Daily Brief - Summer Sizzle or Fizzle?

TLDR: As summer beckons, U.S. crude stockpiles are shrinking, refining is ramping up, but a buffeting dollar is keeping oil prices from truly soaring.

Wednesday saw Brent crude edge up modestly to $83.58 a barrel, while U.S. West Texas Intermediate (WTI) crude managed a slightly stronger push to finish at $78.99 a barrel.

The dip in U.S. crude inventories—falling 1.4 million barrels to 459.5 million—surpassed analyst expectations, hinting at a tightening market as refiners prep for the high-octane demands of the summer driving season.

Despite the uptick in refinery output, gasoline demand remains sluggish, casting a shadow over potential market optimism. This softness in demand contrasts starkly with last year's more robust figures ahead of Memorial Day, a key kickstarter for fuel consumption. Furthermore, a strengthening U.S. dollar—bolstered by bets on a robust U.S. economy—put additional pressure on oil prices by making the dollar-denominated commodity pricier for holders of other currencies.

Market sentiment is also being influenced by geopolitical events. Recent hopes for a ceasefire in Gaza have eased some of the geopolitical risk premium on oil, although how this plays out in the longer term remains to be seen. With oil trading dynamics now facing the dual challenges of sticky U.S. inflation and a potent dollar, the path ahead for oil markets could be as winding as a summer road trip.

Scenario Spotlight: When Crude prices jump

The chart above displays the median 1-month response from Crude futures, based on data from the past 20 instances where prices jumped 1% in 1 day and crossed above $79/barrel.

Market Movers: Hot Picks and Passes

Here are the historically best and worst performing energy stocks on a 1-month basis, based on previous jumps in oil prices:

Top 3 Performers:

1. Marathon Petroleum: 9.72%
2. Valero: 5.10%
3. Suncor Energy ADR: 4.86%

Bottom 3 Performers:

1. TotalEnergies ADR: 0.93%
2. Kinder Morgan: 1.47%
3. Baker Hughes A: 1.48%

Earnings Spotlight: Marathon Digital reports tonight

Marathon Digital Holdings, Inc. (MARA) exhibits a positive outlook tied closely to Bitcoin's volatile prices. The company's recent consulting contract with the Kenyan government, led by President William Ruto, aims to address Bitcoin's regulatory and energy concerns.

Moreover, the quarter's earnings are expected to benefit from increased Bitcoin production and higher year-over-year prices. These developments suggest a potentially strong period ahead for Marathon Digital.