Earthquake As Oil Markets Wait For Exxon and Chevron Earnings

Wednesday's earthquake left markets in suspense mode, as euphoria from trade deals winds down and traders focus on upcoming earnings from supermajors like Exxon and Chevron.

Key Developments

• Crude prices holding after a series of risk events such as a massive earthquake and sanctions targeting Russia and Iran shook up markets on Wednesday.
• Hawkish stance from the Fed revives worries around demand.
• ExxonMobil and Chevron expected to report lower earnings in Q2 as crude prices remain under pressure.

Shipping Ports Closed, Uncertainty Prevails

Crude prices rose on Wednesday due to a combination of factors. One of the more dramatic was the massive , triggering tsunami alerts all across the Pacific. The area doesn't have significant oil production. However, the threat to shipping, which caused momentary port closures around the Pacific, unnerved some traders before news that Russia's LNG export facilities in Sakhalin continued to operate normally.

Other events that were the EIA report showing strong gasoline demand. Geopolitics interfered as well, after US President Donald Trump announced he was shortening the deadline for Russia to reach a peace agreement with Ukraine to 10-12 days. He threatened "secondary" sanctions on countries that bought Russian oil, such as China and India. The US also announced new sanctions targeting shipments of Iranian crude. In the other direction, the Fed's hawkish position following its decision not to cut rates raised demand concerns.

Exxon and Chevron Reporting

ExxonMobil will report its Q2 earnings before the market opens on Friday, with the consensus for from $2.14 in the same period last year. Sales are expected to decline 13.7% to $80.3 billion. The focus for investors is likely to be around the company's cost-cutting initiatives as its earnings have been affected by lower crude prices. In its last quarter earnings, the company said it expected to conduct $20 billion in annual buybacks, and was looking to increase upstream production to 4.7M bbl/day, with 1.5M coming from the Permian Basin.

Chevron will also report before the market on Friday, with from $2.55 a year ago. The company is facing similar issues as the rest of the industry, facing lower crude prices compared to a year ago, which are impacting the bottom line. Sales are expected to decline 12% to $45.1 billion. Last quarter, the company disappointed by announcing a smaller share buyback of $2.5-30 billion to be executed through last quarter, and is expected to announce a similar amount for Q3. Chevron recently was given the green light from the Trump administration , reversing the ban from earlier this year.

WTI Momentum Could Be Fading

The recent geopolitically-driven spike in crude prices has pushed RSI into overbought territory as it struggled to get above the $70.00 per barrel level. A move to the downside could find support at the middle of the Bollinger Bands at the round $68.00 level, with a break below eyeing support at the local swing low of $64.90. To the upside, crude could encounter resistance at the upper band at $71.00 if momentum accelerates, followed by the round $75.00 level.

Source: SpreadEx | Light Crude, Spot