Daily Brief - Crude Comeback

TLDR: Oil prices are holding steady after the biggest advance in a week, buoyed by positive sentiment in broader markets.

Brent crude is trading above $84 a barrel following a 2% rise on Monday. The surge in equity markets, with the S&P 500 marking its 30th record high this year, is supporting crude prices.

Oil has seen gains this month, recovering from a quarterly decline, thanks to OPEC+ extending supply cuts. However, demand signals from Asia are mixed, with India showing lower gasoline consumption and Chinese refining activity slowing. China's industrial activity data on Monday fell short of expectations, adding to the uncertainty.

Analysts predicts Brent oil futures will average between $80 and $85 a barrel in the latter half of the year. This stable outlook is attributed to OPEC+ supply policies balancing shifts in global oil demand.

Brent’s prompt spread, the difference between its two nearest contracts, indicates near-term strength. The spread has widened to 74 cents a barrel, doubling from a week ago, reflecting a bullish pattern.

Scenario Spotlight: What next for Brent Crude?

The chart above illustrates the historical 6-month response from Brent Crude prices, when prices are below $85/barrel and rally 8% in 2 weeks.

Market Movers: Buy oil stocks?

The chart above shows the historical 6 month response from oil stocks when oil prices are below $85/barrel and rally 8% in 2 weeks

Earnings Spotlight: KB Home reports tonight!

KB Home is expected to announce earnings of $1.80 per share, down from $1.94 per share last year. Analysts predict revenues of $1.65 billion, compared to $1.77 billion in the same period of fiscal 2023.

Despite this, KB Home's strong Q1 performance, marked by robust order growth and a good start to the spring selling season, indicates it is on track to meet near-term goals. The company is optimistic about overcoming challenges like macroeconomic uncertainties and elevated mortgage rates, supported by a healthy backlog, improved build times, and new community openings, especially targeting first-time homebuyers.