Oil Reaches A High For 2016. More Rebound To Come?

Oil prices hit their high for the year today, breaking $45/barrel for the first time since November to extend a 70% increase up from oil’s 13-month low in February.

The gains, up to $45.18/barrel on the New York Mercantile Exchange, followed late Tuesday’s release of data from the American Petroleum Institute that US inventories fell by 1.1 million barrels last week.

The bullish API data runs in contrast to analysts’ estimates that the Department of Energy will report a 1.7 million barrel increase, and that inventories at a key US delivery hub climbed 1.5 million barrels last week, the Wall Street Journal reports.

Still, Energy Management Institute analyst Dominick Chirichella says a bullish narrative on the oil market is prevailing. “Unless there is a more consistent pattern of bearish current fundamentals, the upside rally is likely to continue.”

Some asset managers took the whole oil slump as an opportunity, despite others—including PERE giant Blackstone—being hit hard in the wallet by early-year market turmoil. If we continue to see a rebound, it looks like those bulls were on the right track

Without a rebound, the banking industry will be keeping a sharp eye on the $147B in unfunded loans that they promised the energy industry—which have yet to be tapped by oil firms.

“Let’s not sugarcoat it. This is not necessarily a loan a bank wants to make at this point,” Glenn Schorr, a bank analyst at Evercore ISI, told the Wall Street Journal in mid-April.

The loans—given mostly by the four largest US banks, JP Morgan, Bank of America, Citigroup and Wells Fargo—were promised before oil’s steep decline, and are proving to be a headache for banks.

“With oil at $60, it’s not that big of a deal. With oil at $40, it becomes more of a source of concern,” Barclays analyst Jason Goldberg said of the unfunded loans. [WSJ]

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