurt global economic growth has emerged as a bearish factor limiting the upside for oil prices.
Crude futures are now wedged at roughly the midpoint between recent highs and lows. NYMEX April crude settled Thursday at $62.60/b, up 3 cents. ICE May Brent rose 25 cents to $65.79/b.
By comparison, NYMEX crude topped $66/b in late January and then fell to around $58/b in mid-February. Over the same period, ICE Brent fell from more than $70/b to $62/b.
Both of those highs represented levels not seen since December 2014, marking a turnaround as prices firmed on the back of OPEC supply cuts and a bullish outlook for the global economy.
"We've just decided to embrace volatility," Ryan Lance, chairman and CEO of ConocoPhillips, said Tuesday in Houston at CERAWeek by IHS Markit.
Producers may be unable to improve drilling times, which have been reduced to five or six days from 20, but more work may be done on completions and enhanced recovery, he said.
Attention will turn next to weekly US inventory data, which the Energy Information Administration will release Wednesday.
Analysts that S&P Global Platts surveyed Monday expect crude stocks rose 2.5 million barrels, while gasoline and distillate stocks likely fell by 500,000 barrels and 1.6 million barrels, respectively.
A larger-than-expected draw in gasoline and distillate stocks could help crack spreads rebound from pressure over the past week.
The NYMEX ULSD crack was around $17/b Monday, its lowest level since July. As of Tuesday afternoon, the ULSD crack was up 22 cents at $17.31/b. The RBOB crack was down 5 cents at $18.65/b.
Another statistic to watch is stock levels at Cushing, Oklahoma, the delivery point for the NYMEX crude contract.
After having fallen 10 straight weeks and 15 of the last 16 weeks, Cushing stocks sit at 28.785 million barrels, the lowest point since December 2014, according to EIA data.
"Cushing stocks will likely increase near term, but renewed declines this summer will lead to stronger backwardation, sending WTI prices above $70/b," S&P Global Platts Analytics said in a note.
"Midland differentials to WTI weakened as Gulf Coast premiums narrowed, closing the arb for shipping spot barrels from the Permian Basin to Houston and Nederland," the note said.
Crude differentials have shifted, making the economics more favorable for sending Permian Basin barrels to Cushing, while the Gulf Coast market has become less appealing.
WTI Cushing has averaged a 41-cent premium to WTI Midland since February 1, versus a 93-cent discount in January and a 44-cent discount in December, Platts data showed.
Conversely, WTI MEH's premium to WTI Midland has averaged $2.58/b year to date, down from $3.99/b in December and $4.44/b in November. MEH represents WTI at the Magellan East Houston Terminal.
That shrinking premium will likely discourage some barrels from flowing from the Permian Basin to the Gulf Coast, especially if it is not enough to cover the transportation costs.
The cost for shipping through pipeline from the Permian to Houston averages roughly $3/b, while the cost from the Permian to Cushing is just under $1/b, according to data the Federal Energy Regulatory Commission collected.
